Preface

The U.S. Treasury Department has decided to abolish a regulatory requirement that mandated U.S. small businesses to disclose owner information to the federal government. Initially introduced under the Corporate Transparency Act of 2021, this regulation aimed to prevent illegal activities through anonymous shell companies by collecting basic data on "beneficial owners." The original law intended to enforce compliance through financial penalties. However, the Financial Crimes Enforcement Network (FinCEN) has recently issued an interim final rule exempting U.S. citizens and companies from this requirement, marking a significant departure from the initial intent of the act.

Lazy bag

The U.S. Treasury's decision to drop the owner reporting rule raises concerns over allowing loopholes for illicit activities. This exemption significantly reduces the number of entities required to report, shifting the regulatory landscape away from its original goal.

Main Body

The U.S. Department of Treasury's recent announcement to revoke the requirement for small businesses to report ownership information has sparked significant debate among policymakers, legal experts, and advocacy groups. Originally mandated by the Corporate Transparency Act in 2021, this rule aimed to tackle the issue of anonymity in business ownership, which has been exploited by criminals to launder money through opaque shell companies in the U.S. The requirement was initially slated to effect with comprehensive penalties for noncompliance.

However, amidst numerous delays caused by legal challenges, the Financial Crimes Enforcement Network (FinCEN), a branch of the Treasury, has issued a surprising interim final rule. This rule, dated March 21, exempts all U.S.-based businesses from the ownership reporting requirement. It allows a public comment period and is expected to be finalized later this year. According to legal analysts, this move fundamentally dilutes the Corporate Transparency Act’s main goal, potentially reinstating opportunities for illicit financial maneuvers.

FinCEN, tasked with overseeing compliance, estimates that the revised rule will initially affect only about 20,000 entities, a stark reduction from the 32.6 million businesses anticipated under the original mandate. This revised scope mainly impacts foreign companies, while U.S.-registered businesses with domestic beneficial owners will face fewer obligations.

Experts, including Erin Bryan, a partner at Dorsey & Whitney, indicate that this abrupt policy shift renders a substantial portion of shell companies exempt from reporting. Bryan highlights that this deviation undermines efforts established by most Western governments, which already have similar regulations in place, enhancing financial transparency.

Despite criticisms, officials defend the decision as aligning with the Trump administration's deregulatory pursuits, as mentioned by Andrea Gacki, FinCEN’s director since 2023. The decision follows a temporary suspension of the rule enforcement by the Trump administration, highlighting a continuous regulatory tug-of-war.

Though FinCEN remains tight-lipped on the broader implications, the rule change also considers alternative data sources and weighs regulatory burdens against public interests. Yet, transparency advocates caution that this provides an opportunity for wrongdoers to sidestep scrutiny.

Scott Greytak of Transparency International U.S. expressed concerns that reversing the rule potentially allows criminals to form and operate shell companies within the U.S., posing a national security threat.

Key Insights Table

Aspect	Description
New FinCEN Rule	Exempts U.S. businesses from reporting ownership details; applies only to certain foreign entities.
Impact of Exemption	Reduces compliance scope, raising concerns over money laundering risks.

Last edited at：2025/3/25