As of January 1, 2024, the U.S. Department of the Treasury began accepting beneficial ownership information reports in a newly created registry pursuant to the Corporate Transparency Act of 2021, which requires many companies doing business in the United States to report information about the individuals who own or control them.
Existing companies created or registered to do business in the United States before January 1, 2024 must file by January 1, 2025, while new companies must file within 90 days of their creation or registration.
“The law contains a number of exemptions,” Eisinger Law Partner Carolina Sznajderman Sheir noted, “however, condominium and homeowners’ association board members are generally not likely to be among them.”
Filing is a free, simple, on-line and secure one-time process through the U.S. Treasury’s Financial Crimes Enforcement Network (FinCEN) portal here. Beneficial ownership information reporting is not an annual requirement. A report only needs to be submitted once, or within 30 days in the event of a correction, or a change of beneficial ownership, such as new association board membership.
Generally, reporting companies must provide four pieces of information about each beneficial owner:
–Date of birth
–Identifying number, issuer and image of a non-expired U.S., local government or Tribal photo identification. A non-expired foreign passport can also be used.
The reporting company must also submit certain information about itself, such as its name(s) and address. In addition, reporting companies created on or after January 1, 2024, are required to submit information about the individuals who formed the company.
“It’s important to understand that, because failing to report or providing false information can result in civil fines of up to $500 per day, and criminal penalties of up to $10,000 per day and two years of prison time, we are advising our clients to contact us if they have any questions about whether their association qualifies as a reporting company,” Sheir cautioned.
Associations should also be aware of recent fraudulent attempts to solicit information from individuals and entities who may be subject to reporting requirements under the Corporate Transparency Act. This may come in the form of fraudulent email or postal correspondence titled “Important Compliance Notice” that asks the recipient to click on a URL or to scan a QR code. FinCEN does not send unsolicited requests and warns its system users not to respond to these types of fraudulent messages, nor click on any links or scan any QR codes within them.
The Corporate Transparency Act is designed to curb illicit financial activities that heretofore exploited vulnerabilities in the United States financial system, particularly in real estate where home purchases by shell corporations have frequently tilted the economic playing field and negatively impacted average buyers.
“The launch of the United States’ beneficial ownership registry marks a historic step forward to protect our economic and national security,” said Secretary of the Treasury Janet L. Yellen. “Corporate anonymity enables money laundering, drug trafficking, terrorism, and corruption. It harms American citizens and puts law-abiding small businesses at a disadvantage. Having a centralized database of beneficial ownership information will eliminate critical vulnerabilities in our financial system and allow us to tackle the scourge of illicit finance enabled by opaque corporate structures.”
Throughout the extreme market stress of the 2007-2009 financial crisis, as well as that of the COVID pandemic, it’s no secret that Florida’s real estate market has been a top target for international buyers, many of whom purchase through anonymous shell corporations. While not all foreign purchases are illicit and not all U.S.-based purchases are aboveboard, foreign buyers bought $5.1 billion worth of South Florida residential real estate in 2023 alone—actually less than the $6.8 billion they spent in 2022, according to the Miami Association of Realtors.
About the Corporate Transparency Act
According to a 2020 study by Global Financial Integrity (GFI), the U.S. real estate market has become a significant destination for the laundered proceeds of illicit activity, including corruption, with more than $2.3 billion identified having been identified as laundered through U.S. real estate between 2015 and 2020. In addition to providing corrupt actors a means to launder ill-gotten gains, GFI noted that a lack of transparency in real estate purchases imposes tangible costs on average Americans in the form of artificially inflated real estate prices.
On June 3, 2021, President Biden established the fight against corruption as a core U.S. national security interest. Accordingly, he directed his national security team to lead the creation of The United States Strategy on Countering Corruption, a comprehensive plan to address deficiencies in the U.S. anti-money laundering efforts.
Guided in part by the Corporate Transparency Act, the U.S. Strategy on Countering Corruption goals include:
–Finalizing effective beneficial ownership regulations, and building the aforementioned database of the beneficial owners of certain companies in order to help domestic and international partners identify bad actors; and
–Promulgating regulations targeting those closest to real estate transactions to reveal when real estate is used to hide ill-gotten cash or to launder criminal proceeds.
Should you have any questions or comments, please contact us at Eisinger Law.
Eisinger Law is a multi-practice Florida law firm focused on community association law, real estate law, developer representation, civil/commercial litigation, insurance law, estate planning and probate. For more information, visit eisingerlaw.com or call 954-894-8000.