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Ensuring Compliance with the Corporate Transparency Act: Crucial Questions for Your Wealth Advisor

By Ora Partners 

The U.S. Corporate Transparency Act (CTA) has significant implications for wealth management advisors and their clients. This legislation aims to combat money laundering, terrorist financing, and other illicit activities by requiring certain entities to disclose their beneficial ownership information to the Financial Crimes Enforcement Network (FinCEN). When working with a wealth management advisor, individuals should understand the critical aspects of this act and its impact. 

As a high-net-worth individual, familiarize yourself with the entities covered under the CTA. It applies to corporations, limited liability companies (LLCs), and similar legal structures formed under state law. These entities must report information about their beneficial owners, including individuals who directly or indirectly control 25% or more of the entity’s ownership interests. Furthermore, it’s important to understand your obligations with reporting requirements and compliance because of this new legislation which will come into effect January 1, 2024. 

Ensuring Compliance with The Corporate Transparency Act 

Affluent individuals with diversified portfolios, should work with a wealth advisor to be cognizant of the provisions outlined in the Corporate Transparency Act. Examples includes understanding the ins and outs of reporting obligations, beneficial ownership disclosure requirements, and potential penalties for non-compliance.  

Ensure your wealth manager establishes robust procedures for identifying and verifying beneficial owners of all corporate entities within your portfolio. This involves thorough due diligence, providing accurate information and reporting structures, and ensuring they implement appropriate risk-based assessments. 

The CTA emphasizes the importance of conducting enhanced due diligence on high-risk clients or those involved in specific industries prone to money laundering or illicit activities. Your wealth management advisor should develop tailored risk assessment frameworks to identify potential risks and implement additional monitoring measures accordingly.  

Wealth management advisors must maintain comprehensive records of their compliance efforts, including all relevant documentation related to beneficial ownership identification, verification processes, risk assessments, and ongoing monitoring activities. These records will be vital in demonstrating compliance during regulatory audits or investigations. Ensure your wealth management advisor shares these records with you and your legal team. 

Navigating Potential Challenges 

As the Corporate Transparency Act rolls out next year, high-net-worth individuals with diversified portfolios and businesses should familiarize themselves with its implications to ensure compliance. Engaging in open and transparent communication with your wealth management advisor becomes crucial to navigating this new regulatory landscape. Here are some critical questions to ask your wealth advisor. 

1. How will the CTA impact my current business structure? Understanding how this legislation affects your existing corporate structure is vital. Your wealth management advisor should be able to assess potential vulnerabilities and recommend necessary adjustments.  

2. What are the reporting requirements under the CTA? It is essential to comprehend what information needs to be disclosed, who will have access to it, and how frequently reporting must occur. Your wealth management advisor should guide you through these requirements while ensuring accurate and timely submissions.  

3. How can we proactively address potential risks associated with increased transparency? Discuss strategies for mitigating any adverse effects of enhanced transparency is crucial. For example, an offshore trust with a reputable wealth solutions firm could serve as a way to mitigate any privacy concerns.  

Of course, these questions are just the beginning toward understanding how the CTA will impact your financial portfolio and business. Seeking guidance from a wealth advisor or attorney is recommended to ensure your assets and business interests are =not only safeguarded but compliant. 


Navigating The Corporate Transparency Act: What Affluent Individuals Need to Know
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