Corporate Transparency Act Insights: Act Now or Risk Penalties Later

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Annie: Hello, everyone, and welcome to today's webinar, "Corporate Transparency Act Insights, Act Now or Risk Penalties Later." My name is Annie Triboletti. I will be your moderator.

Joining me today are two of CSC's experts. We have Alli Gerhart, who is our Vice President of International Compliance and Governance, and we also have David Jefferis, who is our Senior Director of Product Management for Global Compliance. So with that, I'd like to welcome David and Alli.

David: Great. Thank you, Annie. We appreciate it, and we want to start by saying thank you to our audience for registering and joining. And we have a lot of great content to share. We know that this is a very hot topic. And so if you are at the beginning of the journey with just trying to understand the CTA, we've got some content to kind of help you with some of those foundational concepts. But then if you're a little more intermediate or advanced in your understanding, we also have some updates with new guidance and kind of keeping you apprised of the latest and greatest.

And so really to take a quick look at the agenda, my colleague Alli is going to do the bulk of the heavy lifting. We're going to start at the beginning, and there's a lot of acronyms and terminology. What is the CTA? Who is FinCEN? What's a reporting company? Who is a beneficial owner? What the heck is a company applicant? So we're going to kind of step by step break down that terminology and those concepts and then, again, get into, for the benefit of those that have really been paying attention, what's new because every so often the Financial Crimes Enforcement Network, which is FinCEN, will come down from on high and give a little bit of clarity on some of the items that have been creating some confusion and ambiguity for folks. So we want to keep you apprised of some of that latest guidance. And then, at the very tail end, I'll jump back into the conversation to talk a little bit about the solutions that CSC actually brings to the table for organizations that are looking for some assistance with complying with the CTA.

As was noted by Annie, we do have a Q&A widget, which fills up pretty quickly with questions. But we love that engagement. We'll do our absolute best to answer as many as we can. Probably won't get to them all, but we'll try and we'll certainly look to leave a little bit of time at the tail end of today's webinar for Q&A as well. So without further ado, I'm going to turn things over to my colleague Alli.

Alli: Great. Thank you so much, David, and thank you to everyone for joining us today.

Broadly speaking, the CTA obligates reporting companies to report certain information about their company applicants and beneficial owners. Therefore, in order to really apply the CTA effectively, you need to understand those three key terms — reporting company, company applicant, and beneficial owner. For those who aren't yet familiar with those terms, no worries. I'm going to be talking about each of them in a high level. But within that discussion, I'll talk about recent guidance that FinCEN has given us to be able to work through these issues more effectively.

So, in general, a reporting company is a domestic corporation, LLC, or similar entity, or a foreign company registered to do business in the U.S. unless an exemption applies. A company applicant is the filing party. The term refers to the person who files the company formation document with the registry, and if different, the person that directed the filing. Beneficial owners are the company's ultimate owners and significant controllers.

The term "reporting company" means a corporation, limited liability company, or similar entity that is either created by the filing of a document with the secretary of state or similar office of a state or American Indian tribe, or formed under the law of a foreign country and registered to do business in the U.S. by filing a document with the secretary of state or similar office of a state or Indian tribe. FinCEN has so far declined to further define what constitutes a similar entity, and this ambiguity has raised several questions. What about S corps, HOAs, trusts, or sole proprietorships? FinCEN has offered some specific guidance on a few of these scenarios throughout this past year. Our prior webinars have addressed some of those FAQs as they became available.

However, the key to note is that a company will only be a reporting company if it was created by a filing of a document with the secretary of state or similar office. But it's that phrase "created by the filing of a document with a secretary of state or similar office" that is the North Star.

So reporting company exemptions, even if an entity meets the definition of a reporting company, you must then consider whether it meets any of the 23 exemptions. If an exemption applies, the entity is not a reporting company and the company does not need to file a BOI report with FinCEN.

The vast majority of the exemptions apply to regulated companies, such as financial institutions, SEC-regulated companies, public utilities, and insurance companies. The exemptions are specified by reference to definitions contained in particular laws, such as the Securities Exchange Act, the Investment Advisers Act, the Commodity Exchange Act, and others. If these apply to your business, you're probably already aware of them.

I assume people who are tuning into webinars of this sort at this stage are thinking they're probably going to be reporting companies, so I'm going to focus on a few key exemptions here — the large company exemption, the subsidiary of exempt entity exemption, and the inactive entity exemption. We'll look at these in a bit more detail and consider some scenarios.

Large operating company exemption. So for large, private, unregulated corporates, this exemption is key. There are three elements of this exemption, all of which must be satisfied for the exemption to apply.

First, the company must have more than 20 employees. Those employees must also be employed in the U.S. and must be employed by the entity itself, not aggregated across a corporate group. This lack of aggregation is a trap for the unwary. A company that would normally be thought of as a large corporate enterprise may not meet this definition if their employees are perhaps spread across different subsidiaries or otherwise not employed at the parent company level.

Second, the company must have at least $5 million in gross receipts or sales from U.S. income. That amount must be reported on the company's federal income tax or information return for the previous year, excluding amounts from sources outside the U.S. Helpfully where the company is part of a consolidated group, it's sufficient for that $5 million to be met by the group collectively rather than the entity individually.

And third, the company must have an operating presence at a physical office within the U.S. This has been defined to mean a physical location where the entity regularly conducts business. The location must be owned or leased by the entity and must be physically distinct from the place of business of any other unaffiliated entities.

FinCEN acknowledges that it's possible for companies to fluctuate above and below one or both of either the employee or the gross receipts or sales thresholds. When that occurs, the reporting company must file an updated BOI report. Updated BOI reports are due within 30 days of the occurrence of that change.

The next exemption is subsidiaries of exempt companies. This is another critical exemption for larger corporate structures. The exemption applies to an entity whose ownership interests are controlled or wholly owned, directly or indirectly, by certain types of exempt entities.

This is a fairly simple rule. There's no multi-element test, but there are two key things to be aware of here. First, notice the emphasis on wholly-owned entities. Entities that are only partially owned by an exempt entity or parent companies of an exempt entity do not qualify for this exemption. This was a deliberate decision by FinCEN. In their view, to extend the definition to these types of entities would be effectively creating a new exemption, which they declined to do.

Second thing to know, the exemption does not apply to subsidiaries of all exempt entities. The vast majority of exemptions do qualify for the subsidiary exemption, but there are four that do not and those are listed here on this slide. The thing to know is that if your parent company is relying on one of these exemptions, its wholly-owned subsidiaries cannot utilize the subsidiary exemption. In that case, the subsidiary will be a reporting company unless some other exemption applies.

Finally, the inactive company exemption. I frankly consider this to be the exemption of last resort. It has six elements, all of which must be satisfied for the exemption to apply. In my view, several of these elements contain a bit of uncomfortable ambiguity, and a change in circumstances could very quickly disqualify the entity, thereby requiring an updated BOI report.

The six elements are listed here. The first element is pretty clear. The entity must have been in existence on or before January 1st, 2020. The second element is that the entity was not engaged in active business. This is a little bit more ambiguous. Some commenters have questioned whether winding up activities could be considered active business. FinCEN declined to create specific rules, reasoning that there was simply too much variability in state practice and more specific examples would just lead to additional confusion.

The third element, no foreign ownership, should also be fairly simple to apply. The rule covers both direct and indirect and whole or partial ownership.

The fourth element, no change in ownership in the preceding 12 months. This was also flagged by some commenters to be somewhat ambiguous. Does a change in ownership apply to direct or indirect, whole or partial ownership, just like the previous element? In the commentary to the final rule, FinCEN states with respect to the meaning of any change in ownership, FinCEN believes that the proposed regulation is sufficiently clear. It would cover any and all changes in an entity's ownership.

The fifth element requires that the entity has not sent or received any funds in an amount greater than $1,000, either directly or through any financial account in which the entity or any affiliate has an interest in the proceeding 12-month period.

The sixth element requires that the entity does not otherwise hold any kind or type of assets, including any ownership interest in any entity. Commenters urged FinCEN to clarify that the exemption would apply even if an entity had a bank account or owned certain incidental assets, such as IP rights or website domains. Here again, FinCEN declined. I mention the commentary here because, in my role as in-house counsel, I see entities in our structure that for all practical purposes are not actively conducting business. However, getting rid of historical entities can be a real challenge. Sometimes entities can be around for so long that the original meaning or the original activities of that company are no longer really certain. It's no longer really clear what that entity does or what assets may be tied to it. And for that reason, you're a little bit reticent to get rid of them because you just don't know what might break if that entity were to go away. And it's that same ambiguity that makes this exemption really hard to rely on.

So putting these three exemptions together, here's a really simple example. Large Company is exempt under the large company exemption. It has direct and wholly-owned subsidiaries, who are all exempt under the subsidiary of exempt company exemption. You don't need to rely on any other exemption here.

Switching the example a little bit, here we have a JV partner with a 20% interest in JV sub A. LC sub 1 and its subsidiaries, LC sub 2 and LC sub 3 are still wholly owned by Large Company, so they can rely on the subsidiary exemption. However, JV sub A and JV sub B are only partially owned by Large Company. They will need to inquire about the status of JV partner, unless they independently qualify for some other exemption. We know that because JV sub A owns 100% of JV sub B, JV sub A will not qualify for the inactive company exemption. Here, we would need more information about JV partner, JV sub A, and JV sub B to determine whether any of these are operating companies or reporting companies.

Final example, here we have a wholly-owned corporate structure, but the entity qualifying for the large company exemption is not the ultimate parent. This can easily happen when, like here, the main operating company, Large Company, is held by a holding company with no employees of its own. Perhaps the enterprise also has a few subsidiary companies owned by the Holding Company rather than the Large Company.

The key thing to understand in this example is that neither the large company exemption, the subsidiary exemption, or the inactive company exemption apply to HoldCo. Assuming HoldCo is a corporation or other entity created by a filing with the secretary of state and no other exemption applies to HoldCo, HoldCo is a reporting company. Further, assuming the same facts about HC sub A and HC sub B, these entities will also be reporting companies. They cannot rely on the subsidiary exemption since they are not in the direct chain of ownership of Large Company.

So once you determine that you have a reporting company, the next key concept is the company applicant. But before you do too much analysis, first consider whether this is relevant to your reporting company. For this question, the key date is January 1st, 2024, the day the CTA came into effect. For domestic reporting companies created before 01/01/24, the foreign reporting companies and foreign companies registered to do business before 01/01/24, you do not need to report a company applicant. This is extremely helpful, and it was a deliberate policy decision. For companies that have been in existence for a long time, it may not actually be possible anymore to locate the name or the individual and the details of the person who originally filed that certificate of formation or registration. But after 01/01/24, you had notice of this requirement and are expected to collect those details.

So for companies created or registered on or after 01/01/24, there must be at least one but no more than two company applicants. The company applicants must be individuals, not legal entities or organizations. There are two types of company applicants. First, the individual who directly files the document that creates or registers the company, and two, if more than one person is involved in the filing, the individual who is primarily responsible for directing or controlling the filing. We'll talk more about updates to BOI report shortly, but for now it's helpful to know that once a company applicant information has been reported, there is no need to update this information if any of the company applicant's personal data changes.

Most companies are created or registered through their registered agent, like CSC. For CSC's customers utilizing our filing services, a CSC employee will be a company applicant, and we will be able to provide the company with the employee's name and FinCEN identifier in order for the company to file any necessary BOI report.

The question of who is primarily responsible for the filing can be a bit more ambiguous. It's easy to envision a scenario where more than two people are involved. So you have to make a bit of a judgment call about who is primarily responsible. In my organization, that person is generally me as the attorney in charge of our corporate governance. I don't personally file the incorporation document, but I would coordinate with business leaders to make sure that need is met. I'd prepare the filing. I'd direct our service teams when it's time to actually complete the filing. So for all intents and purposes I would be a company applicant in that scenario. I've also spoken to several law firms who are taking the position that the attorney in charge of the matter itself is also a company applicant. Again this is a judgment call based on the particular facts and circumstances of your involvement.

Finally, every reporting company must report at least one beneficial owner, but there is no maximum number of possible beneficial owners. Beneficial owners are always individuals, and there are two types — individuals who directly or indirectly own or control at least 25% of the ownership interests of the reporting company, and two, individuals who exercise substantial control over the reporting company.

Reporting companies are required to report all individuals who meet the ownership test and all individuals who exercise substantial control. So what is an ownership interest? Under the CTA, an ownership interest is very broad, and it includes equity, stock, or voting rights, capital or profits interest, convertible instruments, options or other non-binding privileges to buy or sell any of the foregoing, or as a catchall any other instrument, contract, or other mechanism used to establish control. A 25% or greater interest in any of these items makes an individual a beneficial owner under the ownership interest test.

So what does it mean to have substantial control? Again, the test is very broad and includes any individual meeting any of the four general criteria. First, a senior officer of the company, such as a president, CEO, CFO, COO, general counsel, or other officer, regardless of title, who perform a similar function. Second, someone with the authority to appoint or remove certain officers or a majority of directors. Third, someone who directs, determines, or has substantial influence over important decisions, or as a catchall has any other form of substantial control.

Given all of these different ways to become a beneficial owner, the definition could potentially include a lot of people. Depending on the company's ownership and control structure, there may be some ambiguity. To illustrate the analysis, FinCEN provides a few scenarios in its written guidance.

The most complex example is listed here for a reporting company that is a corporation with multiple indirect owners through Company Y and Company Z. In this example, Individuals A, B, C, and F are beneficial owners. Individual A is the CFO, Individual C is the CEO and president, and Individual F does not have an official title but we're told he does direct important decisions. These individuals all meet the substantial control test.

Individual B owns 70% of Company Y's 50% interest in the Reporting Company. Individual B's indirect ownership interest can be calculated by multiplying 50% time 70% for a total interest of 35%. Therefore, Individual B is also a beneficial owner because his indirect ownership interest in the Reporting Company exceeds 25%.

Individuals D and E only own 25% of Company Z's 50%, for a total interest of only 12.5% each. Absent any other facts indicating any other form of ownership and control, we can conclude that Individuals D and E are not beneficial owners.

Although we've already determined that Individual A is a beneficial owner under the control test, it's also worth mentioning that he's also a beneficial owner under the ownership test. He owns 30% of Company Y's 50%, which equals 15%, but he also owns 25% of Company Z's 50%, which equals 12.5%. Therefore, his total indirect ownership interest in the reporting company is 15% plus 12.5%, or 27.5%.

For purposes of filing a BOI report, it's not necessary to specify how exactly someone qualifies as a beneficial owner. I include that information here just to more fully explain the analysis.

The prior example was the most complex example available in FinCEN's guidance. But one of the major points of difficulty we've seen is how to apply the beneficial owner analysis when a trust directly or indirectly holds shares in a reporting company.

In the April FAQs, FinCEN clarified that, yes, beneficial owners can own or control a reporting company through trusts. Unfortunately, for the beneficial ownership analysis, when it comes to trusts, there's a tremendous amount of variability. In April, FinCEN did attempt to provide some clarity, but noted that particular facts and circumstances determine whether specific trustees, beneficiaries, grantors, settlors, or other individuals with roles in a particular trust are considered beneficial owners.

The following conditions indicate that an individual owns or controls an ownership interest through a trust. One, a trustee or other individual that has the authority to dispose of trust assets. Two, a beneficiary that is the sole permissible recipient of income and principal from the trust or has the right to demand a distribution or withdraw of substantially all of the assets from the trust. Or three, a grantor or settler who has the right to revoke the trust or otherwise withdraw the assets of the trust. Note that this list may not be exhaustive of all of the conditions under which an individual owns or controls ownership interest through a trust. There may be other arrangements under which individuals associated with a trust may be considered a beneficial owner of the underlying reporting company.

In FinCEN's April FAQs, they also included an important answer to reporting obligations in respective corporate trustees. By corporate trustee, we mean a legal entity, rather than an individual, that exercises the powers of the trustee. If ownership interests in a reporting company are owned or controlled by a trust with a corporate trustee, the reporting company must determine whether any of the corporate trustee's individual beneficial owners indirectly own or control at least 25% of the ownership interests of a reporting company through their ownership interests in the corporate trustee. In other words, look through the corporate structure of the corporate trustee. It's worth noting, though, that this may be really hard to do. A corporate trustee is likely a third party over which you have no information or even any right to information. If you're employed or engaged by the reporting company, you may be relying on counsel or management of the corporate trustee for this information.

Fortunately, the FAQs go on to say that the reporting company may but is not required to report the name of the corporate trustee in lieu of information about an individual beneficial owner if all of the following three conditions are met. First, the corporate trustee is an entity that is exempt from the reporting requirements. The individual beneficial owner owns or controls at least 25% of the ownership interests in the reporting company only by virtue of ownership interests in the corporate trustee. And three, the individual beneficial owner does not exercise substantial control over the reporting company.

Finally, in addition to considering whether the beneficial owners of a corporate trustee own or control the ownership interests of a reporting company whose ownership interests are held in trust, it may be necessary to consider whether any owners of or individuals employed or engaged by the corporate trustee exercise substantial control over a reporting company. The factors for determining substantial control by an individual connected with a corporate trustee are the same as for any other beneficial owner.

Report contents, timing and penalties. So once you have determined that an entity is a reporting company and have determined its company applicants and beneficial owners, you'll need to file the appropriate information with FinCEN. There are five pieces of information required for each reporting company: full name of the reporting company; all trade names, fictitious names, or DBAs regardless of whether the name is registered; street address of the company's principal place of business; jurisdiction of formation; and IRS taxpayer identification number.

If a reporting company does not have a principal place of business in the United States, use the following hierarchy of locations. First, if a reporting company does not have a principal place of business in the United States, then the company must report the primary location in the United States where it conducts business. Second, if a reporting company has no principal place of business in the U.S. and conducts business at more than one location in the U.S., then the reporting company may report as its primary location the address of any of those locations where the reporting company receives important correspondence. And third, if the reporting company has no principal place of business in the U.S. and does not conduct business functions at any location in the U.S., then its primary location is the address in the U.S. of the person designated to accept service of legal process on its behalf. Usually that's your registered agent.

So the requirement to report the TIN for every reporting company has been a source of confusion at the outset. We get this question all the time. What about disregarded entities that do not have a TIN? What should they report? Finally, FinCEN gave us some answers in July.

There are three types of TINs: the Employer Identification Number or EIN, which are assigned to companies; Social Security numbers used by individuals, usually U.S. citizens and permanent residents; and individual taxpayer identification number or ITIN, also used by individuals, generally non-resident foreign nationals who have a tax filing obligation in the U.S.

Often a disregarded entity will not have its own EIN. But if a disregarded entity does happen to have an EIN, you can report that number. The key thing to know is that a disregarded entity that does not have an EIN is generally not required to obtain one just to meet its BOI filing requirements.

If the disregarded entity is a single member LLC or otherwise has only one owner that is an individual with a Social Security number or ITIN, the disregarded entity may report that individual's Social Security number or ITIN. If the disregarded entity is owned by a U.S. entity that has an EIN, the disregarded entity may report the other entity's EIN. If the disregarded entity is owned by another disregarded entity or a chain of disregarded entities, the disregarded entity may report the TIN of the first owner up the chain of disregarded entities that has a TIN.

For newly formed companies that need to obtain a tax identification number quickly, FinCEN has also provided more comprehensive instructions about how to do this.

For each beneficial owner and company applicant, the reporting company must file the full legal name of the individual, the date of birth for the individual, the residential street address, noting that the company applicant can report a business address under certain circumstances, a unique identifying number from certain government documents issued to the individual, and an image of the document containing the unique identifying number that also includes a photograph of the individual. Acceptable documents containing the unique identifying numbers are non-expired passports, driver's licenses, and other state, local, or tribal identification documents.

For privacy reasons some company applicants and beneficial owners may not wish to share their personal data with the reporting company. The CTA offers an alternative reporting option called the FinCEN identifier. The process to obtain a FinCEN identifier is fairly quick and can be done online. The individual will simply submit all of their own personal data to FinCEN and receive an identification number. The individual can then share that number with the reporting company in lieu of their personal data. The reporting company then submits the individual's name and FinCEN identifier rather than the other fields. An entity may also obtain a FinCEN identifier when it submits a BOI report or at any time thereafter.

Although the FinCEN identifier is helpful for protecting personal information, there are a couple of limitations and concerns you should be aware of. First, an individual or reporting company may only obtain one FinCEN identifier. This, of course, makes sense, but someone could easily forget or lose that number.

But the biggest concern is that issuance of a FinCEN identifier places the holder under a lifelong obligation to file an update within 30 days after any of the application information changes. Failure to do so is a reporting violation subject to civil and criminal penalties. This is concerning, but the obligation still exists even if the individual no longer has any interest in or relationship to a reporting company in the future. FinCEN has previously stated that they're aware of that burden and are looking at options, but so far there have been no further developments.

Time to file a BOI report depends on when the domestic reporting company was first created or when the foreign reporting company was first registered to do business in the U.S. As I'm sure everyone is aware, companies created or registered before 01/01/24 must file BOI reports by 01/01/25. Companies created or registered during the 2024 calendar year must file within 90 days. And for companies formed or registered on or after 01/01/25, the reporting deadline shortens to 30 calendar days of its creation or registration.

BOI reports must be updated within 30 calendar days of any change to reported information, with two notable exceptions. There is no requirement to report a company's termination or dissolution, and there is no requirement to file an updated report for any changes to personal information of a company applicant. Additionally, if an inaccuracy is detected in a previously filed BOI report, the company must file a corrected report no later than 30 calendar days after the date that the company becomes aware of the inaccuracy or had reason to know it.

Dissolved or terminated entities. This is another key update that FinCEN issued for us in July. If a reporting company is dissolved or terminated before its initial BOI report would otherwise fall due, must it still file a BOI report? So earlier this year, there was a school of thought that because a BOI report must be correct as of the date of filing, a terminated entity that has no beneficial owners on that date, therefore it must follow that there's no obligation to file a BOI report.

Although there's some good logic to this, FinCEN has recently made clear that that is not correct. If a company ceased to exist before the CTA came into effect on January 1st, 2024, there is no filing obligation. However, if it continued to exist at any time in 2024, even if it terminated before the BOI report was due, the company is required to file a BOI report. By cease to exist, FinCEN means that the company entirely completed the process of formally and irrevocably dissolving, for example by filing dissolution paperwork with the applicable registry, receiving written confirmation of dissolution, paying related taxes or fees, ceasing to conduct any business, and winding up its affairs. An administrative dissolution or failure to pay annual franchise taxes likely does not meet this requirement.

We actually have this scenario at CSC. We had one subsidiary that had not been engaged in any active business for a long time. We filed the certificate of dissolution in 2023, but did not receive final confirmation from the Secretary of State until mid January of 2024. Technically, the entity continued to exist until that confirmation was received. So that's one more entity that I'm adding to our list of reporting companies.

Interestingly, the guidance did not address who the terminated company should report as its beneficial owners. After all, a company that does not exist does not have any owners. However, I think it's only logical that the reporting company should report the beneficial owners which owned or controlled the company immediately prior to its termination. That's what I'm doing, absent any further or contrary guidance from FinCEN. It's also consistent with another rule concerning reporting companies that file an initial BOI report, then later terminate. In this case, there's no obligation or even any opportunity to update the BOI report to indicate that the entity is no longer in existence.

So since June there has been quite a bit of litigation activity over the CTA. In our March webinar, we discussed the then very recent ruling from the Northern District of Alabama, finding the CTA unconstitutional. The rule enjoined FinCEN from enforcing the CTA against the plaintiffs in that case, but it did not affect the obligations of other non-party companies. Therefore, it leaves intact every other company's obligation to file by January 1st, 2025, if it's an existing company. As anticipated, the case is currently on appeal to the 11th Circuit, and a hearing in this case is scheduled for later this month.

There are, well, at least six other constitutional challenges filed in district courts across the country. Most recently a case was filed in the District of Utah at the end of July. We can anticipate that different courts and different circuits will come to different conclusions on constitutionality, and that'll set us up for further appeals on the issue.

At this point, however, I find it highly improbable that we'll have a final judgment on constitutionality before the end of this year. We know that many companies have been watching these constitutional challenges and waiting to file BOI reports for existing companies potentially until we have a better sense of how these challenges will fare. I certainly see the logic in this approach. However, we're now less than four months from the filing deadline. We're imploring our customers, "Please do not wait until the last minute to make these filings. If you've not already filed at this point, please at least consider finishing your analysis of the filing requirements as it relates to your structure and also start gathering the information that you will need to file for each company and for each beneficial owner and start having those conversations with your beneficial owners to the extent that they're not aware that they would be covered by this legislation."

So with that, David, I will turn it over to you.

David: Awesome. Thank you, Alli. We've had a lot of very intriguing questions come in through the Q&A. I've answered the ones that I feel comfortable answering, but I've left a lot for you, so I know you'll peruse that and we'll try to save a little bit of time at the back end to try to answer some more of the questions that are coming in. And we, again, thank everyone for their engagement.

So I'm here to talk a little bit about how CSC can assist clients with their CTA compliance. And so for any folks that may have joined us, back in June, the last time we did a CTA update webinar, we were sharing at that time the results of the survey that we commissioned, where we spoke with over 200 organizations, asked them various questions about the CTA, and really the big kind of headline from that survey was that 83% of our respondents had concerns and most of them were kind of a high degree of concern over their organization's ability to comply with the CTA. So if you have questions, you have concerns, you're certainly not alone. And the good story here is that CSC absolutely has really a suite of services that we can bring to bear to, again, assist our clients with this new compliance obligation. So let's kind of take a look at the offering that CSC has.

So really at the heart of our offering is what we would describe as an end to-end filing service. Now to be fair, we are relying on our clients to make the critical determinations as to whether or not an entity meets one of the exemptions, like Alli talked about, or if in fact it is a so-called reporting company. We're also relying on our clients to make those important determinations about who actually should be classified as a beneficial owner, whether that's via ownership or via substantial control or both. And then also, if we're talking about entities formed in 2024, also kind of getting into that company applicant decision as well in terms of who meets that particular designation. But once you've sort of worked through that, we really can step in and take over.

And so we have a dedicated team of individuals that have been doing this day and day out. Since the beginning of the year, we've done thousands upon thousands of filings, and we can be, again, very prescriptive in terms of the information that we would need from your organization to be able to file on your behalf. And so it gets into, again, reporting company details, like the legal name, where is it formed, DBAs, EIN or similar tax identification number, principal place of business, information on beneficial owners and company applicants, which could be something as simple as a 12-digit FinCEN ID or as involved in quite a lot of personal information about those individuals. And we provide our clients with multiple avenues and secure avenues to provide that data to CSC so that effectively we can take over and prepare and file those reports on your behalf. And we certainly provide filing confirmation evidence back to clients to know that we, in fact, did complete the filing and it has been accepted with FinCEN.

There's also what I would describe as an optional element to our service, where if you find yourself in a situation where you've done the legwork of identifying beneficial owners, but maybe some of these individuals are not sort of in the day-to-day of your business, you could, for an additional fee, have CSC actually reach out on your behalf, with a lot of context provided, to actually gather the necessary information for those beneficial owners for inclusion in the reports that we would file on behalf of your organization. So again sort of taking on the nagging and the work involved and sort of corralling information for beneficial owners on behalf of your organization.

Now the focal point for most of the organizations that we speak with is on what are described as initial filings, which is the first time that you're filing with FinCEN, which again as we've discussed would be at the very beginning of next year, January 1st, 2025, for entities formed prior to this year. But again, for entities formed within 2024, you've got just this 90-day window in which to work.

So again, most folks are kind of hyperfocused on these so-called initial filings. But as you may be aware, there's also a need to submit amended filings if information changes about your reporting companies or your beneficial owners. There's also the concept of corrected filing. So if you inadvertently provide information that is not accurate and then it occurs to you that a mistake was made, a corrected filing would be applicable in that circumstance. And then there's also the concept of a newly exempt filing. And so the idea here is that you do the upfront analysis, an entity does not appear to meet any of those 23 exemptions, and so either you or through CSC you submit an initial beneficial ownership information report. But then circumstances change and that entity now, in fact, does meet an exemption, so you or we on your behalf could submit what's called a newly exempt filing. So we do offer, again, filings around sort of those four scenarios, which are the four different types of beneficial ownership filings with FinCEN.

We do have a smart form on the CSC Global dashboard that you can use to provide the information that we require. And then for organizations with a higher volume of entities, we also can work in spreadsheets, just to make it more efficient for you to provide CSC with the information needed to file on your behalf.

So one last thing I'll mention about the filing service, I mentioned the dedicated team of individuals. Despite the fact that the CTA is obviously a relatively new piece of legislation that just went into effect at the beginning of the year, if you sort of take a step back and break it down, what does it really involve? It involves, from our standpoint of the filing service, gathering information, letting you know what we need, collecting and aggregating, submitting, drafting, filing, giving evidence back, and that is really at the heart of what we've done for over 100 years as a service organization. So it's very much in our wheelhouse, and we've really developed a very refined process for handling these filings on behalf of our clients.

One last thing I'll mention before I go to the next slide is that CSC does not have to act as your registered agent in order to engage us to file a beneficial ownership report on your behalf. But there are I'm sure folks on the call where we are acting as your registered agent, there may be folks on the call where we also prepare and file annual reports on your behalf, and so in those circumstances there's quite a bit of information that we have about your companies at our disposal, so to speak, within our Navigator platform. We would know the legal entity name, where it's formed, the formation date. If you're using us for annual reports, we would likely have an EIN or similar tax ID, a principal place of business. If you're engaging us to form or file or renew DBAs, we would likely have your DBAs on file. So one of the services that we can provide is effectively staging all the information that we have for your companies, and then basically you would go through it and say, okay, let's delete out these entities if there are some that have exemptions, right? Obviously, you only want us to file for those entities that are obligated to file. And then sort of filling in the missing pieces with who the beneficial owners and/or company applicants would be.

So that's a complementary service. So we're happy to, again, provide you with the data that we have as your agent and potentially annual report filing partner, just to get you kind of one step closer to the finish line. You complete the rest, hand it back, and then we take over the legwork, the hard work of actually doing filings, which really are one reporting company at a time. So even if you have, let's say, beneficial owners that cut across numerous entities, where there's a lot of uniformity, it's still one filing per reporting company. So it can be a bit time consuming. The ultimate value proposition is get this off your plate, focus on strategic things that matter for your organization, and let us do sort of the grunt work of the filings in this case with FinCEN on your behalf.

Now what I'll say on the next slide is that we work with clients in some cases that have a filing here or a filing there, but we also work with organizations that have in some cases dozens or hundreds of filings because they're unable to find exemptions in many cases. And so we absolutely can work with you on these larger projects. And also, if you have maybe unique requirements around what invoicing should look like or how evidence should be delivered that's confirming the filings have been accepted, while we do have a certainly vetted standard process that we follow, certainly we're open to conversations about doing something that's a little bit different than the standard if you have maybe some unique needs around CTA compliance. So happy to have those conversations.

The last slide that I'll talk about, before we go to questions and we have a quick poll, is a little bit of a nod to our Entity Management platform. Now I do like on this slide to be as clear as I can possibly be, which is to say that you can absolutely engage CSC to file I almost said annual reports. You can engage us to file annual reports, but what I meant to say is you can engage CSC to file beneficial ownership reports with FinCEN on your behalf and not spend a penny on technology. You could simply provide us the information that we need, and we file on your behalf for a filing fee.

However, one thing to consider is not only is this an obligation upfront, the so-called initial filing, but as we talked about a little bit, if things change, there's a need to submit amended filings, and so you might start to ask yourself, "How comfortable are we that we have a source of truth for all of this information on a now and going forward basis?"

And so we have an award-winning Entity Management solution, where you can track all of your legal entities, flag those that have the reporting obligation versus those that are exempt. You can track your beneficial owners. You also have the ability to either track FinCEN IDs if you have them. Or in absence of FinCEN IDs, you can start tracking all the personal information, not just the legal name, but residential address and birthday, driver's license or passport number. You could very securely store a scanned image of the identifying document, which would also be needed for the submission to FinCEN.

So there's a framework for capturing and managing all that data in the platform. There's even a visualization report around beneficial owners that went live late last year, where if you have the circumstance where you have individuals that are sort of further up the org chart, and Alli was doing a great job of some examples of that, our visualization tool, based on your ownership records, can actually create that org chart picture, show you the active appointments kind of as you go up the chain to help you kind of see the pieces of the puzzle to make those critical determinations as to who has substantial control or who might directly or indirectly possess more than 25%, 25% or more ownership in an underlying reporting company. So not a required component, to be quite clear, of our filing service, but an optional technology element that can assist organizations on a going forward basis.