CTA Exemptions - Banks

There are 23 exemptions in the CTA (Corporate Transparency Act) that relieve some companies from the duty to file a beneficial ownership report.

Last week, I wrote about the public company exemption.  This week, I am going to outline the exemptions that exist for banks.

CTA Filing Obligations

The Corporate Transparency Act (CTA) obligates most companies in the U.S. to file a beneficial ownership report with FinCEN.  FinCEN is the financial crimes enforcement network of the U.S. Treasury Department.  Each beneficial ownership report must identify the company applicant who formed the company and each beneficial owner.  For each of these individuals, the report must provide the person's full legal name, data of birth, home address and a unique identifying number and provide an image of the document that provides that number.  Acceptable documents and numbers include an unexpired passport or drivers license.

Because of the sensitivity of this personally-identifiable information (PII) many companies will face an immense challenge to collect, store and compile this data into the FinCEN report.

Once filed, the company must amend its report within 30 days after any change in any item of previously-reported information (such as a change in home address, or a passport or drivers license renewal). 

Because the focus of the CTA, however, is to build a database of beneficial ownership to empower law enforcement to fight money laundering, FinCEN's proposed regulations exempt many types of companies whose beneficial ownership is already part of a government regulatory system.

Exemptions for Banks

Subsection 1010.380(c)(2)(iii) of the proposed regulation exempts any "Bank." The proposed regulation defines "bank" as it is used in any of: 

(A) Section 3 of the Federal Deposit Insurance Act (12 U.S.C. 1813);

(B) Section 2(a) of the Investment Company Act of 1940 (15 U.S.C. 80a-2(a)); or

(C) Section 202(a) of the Investment Advisers Act of 1940 (15 U.S.C. 80b-2(a)).

The first prong of this test broadly includes every state and federal bank, and their respective branches, that accept deposits that are insured by the FDIC.  Each entity of this type is heavily regulated by the FDIC so that this branch of the U.S. government knows the beneficial owners and persons in control of the entity. 

The second prong pull into the exemption several other entities that are treated like banks for purposes of the Investment Company Act (such as any member bank of the Federal Reserve System, and any  other banking institution that is subject to examination by any federal or state bank regulatory authority). 

The third prong is nearly identical to the second.  

Because banks are accustomed to maintaining controls and reporting on their compliance to a regulator, each bank should know its regulatory status for CTA exemption purposes.

Banks that undergo changes in regulatory authority, however, should remain alert for ways that such a change might impact their CTA exemption.