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New ownership transparency laws seek to curtail money laundering

On Behalf of | Dec 5, 2023 | White-Collar Crimes |

Money laundering is a complicated process. An individual or business tries to hide the true origins of capital, often in the hopes of using ill-gotten funds for seemingly legitimate purposes, like investing in a business or buying a house. Money obtained through criminal activity is difficult to use without triggering financial questions or a criminal investigation.

By passing the money through a business, those engaged in criminal activity can make illegitimate funds appear legal. They can pay taxes on those resources and then use them like they would capital acquired through legal business practices or employment. Money laundering is a common white-collar criminal offense, and those invested in businesses may be at increased risk of money laundering accusations after the implementation of a new transparency law.

How has the law changed?

The Corporate Transparency Act requires that businesses report the names and other identifying information of those involved with the company to the Financial Crimes Enforcement Network (FinCEN). Beginning in January 2024, corporations and limited liability companies (LLCs) will need to submit reports naming the individuals with a beneficial ownership interest.

The company will need to file a report naming anyone with a major ownership interest and also anyone who played a role in filing the papers to form the company. The goal of these new requirements is to help connect specific people with certain businesses and increase transparency to fight terrorism, organized crime and money laundering.

Those with an interest in multiple companies could be at risk of money laundering charges after the implementation of the Corporate Transparency Act. Innocent financial transactions might look suspect when regulatory officials know about someone’s other business investments. As a result, tracking changes to the law may help those engaged in business investing avoid or better respond to accusations of criminal activity.