Corporate Transparency Act for Real Estate Borrowers and Lenders: New Federal Reporting Requirements

Description

The CTA establishes beneficial ownership disclosure and reporting requirements for any newly formed and existing corporation, LLC or partnership which files formation documents in any state. Real estate counsel must understand the disclosure and other requirements of the CTA, including what constitutes a "beneficial owner" and the entities to which it applies.

Any entity that has filed formation documents in any state is considered a "reporting company" for purposes of the CTA, subject to certain exemptions. Newly formed entities must submit a disclosure of its beneficial owners to FinCEN at the time of formation, and existing entities must file the disclosure within two years. A reporting company must also provide updated information to FinCEN within one year upon a change in beneficial ownership.

Failure to comply with the new CTA reporting requirements will result in serious penalties. Failure to meet the reporting standards may result in civil penalties of up to $500 per day, and any individual who willfully provides false or fraudulent information may face criminal fines up to $10,000 and/or imprisonment for up to two years.

The CTA adds a new layer of reporting and compliance requirements for lenders in real estate finance transactions. Lenders will need to reassess their AML protocols to better match the requirements of the CTA.

Listen as our authoritative panel discusses the CTA, the new federal reporting requirements it imposes on borrowers, and the added due diligence issues it presents for lenders.