With the Corporate Transparency Act (“CTA”) going into effect on January 1, 2024, it should come as no surprise that bad actors are already exploiting the new law to collect personal information from companies and use it for unlawful purposes.
As we discussed in an earlier CSG Law client alert, The Corporate Transparency Act: How Will It Impact Your Business?, the U.S. Department of Treasury’s Financial Crimes Enforcement Network (“FinCEN”) will require certain companies to disclose ownership information about the company and the individuals who directly or indirectly own or control the company (“Beneficial Owners”). The information that must be reported about a company’s Beneficial Owners includes personal information about such individuals such as their name, date of birth, home address, and a unique identifying number (such as a passport number, driver’s license, or identification document issued by a governmental agency) and a picture of the identification document containing the unique identifying number. This information will be required to be submitted through a secure filing system available on FinCEN’s website.
The Better Business Bureau recently alerted the public to a scam in which bad actors are sending official-looking letters in the mail addressed from the “United States Business Regulations Department, Corporate Transparency Act Division, Process and Filing Center” and titled “Important Compliance Notice” or a similarly official-appearing notice, in which the recipient is advised that it has “reporting obligations under the Corporate Transparency Act” and must report ownership information by visiting a website or scanning a QR code. The letter may include unlawfully obtained personal information about the recipient and an official-looking seal and watermark to make the letter seem legitimate.
While the scams reported to date have been transmitted through the mail, it is reasonable to assume that bad actors will also use email, facsimile, and other means to try to lure victims to share sensitive information about Beneficial Owners. FinCEN has not indicated that it intends to send letters or reach out to businesses or individuals regarding the CTA or requesting personal information. Furthermore, FinCEN has advised that it will not start accepting reports under the CTA before January 1, 2024.
If you receive a letter relating to the CTA from what appears to be a governmental entity, you should disregard the letter and report it to the Better Business Bureau Scam Tracker. Do not visit any website referenced in any such communications, scan codes or click on links. If you are unsure whether a communication is legitimate, you can visit FinCEN’s official website at Beneficial Ownership Information Reporting | FinCEN.gov, or contact your CSG Law attorney.
Note also that when companies are compiling the necessary data about its Beneficial Owners, it should take appropriate, reasonable measures to protect the integrity, confidentiality, and availability of this information, to guard against unauthorized use of or access to such data. Please contact your CSG Law attorney for more information regarding the CTA and measures that companies can and should take to secure the personal data they collect and to protect against and to detect scams. Further, if you do fall victim to this or any other scam, your CSG Law attorney and our incident response team is here to help.
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About the authors:
Michelle J. Delaney serves as Counsel in the CSG Law Corporate & Securities Group. Michelle handles a range of corporate matters, including private M&A, venture capital, debt and equity financings and general corporate matters including business formation, governance and compliance. Prior to joining the firm, Michelle served as a clerk to the Honorable Francis J. Vernoia, Superior Court of New Jersey, Appellate Division.
Glenn L. Stein Practice Group Leader of the CSG Law Corporate & Securities Group, serves as a trusted legal advisor and counselor to clients with a diverse corporate practice involving mergers and acquisitions, private equity and venture capital financing transactions, debt offerings, corporate restructurings, joint ventures and joint development transactions. He also counsels a wide range of public and private companies on their day-to-day legal concerns, including the drafting and negotiation of operating agreements, stockholder agreements, employment agreements, consulting agreements, and contractual arrangements with distributors, manufacturers, suppliers and vendors.