CTA compliance concerns grow globally

A new study by CSC has revealed that 83% of senior in-house legal and compliance executives are worried about their organisation’s ability to comply with the Corporate Transparency Act (CTA), which came into effect on January 1, 2024. The survey also found that over 76% believe the CTA is causing broader concern among U.S. businesses, highlighting the widespread impact of this new legislation.

The CTA was introduced to strengthen law enforcement and government agencies' ability to combat national security threats, corruption, terrorism, and money laundering. However, its implementation has led to significant uncertainty, as organisations struggle to interpret and meet its requirements.

CSC, a leading global provider of business administration and compliance solutions, conducted the study among 200 senior professionals, including general counsels and corporate secretaries, across a diverse range of industries in the U.S., Continental Europe, the U.K., and APAC. Respondents included both U.S.-based corporations and multinational corporations with entities registered in the United States.

The findings, detailed in CSC’s report titled “The Corporate Transparency Act: Readiness, Concerns, and Implications,” reveal key concerns and compliance challenges faced by organisations as they navigate the complexities of the new law. Despite the CTA being in effect for several months, many businesses are still grappling with its implications.

Julie Dallmann, product management director at CSC, noted, “While CTA regulation has been in effect since the start of this year, organisations are still grappling with what it means for them. The legal complexities involved are unchartered territory for many, with the different moving parts both challenging to interpret and balance.”

The research found that nearly all respondents (93%) are aware of the CTA, but only 45% understand its reporting requirements, and just 39% are aware of the reporting deadlines. Familiarity with exemptions under the CTA is even lower, with only a third of respondents being aware of them.

One major concern identified by the study is the lack of guidance on what non-U.S. entities need to do to comply. Nearly two-thirds (62%) of respondents cited this as a significant challenge, ahead of concerns about high fees, costs, and a lack of understanding about penalties for non-compliance, which were highlighted by nearly 40% of respondents.

“The extent to which businesses are still feeling unfamiliar or uncomfortable about their organisation’s ability to comply with the CTA is worrying but unsurprising,” Dallmann commented. “It’s clear the subjectiveness of the CTA, including ambiguity around exemptions and the question of who within an organisation meets the definition of being a beneficial owner, is causing uncertainty as to its provisions.”

With much of the responsibility for compliance falling on organisations themselves, many businesses are turning to third-party service providers for help. These providers offer expertise in navigating the complexities of the CTA, allowing companies to focus on their core business activities without being bogged down by compliance issues.

For more detailed insights, CSC’s report, “The Corporate Transparency Act: Readiness, Concerns, and Implications,” is available upon request.