The US Corporate Transparency Act requires US business owners to register with the Financial Crimes Enforcement Network (FinCEN), a bureau of the US Department of the Treasury. FinCEN's mission is to safeguard the financial system from illicit use and combat money laundering and promote national security through the collection, analysis, and dissemination of financial intelligence and strategic use of financial authorities.
As part of a global effort to increase corporate transparency and combat illicit activities such as money laundering, tax evasion, and fraud, many nations have implemented comprehensive legislation requiring corporations to disclose their beneficial owners. Until the passage of the Act in 2021, the United States had faced criticism for lagging behind these international norms. The lack of transparency in states such as Delaware was particularly highlighted, due to the ease with which shell corporations could be established there, obscuring real owners and complicating investigations. The Act was introduced to address these gaps and align U.S. corporate transparency regulations with global standards.
The Act aims to assist law enforcement in detecting and preventing the misuse of companies and other legal entities for illicit purposes such as money laundering, financing terrorism, tax fraud, and similar criminal activities. The Act enhances transparency by mandating the disclosure of beneficial ownership information by nearly all US business entities, including foreign entities that have registered to do business in the US.