Treasury’s Financial Crimes Enforcement Network (FinCEN) has released a long-awaited final rule removing the requirement for U.S. entities and persons to report their beneficial ownership information.
The reporting requirement was put in place under the 2021 Corporate Transparency Act. Initially, a large swath of business entities was required to file reports with FinCEN detailing their owners, officers, and other control persons.
The beneficial ownership information, said the law’s proponents, would help enforcement authorities uncover shell company abuses, such as money laundering, financing of terrorist activities, and tax evasion. The CTA passed with broad bipartisan support as part of the 2021 National Defense Authorization Act, P.L. 116-283 (§§ 6401 to 6403).
However, the CTA and its reporting rule faced constitutional challenges in courts around the country. Opponents also raised concerns about the reporting burdens, the law’s steep penalties for failure to file, and information security.
Amid the litigation, Treasury extended the initial reporting deadline — then in March 2025 the agency released an interim final rule exempting U.S. entities and U.S. persons from the reporting requirement.
For nearly a year and a half, Republican lawmakers and small business groups have pushed for a final rule, contending this would provide them with certainty. They also urged FinCEN to “purge” domestic beneficial ownership information filed before the reporting requirement was scaled back.
Final rule exempts domestic entities, persons
On August 11, Treasury released a final rule solidifying exemptions for domestic entities and U.S. persons who are beneficial owners. The final rule also exempts foreign companies from the requirement to report U.S. person “company applicants.” In addition, it removes the requirement for U.S. persons to update or correct information used to obtain a FinCEN ID, whether as a beneficial owner or a company applicant.
Treasury unpacked the changes in a concurrently released Q&A on the final rule. As of August 12, the final rule was still pending publication in the Federal Register.
Treasury explains its authority for these actions in the final rule preamble. “The CTA expressly gives the Secretary broad authority to exempt entities from its reporting requirements under specified circumstances,” the agency explains. It quotes CTA statutory language directing Treasury to draft reporting requirements to “minimize burdens on reporting companies associated with the collection of [beneficial ownership] information … in light of the private compliance costs placed on legitimate businesses.”
Treasury notes comments it received on the interim final rule contending that the narrowed reporting requirement is “contrary to congressional intent.” However, the agency says the statutory language calls for a “balancing test between generating highly useful information, countering illicit activity, or complying with international standards on the one hand, and minimizing burden on the other.”
Though the final rule’s approach does not align with these commenters’ preference, “it is nonetheless consistent with the CTA’s legal framework,” says Treasury.
CTA proponents warn of consequences
Supporters of the original, broad, beneficial ownership reporting regime swiftly criticized Treasury’s action as enabling anonymous shell companies to continue illicit operations in the U.S.
“By exempting more than 99 percent of U.S. companies from the nation’s most powerful anti-money laundering law in a generation, the Corporate Transparency Act, Treasury has frustrated the ability of federal, state, and local law enforcement to investigate cartel finances at the precise moment when the Trump Administration claims to be exerting maximum pressure in the fight against fentanyl,” said Scott Greytak, of Transparency International U.S.
“This outcome stands in direct tension with Congress’s bipartisan intent in passing the Corporate Transparency Act. It is exceptionally troubling and unjustifiable that at this moment in U.S. history, the U.S. Treasury has effectively produced a blueprint that drug cartels and other criminals can use to finance their illicit operations inside the United States itself through the use of anonymous companies,” Greytak added.
The FACT Coalition’s Erica Hanichak described the final rule as “hand[ing] a major victory to U.S. adversaries, corrupt officials, fraudsters, and tax evaders who use our financial system to move and hide illicit wealth.”
The final rule comes “in the midst of the United States’ evaluation by the Financial Action Task Force (FATF), an international anti-money laundering standard setter,” explains the FACT Coalition. FATF identified beneficial ownership transparency as a priority, and “[b]acktracking on the CTA’s statutory definition of covered entities risks U.S. censure in the FATF mutual evaluation report.”
The OECD’s Global Forum on Transparency and Exchange of Information for Tax Purposes, too, recently called on the U.S. to report on changes to “allow availability of accurate, adequate and up-to-date beneficial ownership information of all relevant legal entities and arrangements.”
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