1.What Just Happened?

The CTA, passed in 2021, was designed to crack down on anonymous shell companies and strengthen anti-money laundering safeguards. It required most corporations and LLCs to disclose their “beneficial owners”—the individuals who ultimately control or benefit from the entity.

However, enforcement of the rule has been delayed, litigated, and debated since its inception. Now, FinCEN’s interim final rule excludes U.S. entities and individuals entirely from the definition of a “reporting company,” meaning they are not required to submit or update beneficial ownership reports.

This is a dramatic scale-back: FinCEN had previously estimated that 32.6 million entities would be subject to the rule in its first year. That number is now down to roughly 20,000 entities—mostly foreign companies registered to do business in the U.S.

2.What Does This Mean for U.S. Businesses?

In plain terms: if you are a U.S.-based company owned by U.S. persons, you are no longer required to file reports under the CTA.

Additionally:

♦ U.S. individuals who are beneficial owners of foreign entities are also exempt.

♦ Certain foreign pooled investment vehicles with U.S.-based control are now largely excluded.

♦ Foreign entities that still fall within the rule’s scope have been granted an additional 30 days to file their reports.

FinCEN is accepting public comments on the interim rule and will issue a final rule later in 2025. Until then, no penalties will be issued for U.S. companies that do not comply with the previously expected reporting requirements.

3.Why the Change?

This exemption aligns with a broader deregulatory agenda. FinCEN Director Andrea Gacki, appointed during the Trump administration, explained in the rule that Treasury had “reassessed the balance” between the usefulness of collecting ownership data and the regulatory burden on businesses.

Critics, however, say this undermines the very purpose of the CTA. Legal experts and transparency advocates warn that the rollback may provide a backdoor for criminals to resume using shell companies to launder money and hide assets within the U.S.

“From this day forward, criminals can evade this national security law by simply starting and running those front companies inside the United States,” said Scott Greytak of Transparency International U.S.

4.What’s Next?

While this interim rule is in effect now, it is not yet final. FinCEN is collecting comments and may revise the rule before year-end. Businesses and industry groups concerned about compliance burdens or transparency issues are encouraged to submit their feedback.

5.Bottom Line

The FinCEN announcement represents a major shift in U.S. corporate transparency policy. While the move may be welcomed by small businesses wary of new compliance rules, it also raises real questions about the U.S.’s commitment to combatting illicit finance. For now, U.S. companies can pause their preparations to file under the CTA—but should stay tuned as the rulemaking process plays out.