CTA For Small Businesses: Penalties for Noncompliance

With the Corporate Transparency Act taking effect in 2024, millions of small companies are expected to be bound by its requirement to file a beneficial owner information (BOI) report within specified time frames. The text of the CTA itself prescribes the following penalties for willful failure to report or update required information, or willfully providing false information:

• Civil fines of up to $500/day, continuing for the duration of the violation; and 
• Criminal fines of up to $10,000 and/or up to two years in prison.  

Notably, these penalties, while severe, do not apply to negligent violations of the CTA. That should come as a relief to anyone confused about what they are required to report. Furthermore, the CTA and rules do grant a safe harbor for updating inaccurate information within a specific time period. Thus, if anyone makes a filing and learns that it was not correct, there is some incentive (or at least no disincentive) to correct it.  

However, the FinCEN implementing rules and commentary specify that beneficial owners, company applicants,  senior officers, the company itself, and other individuals may be held liable for violations under various circumstances. In addition, false information can encompass details provided about the company or the individuals associated with the company. Thus, it is clear that FinCEN expects both the company and its associated individuals to take the filing and update requirements seriously.  

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