The Oklahoma Bar Journal December 2022

for the reporting company, bene ficial owners and applicants; and how updating the reports will be handled. 62 Avoiding applicant role. To avoid filing their personal infor mation in the FinCEN database and limit their professional risk, some lawyers will advise clients about the CTA’s requirements and leave compliance to the clients. 63 They will cease signing and filing the formation certificate with the secretary of state and shift that task to the client. To avoid any rep resentation to FinCEN about bene ficial ownership, they may advise clients about beneficial ownership and may assist in gathering the required information but will instruct clients to file the FinCEN reports. This approach reflects concerns about possible liability for reporting omissions, erroneous reported information or failure to update. 64 Lawyers may also take this approach if they sense a client may be untrustworthy. 65 Accepting applicant role. Many lawyers will decide that cli ents expect and need them to take an active role in the entity forma tion. That may mean lawyers will prepare and file the formation certificates and thus become appli cants under the CTA. Lawyers may also assume the tasks of determining beneficial owner ship and gathering and filing the reporting information. 66 Lawyers’ expanded role may be warranted when clients are less sophisticated about legal matters or electronic filings. Clients may also want lawyers’ expertise to ensure their legal obligations are met.

The CTA will require lawyers to reassess their role in forming new client entities. Beyond advising clients about the choice of entity and drafting the constituent documents, lawyers must decide whether they will become an applicant under the CTA rules.

entity and drafting the constituent documents, lawyers must decide whether they will become an applicant under the CTA rules. The proposed rules define an applicant as “any individual who files an application to form an entity or registers an entity to do business in the U.S.” An applicant also includes “any individual who directs or controls the filing of [the formation] document by another person.” 61 Lawyers must decide whether they will gather the personal informa tion for the client and file it with FinCEN and whether they will assume some role in updating the reports. These expanded roles will mean more professional risk to lawyers and higher costs for clients. These roles are new. Lawyers have no standard practices to guide them, and client expectations may vary. For these reasons, a written letter defining the scope of engage ment is imperative for lawyers forming legal entities. The engage ment letter should describe the client’s responsibilities under the CTA and state who will file the for mation certificate; who will gather and file the FinCEN information

Ethics Opinion 491 provide hypotheticals illustrating how the risk assessment is made and when lawyers should make further inquiry. The risk-based inquiry or client due diligence will determine the extent to which the lawyer documents beneficial ownership. For a trusted, long term client with individual own ers, oral representation and the constituent documents may suffice to evidence ownership. A new client whose beneficial ownership is buried under several layers will require more. Lawyers should, at a minimum, review each owner’s constituent documents, match the owner’s existence with the secre tary of state records and obtain an officer’s certificate attesting to ownership. 59 Lawyers might consider contacting the client’s bank to confirm that the bank’s documentation is consistent with the lawyer’s documentation. 60 To Be or Not to Be an ‘Applicant’ The CTA will require lawyers to reassess their role in forming new client entities. Beyond advis ing clients about the choice of

Filing and Updating Reported Information

Among their new roles, lawyers must decide whether they will gather the required personal infor mation and file it with FinCEN

12 | DECEMBER 2022

THE OKLAHOMA BAR JOURNAL