Lifting the Veil: Corporate Transparency Act Compliance for EB-5 Stakeholders
Mariza McKee, Kutak Rock LLP and Mike Alvano, Kutak Rock LLP
This article originally appeared in the May 2024 issue of IIUSA’s Regional Center Business Journal
The EB-5 compliance landscape is facing a new regulatory horizon with the introduction of the Corporate Transparency Act (CTA). Enacted as part of the National Defense Authorization Act for Fiscal Year 2021, the CTA aims to enhance transparency and combat illegal activities by requiring certain business entities to disclose their beneficial ownership information to the Financial Crimes Enforcement Network (FinCEN) of the U.S. Department of the Treasury. This legislation, which came into effect on January 1, 2024, holds significant implications for the EB‑5 community, including regional centers, new commercial enterprises (NCEs), job-creating entities (JCEs), and their managers.
The CTA was enacted to address a critical gap in the United States’ anti-money laundering (AML) framework. Historically, the lack of a centralized registry for beneficial ownership information has been a significant challenge for law enforcement and regulatory agencies in combating illicit financial activities. Anonymous shell companies, which do not require disclosure of their true owners, have often been used to launder money, finance terrorism, evade taxes, and engage in other forms of corruption. The Financial Action Task Force (FATF), an international standard-setting body for AML and counter-terrorist financing measures, criticized the United States for its failure to collect beneficial ownership information, urging corrective action. In response to this criticism and the growing recognition of the risks posed by opaque corporate structures, Congress introduced the CTA as part of the broader Anti-Money Laundering Act of 2020. The CTA aims to enhance transparency, strengthen the integrity of the financial system, and provide law enforcement with the tools needed to track and prevent illicit activities facilitated through anonymous entities.
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