.svg)
The US Corporate Transparency Act (CTA) is set to undergo another transformation under the Trump administration, with US companies and persons exempted from its beneficial ownership reporting requirements.
On Friday (March 21), the Financial Crimes Enforcement Network (FinCEN) published an interim final rule detailing the changes, alongside a request for comment, which is open for 60 days.
As promised by the Trump administration earlier this month, the rule significantly narrows the scope of FinCEN’s beneficial ownership reporting requirements under the CTA.
It updates the definition of a “reporting company” to mean only those entities that are formed under the law of a foreign country and that have registered to do business in a US state.
Existing companies that meet this definition will have 30 days to file their beneficial ownership information to FinCEN, counting from the date of publication of the interim rule.
Initially, when the Trump administration announced its intention to revise the reporting requirements, these entities had been given until March 21 to file.
New companies classed as “reporting companies” will be given 30 days to file, counting from the date of their registration to do business in the US.
Significant loopholes
Critics of the new rule have argued that it opens up significant loopholes that can be easily exploited by non-US persons.
For example, non-US persons who do not want to file beneficial ownership information could simply abstain from registering a new company in a foreign jurisdiction, and register it only in a US state.
According to the new rules, although the company may be wholly-owned by non-US persons, it would be classed as a domestic company and would no longer be subject to the reporting requirements.
Similarly, a foreign company that does not want to reveal its real beneficial owners could simply arrange for US persons to stand in as beneficial owners, thereby evading the reporting requirement.
The new rules exempt US persons from the reporting requirements in all cases, including in cases where the US persons are the beneficial owners of a foreign company (which would otherwise have to file).
Is this what Congress wanted?
As covered by Vixio, critics of the new rule argue that it undermines the intent of Congress when it passed the CTA in 2020, and is therefore unconstitutional.
Ian Gary, executive director of the FACT Coalition, said that if the rule is finalised in its current form, it would exempt more than 99 percent of companies that were covered by the original statute.
“This decision is tantamount to nullifying the statute and is very unlikely to be upheld in court,” he said.
“Treasury must take these legal and constitutional considerations into account as part of the rulemaking.
Nelson Bunn, executive director of the National District Attorneys Association, made similar comments, noting that beneficial ownership information is a “necessity” for prosecuting crimes.
“Treasury’s interim final rule threatens to deny law enforcement the vital information they need to pursue illegitimate business fronts that jeopardise US national security and public safety,” he said.
“If finalised without amending, this proposal will undermine Congress’s intent and stunt efforts to achieve justice across the nation.”
Exemptions under the original law
Under the original CTA, the Treasury has the authority to grant exemptions from the reporting requirements, but only on the agreement of the Attorney General and the Department of Homeland Security.
If an exemption is granted, each of these parties must be satisfied that reporting by the entities in question “would not serve the public interest”.
They must also be satisfied that the reporting “would not be highly useful in national security, intelligence and law enforcement agency efforts to detect, prevent or prosecute money laundering, the financing of terrorism, proliferation finance, serious tax fraud or other crimes”.
The FACT Coalition argues that the Trump administration’s changes to the reporting requirements contradict two decades of evidence compiled by Congress on the use of anonymous shell companies in illicit activity.
The plans also contradict the Treasury’s own risk assessments, it said, including those outlined in its 2024 National Money Laundering Risk Assessment.
“Shell companies and the lack of timely access to beneficial ownership information are distinct vulnerabilities in the US anti-money laundering and countering the financing of terrorism (AML/CFT) system,” the agency said.
The Trump administration position
The CTA and its beneficial ownership reporting requirements have been the subject of litigation and counter litigation for more than two years — and this looks set to continue.
In early March, when the Trump administration announced its intention to “narrow” the scope of the reporting requirements, it said it was doing so primarily on behalf of US small businesses.
President Trump described the reporting requirements as “outrageous” and “invasive”, while Treasury Secretary Scott Bessent said that exempting US companies and persons from the requirements was a “victory for common sense”.
“Today’s action is part of President Trump’s bold agenda to unleash American prosperity by reining in burdensome regulations, in particular for small businesses that are the backbone of the American economy,” said Bessent.
