Fanny Evans, Senior Associate, Morgan & Morgan
What is the CTA?
The CTA was enacted on January 1st, 2021 as part of the National Defense Authorization Act to prevent the use of companies to evade anti-money laundering rules or to hide other illegal activities. Under the CTA companies will be required to report information regarding its beneficial owners with a beneficial ownership registry maintained by the United States Treasury Department’s Financial Crimes Enforcement Network (FinCEN).
When is the effective date for the CTA and regulations?
The CTA will become effective on the date that its regulations are prescribed and issued by the Secretary of the United States Treasury, which shall be promulgated within one year after the enactment of the Act- that date being January 2022.
Who must report?
Entities required to report are called “reporting companies” under the CTA. A reporting company is broadly defined under the CTA as a corporation, limited liability company or other similar entity that is created under state law or formed under laws of a foreign jurisdiction and registered to do business in the United States. It is unclear whether a similar entity includes partnerships or trusts, and it is expected that the regulations will provide some clarity in this regard.
Who is exempt from reporting?
The CTA contains the exclusion of categories of entities from the definition of reporting company. An entity that falls into one of these categories will not be required to submit beneficial ownership information to FinCEN. To review the list of the exclusions CLICK HERE.
Who is considered a beneficial owner?
An individual who exercises substantial control over the company or who owns or control at least 25% of the company, and applicants, defined as anyone who files an application to form the company or register a foreign company in the United States. The CTA does not explain what constitutes “substantial control” and it is expected that the regulations will provide some clarity in this regard.
What information on the beneficial owner will be reported?
- Full legal name,
- Date of birth,
- Current residential or business street address, and
- A unique identification number, which can be from a non-expired US passport, non-expired US or state government ID, non-expired driver’s license, or a valid foreign passport.
Every reporting corporation must file a report within one year of the beneficial ownership information changing. Changes that trigger this report include (i) a change in substantial control of the reporting company, (ii) a change in contact details for a beneficial owner or applicant, and (iii) beneficial ownership exceeding or dropping below 25%.
Who has access to the FinCEN database?
The information collected in the FinCEN database will not be publicly available; but will be available to federal agencies engaged in national security, intelligence, or law enforcement activity, state or local law enforcement if authorized by a court.
Financial institutions may also receive this information with the consent of the reporting company.
What are the deadlines to report?
a) Any reporting company that is existing at the time regulations are effective must file the report within two years of the effective date of the regulations.
b) Any reporting company created after the effective date of the regulations must file the report while forming the corporation.
What are the sanctions?
Any person who willfully provides, or attempts to provide, false or fraudulent beneficial ownership information, including a false or fraudulent identifying photograph or document, or fails to file complete or file accurate reports or fails to provide updated reports will face penalties of up to $10,000 (accruing at $500 per day that the report is outstanding) and/or imprisonment for up to two years.
Disclosing or using beneficial ownership information without authorization is also subject to a $500 per day penalty and a penalty of up to $250,000 and/or 5 years imprisonment.
For more information, we suggest you contact a suitable attorney in the United States.
The information contained herein should not be interpreted, accepted, construed, or used and is not provided as legal advice and should not be treated as a substitute for legal consultations with a professional. It is merely a summary of the Corporate Transparency Act recently issued in The United States. Please note that the legislation referred to herein may be modified.
Morgan & Morgan promotes Kay-Linda Richardson to role of Senior Officer Manager of MMG Trust (BVI) Corp.
British Virgin Islands, January 14, 2020. Morgan & Morgan is pleased to announce the promotion of Ms. Kay-Linda Richardson to the role of Senior Officer, with the designation of Manager of MMG Trust (BVI) Corp.
The approval was granted by the British Virgin Islands Financial Services Commission, pursuant to section 19(2) of the Banks and Trust Companies Act, 1990, section 15 and Schedule 1A of the Regulatory Code, 2009 and the Guidelines for the Approved Persons Regime.
In her new role, Ms. Richardson will also assume additional team leadership responsibilities while maintaining focus on the Company´s complementary range of services and supervising the processes to comply with new international regulations for greater transparency.
With almost 30 years’ background in the fiduciary and corporate services industry, Ms. Richardson has concentrated her practice in administrative and corporate management, as well as establishing and implementing procedures and controls based on the BVI Financial Services Commission requirements. Ms. Richardson has an International Diploma in Management from the Chartered Management Institute, the level 4 Certificate in International Finance and Administration with ICSA, The Corporate Governance Institute and has attended several workshops and seminars related to corporate formation and management, trusts, compliance, and regulatory matters, among others.
About MMG Trust (BVI) Corp.
MMG Trust (BVI) Corp. was established in the British Virgin Islands in 1988 and specializes in providing service in fiduciary and corporate services for private and institutional clients, corporations, and charitable entities. The company is regulated by the BVI Financial Services Commission and holds a Class I Trust License under the Bank and Trust Companies Act, 1990.
Following the introduction in the British Virgin Islands (BVI) of the Economic Substance (Companies and Limited Partnerships) Act, 2018 (ESA), which became effective on January 1st, 2019, some questioned the sustainability of BVI’s position as a leading international financial centre.
While we cannot underestimate those concerns, we believe that there is also evidence that ESA will not have a negative impact on the BVI. In fact, it will help to curb any irrational fears that may have been detrimental to businesses, families, investors, and professionals using BVI vehicles in the recent times.
Although the economic substance reporting period has not concluded, my recent research supports the premise that despite introduction of this new legislation, BVI’s legal system and corporate services platform will remain stronger than other jurisdictions for international business activity.
You may be asking how can we be so positive? It is because for years we have witnessed the BVI maintain the crucial “philosophy” of a financial centre that is necessary for its success.
This philosophy is composed of human capital, technology, and the ability of regulators to make effective new laws with the support of highly sophisticated service providers. This means that any issues arising from rapidly evolving financial markets or instructions given by the European Union and the OECD in their efforts to enhance tax transparency can be dealt more efficiently. Expertise, talent, and technology are the key driving forces for the world’s leading financial centres.
Over the last decade BVI has had various changes in its legislation that have impacted the financial industry positively such as:(1) maintaining beneficial owner’s due diligence in its territory, (2) the private registry of beneficial owners (BOSS), (3) mandatory filing of company’s register of directors (ROD), (4) maintaining accounting records and underlying documentation and, (5) reporting obligations on ESA just to name a few in no particular order. Some of these changes have been more challenging than others but they all have one thing in common: BVI´s successful “philosophy”.
By reading the ESA and the Rules issued by the International Tax Authority you can tell that the regulator consulted professionals from law firms, trust companies and corporate service providers of the highest caliber with presence in the BVI when drafting the legislation. Whereas, in other jurisdictions it seems that they just decided to play safe and please the requests of the European Union overlooking what their financial industry needs to, not only survive, but grow.
We have reviewed the law and guidance notes on the economic substance of various jurisdictions and concluded that the ESA has provisions that makes it practical and convenient. We will give you three important and clear examples. The first, is the treatment of the companies that serve as holding businesses under the ESA. BVI took a straightforward approach by only placing its interest on the pure equity holding companies which are subject to a reduced substance test that can be met through the company´s registered agent; instead of having different categories of holding businesses as it is in other jurisdictions. This has allowed us at Morgan & Morgan to develop suitable solutions for our clients.
The second example is the treatment of the financial periods. ESA has two financial periods depending if the company was incorporated before or after the implementation date of the ESA. Therefore, just by looking at the incorporation date of the company you can tell its financial period. This method is valuable for a corporate service provider because it may have positive impact in their workload when reporting and advising clients. Furthermore, this approach makes simpler the management of a portfolio of companies for a corporate service provider rather than having the financial period defined by the company´s fiscal year, as it is very likely that will be different for all the companies they represent.
The third example is the reporting period. In some jurisdictions the reporting period is 6 months and in others 9 months; but all jurisdictions have in common that the reporting period is counted from the end of the financial period or fiscal year. Unlike other jurisdictions, in the BVI all companies incorporated before the ESA effective date have the same financial period and therefore the same reporting period. This makes easy to manage the annual reporting obligations for a high volume of companies.
Now, let´s talk about the technical side of ESA. BVI tied the ESA with their Beneficial Ownership Secure Search System Act, 2017 (the “BOSS Act”). Same as in other jurisdictions, annual reporting is mandatory, but it is so easy to do that this should not scare clients away. The BVI government partnered with the same auditing firm that developed the BOSS system to create the system for ESA, called BOSSes. At Morgan & Morgan we developed a similar system that facilitates clients providing us with the information on their companies and also makes it easier for us to report to the competent authority because we both are up to the same level of technology. It is difficult for corporate services providers to convince clients to comply with economic substance legislation in jurisdictions where the reports are to be submitted manually. BVI knows that its stability and future prosperity is inextricably tied to the efficient and safe use of digital technologies.
In June 2020, the BVI Financial Services Commission published its Statistical Bulletin. We were pleased to read that at said date the Registry of Corporate Affairs has the impressive total of 375,832 companies that have placed their confidence in the BVI philosophy. This figure and the past decade show us BVI is very aware that it has a financial sector that is becoming increasingly complex. With a more discerning and savvier clientele, and the competition among financial centres is heating up, the BVI is ready to prevail as one of the world´s premier jurisdictions.
For more information on these topics, please contact:
Morgan & Morgan
Panama, July 29, 2020.
Morgan & Morgan is pleased to announce that, for the fifth consecutive year, the firm´s Private Wealth Law practice group earned top ranking (Band 1) in the 2020 Chambers Hight Net Worth Guide, a publication aimed at the international private wealth market and a key reference point of the world´s leading firms in terms of service excellence and reputation.
“This is a big player in the Panamanian market, capable of dealing with complex tax matters. They are excellent at resolving problems with a practical and effective approach.”, a market commentator says to Chambers.
Three of Morgan & Morgan partners were also distinguished with top rankings in the guide:
Roberto Lewis Morgan, head of the practice with a depth of expertise in wealth preservation and distribution matters, including private foundations and corporate vehicles. A client comments to Chambers that he “gets things moving within the firm” and is “receptive to clients.”
Raul Castro, partner and advisor to the Panamanian government regarding international tax matters, CRS and FATCA implementation. One market insider says to Chambers Castro “is absolutely outstanding,” explaining: “He is the go-to person when you have something complex in Panama or the BVI. He has a very practical approach towards client needs.”
Luis Manzanares, partner and with substantial experience in wealth preservation matters, including tax and succession planning advice on investment funds, trusts and private interest foundations. “A savvy lawyer with huge international experience,” says one client to Chambers.
Morgan & Morgan has a seasoned team of lawyers with vast experience in traditional wealth protection and management structures such as discretionary and non-discretionary trusts, private interest foundations and corporations. More than five years ago, the firm started a new practice led by a group of young lawyers with vast knowledge in modern structures tailored for HNW individuals and families.
More information on this recognition is available here.
April 9, 2020.
At Morgan & Morgan we continue to look for ways to provide our services and continuity to the flow of information on changes in legislation in the different jurisdictions we have presence.
In light of the above, we are pleased to announce the launch of our podcast “Morgan Updates”.
This effort will feature key points on the latest legislations and developments relevant to our offshore jurisdictions.
In this first episode we will update you on the BVI Economic Substance Act (ESA), such as:
• All BVI companies are now required to comply with ESA, the BVI government has not extended the deadline.
• Key obligations to BVI companies you need to understand
• All BVI companies are obliged to file an annual report to the BVI competent authority this year
• We will guide you through the process so you can comply with the obligations
• We have worked on different and suitable solutions for your vehicles
Please contact at [email protected] so we can begin this process or to resolve any doubt or enquiries you may have.
Panama, December 16, 2019. Morgan & Morgan repeated as a leading Panamanian firm in The Legal 500 – Latin America Guide. Banking and Finance, Corporate and M&A, Dispute Resolution, Intellectual Property, Offshore and Shipping earned the top-tier rankings.
In addition, five lawyers of the firm received recommendations:
Fanny Evans, Senior Associate, Morgan & Morgan
In 2013, Virginia Ginni Rometty – CEO of IBM, said “I would like you to think of big data as the next natural resource that can be to our era what steam, electricity and oil were for the Industrial Age.”
Probably, you have read or heard: Data is the new oil! Data is the new bacon! Data is the new currency! These analogies have become very popular because data is now considered one of the most important commodities.
This is the result of the emergence of many successful Social Networks that, although they are not payment platforms, have turned the data into a source of value.
The need for a data-protection compliance program in business is becoming increasingly important after several high-profile leaks of companies’ data. Some of the biggest data breaches over the last two years include T-Mobile, Marriot, British Airways, Quora, Google, Orbitz and just recently, Capital One bank in the United States. A successful data breach may occur in less than one minute. Yet, businesses may take more than weeks to realize a breach has occurred.
When giving the first steps into complex waters like data protection, it is very common that companies get lost in the avalanche of legal requirements or in developing that product or service that might result attractive to its clients. However, for a business, changing the focus to issues that they may consider more interesting should never be an option because the results of data breaches include many types of damages: fromreputational to financial. Sometimes it can even affect an entire country as happened with, in my opinion, the wrongfully or unjustifiably called “Panama Papers”.
In the European Union, data protection is a fundamental right, and the General Data Protection Regulation (GDPR) which came into force on May 25th, 2018, is the new framework for protecting that right. Other countries are looking to the GDPR as they develop or implement their own laws to protect data.
Even if companies have an “it will not happen to me” approach to data breaches, in many countries, legislation is forcing them to rethink their reasoning. Here is where compliance plays an important role to help to plan a data-protection compliance program.
Here are five steps that can help as guidance when drafting or reviewing your data-protection compliance program:
- Understand your risks and legal and ethical obligations
One of the most important elements when building a data-protection compliance program is considering your risks and what is most important and mandatory to the business, instead of jumping into the requirements of a legislation without fully understanding your needs because not all risks or obligations are managed in the same manner or to the same extent. This program needs to set out the appropriate guidance in key areas.
Having said the above, the first step should always be to understand the business necessity to comply. This involves a careful analysis of what your obligations are, what the risk of breaching those obligations might be and what risks your company is willing to take.
- Document and review your policies
Your data-protection compliance program should be properly documented. Once the obligations and risks are understood, it is vital to document them. It is not just enough to know you are data privacy compliant. Your data-protection compliance program should be clearly verifiable and readily accessible through accurate reports and documentation for internal or external examinations.
The compliance officer shall perform a formal review on a regular basis to ensure that the data-protection compliance program is progressing as planned and that it is adjusted to meet any changes in legislation or the business.
- Allocate ownership
The responsibilities and tasks related to confidentiality and data-protection may overlap with other business policies, such as information technology security, recordkeeping, risks and audit, human resources, management of confidential information and others as it requires various skills to succeed. Therefore, the most advanced and elaborated data-protection compliance program will fail if there is no clear ownership of the tasks. Each business will structure the ownership differently, but it is vital that who is the owner of each task of the program is clearly understood and that the owners have the necessary resources, including training, so that they are competent to fulfil their role in a manner that is consistent with the business’ compliance culture.
- Provide training and the necessary resources
Always train your staff. If you have an informed team it will reduce your risk. Raise staff awareness.
Not only does training staff reduce the risk of breaches, it also demonstrates compliance before internal and external inquiries. For example, if an organization was to experience a data breach and they had documented their staff training on data protection, this would be used as evidence to prove that they had taken the appropriate steps to prevent a data breach and were taking the legislation seriously, if any.
Training should aim to ensure that all members of the team have an understanding of the data that they will have access to and the risks entailed. Training should be provided on a regular basis, and it ought to be performed again whenever there are significant changes to positions, structures, risks or obligations, or when actual issues arise. Also, the business shall incorporate data protection training into its process for onboarding new employees.
Businesses shall embed data-protection compliance program into it culture so that protecting information becomes second nature. This aspect, training and continuing education, should always include senior management.
- Review the Financial Action Task Force (FATF) Guidance on the Risk-Based Approach
A risk-based approach to compliance involves identifying the areas of high risk within the business’s compliance universe and building and prioritizing its compliance programs around these risks.
In order to assist both public authorities and the private sector in applying a risk-based approach, the FATF has adopted a series of guidance in co-operation with relevant sectors. Businesses shall review the guidance applicable to its industry to make sure that the appropriate mitigation measures in accordance with the level of risk are taken.
Data is one of the most important assets a business has. For that reason alone, data protection compliance program should be a top priority for any business.
Alvaro Tomas, partner and Vice President of Operations of the Fiduciary Unit of Morgan & Morgan
The Panamanian government has issued Law 99 of October 11, 2019, which establishes a General Tax Amnesty Law (“Amnesty”) that includes the elimination, for a limited period, of the penalties and surcharges caused by non-payment of the obligations with the National Treasury for corporations and private interest foundations. This law also includes amnesty for various types of interests and penalties resulting from non-payment of other taxes (for example: property or income tax).
Tax Amnesty Terms
The Amnesty Law will be extended until February 29, 2020 with exoneration as follows:
Full exoneration (100%) for those who pay in October and November 2019;
95% for those who pay in December 2019;
90% for those who pay in January 2020 and;
85% for those who pay on February 29, 2020.
The aforementioned Amnesty is the perfect opportunity to bring your legal vehicle into good standing without additional charges or to proceed with its dissolution instead of being struck off (which is the legally correct manner).
At Morgan & Morgan we have a range of seasoned professionals working alongside the young talent that can help you with the administration of your corporate vehicles and foundations. Please write to [email protected] if you are interested in more information.
In order to comply with the international guidelines regarding corporate transparency, the government of Panama enacted Law 52 of October 27, 2016 in the Official Gazette, which establishes the obligation for Panamanian companies and other entities to maintain accounting records, financial records and supporting documentation of all transactions that took place during the last five (5) years, so that their financial status can be easily determined with reasonable accuracy.
The corresponding records and documentation should be sufficient to demonstrate and evidence the transactions executed by the company accurately.
To whom does this Law apply?
Law 52 was regulated by Executive Decree No. 258 of September 13, 2018 and is applicable to legal entities that do not carry out operations to be completed or that will not have effects within the Republic of Panama.
Legal Entities are any corporation, limited liability companies, any other legal entity for commercial purposes and private interest foundation, incorporated and in force in accordance with the laws of the Republic of Panama
Regulations established in the Law
Accounting records must be held by the Resident Agent; otherwise, the clients are obliged to provide to the Resident Agent the physical address where they are held and the name and contact information of the person in charge of keeping these documents in custody. Additionally, if there is a change of address for any reason, the client must inform the Resident Agent of the new address within the next fifteen (15) days.
If the information is not kept by the Resident Agent, it must be delivered to it within the next fifteen (15) days counted as of the date on which this information is requested.
Additionally, Resident Agents are required to keep a copy of the records of shares and shareholders of the companies under their administration.
The Resident Agent will be obliged to resign as such in the event that the legal entity fail to provide the accounting records within the aforementioned period of fifteen (15) days, a new Resident Agent may not be registered until the grounds that gave rise to the sanction are remedied.
Such information regarding where the accounting records are held are relevant to Article 5 of Law 52, as:
The physical address where the accounting records are held and the name of the person who keeps the accounting records and supporting documentation.
The records must be prepared and endorsed by a Certified Public Accountant of the Republic of Panama.
Legal entities that fail to comply with the obligations established in Law 52 will be subject by the competent authorities to a fine of $1,000.00 and a penalty of $100.00 for each day of noncompliance.
Karla Pinilla, CPA
Morgan & Morgan
Naim Musa, Managing Director, Morgan & Morgan, Belize office
Pursuant to the International Business Companies (Intellectual Property Asset Prohibition) Regulations, 2019 and related legislation, companies incorporated under the International Business Companies Act of Belize (IBCs) shall not acquire, hold own or deal with any Intellectual Property Asset as follows:
• IBCs incorporated on or before 16 October 2017 shall not acquire, hold own or deal with any Intellectual Property Asset unless that asset is approved by the Belize International Financial Services Commission for holding IP assets up to 30 June 2021. After 30 June 2021 all Intellectual Property Assets must be disposed.
• IBCs incorporated on or after 17 October 2017 shall not acquire, hold own or deal with any Intellectual Property Asset.
Under law, “Intellectual Property Asset” means any intellectual property right in intangible assets, including but not limited to copyright, patents, trademarks, brand, and technical know-how, from which identifiable income accrues to the business (such income being separately identifiable from any income generated from any tangible asset in which the right subsists).
This law is currently in effect and we would encourage that clients take such necessary steps to dispose of all Intellectual Property Assets from any IBCs or, if applicable, seek necessary administrative approval for the holding of same. Failure to do so may result in penalties and fines.
You may forward any questions on this legislative amendment to our Belize office at [email protected]