The US Treasury Department announced that it would suspend enforcement of the Corporate Transparency Act with regard to US citizens and domestic companies. This solution has considerable implications for businesses, so let’s look at it under the microscope.
Corporate Transparency Act: Background
The CTA was adopted in 2021 to combat money laundering and terrorism financing by increasing the transparency of corporate structures. The laws imposed an obligation on companies to provide information on their beneficial owners to the Financial Crimes Enforcement Network (FinCEN).
Decision of the Treasury Department
On March 2, 2025, the US Treasury Department announced it would suspend fines and other measures for failure to comply with the Corporate Transparency Act (CTA) with regard to US citizens and domestic companies. FinCEN said on the same day that CTA enforcement measures would not apply until the new transition rule took effect. Moreover, the regulator promised to publish draft amendments to the law before March 21, 2025.
In its turn, the US Treasury Department assured that the CTA would not apply even after the new rules took effect:
- to US citizens;
- to domestic reporting companies;
- to beneficial owners of American companies.
Thus, the overwhelming majority of 32 million enterprises that were covered by the rules according to FinCEN’s preliminary estimates are no longer obliged to disclose the information about their beneficial owners.
CTA: Sphere of Application
There is one more important change that concerns the sphere of CTA application. The Treasury Department announced it was planning to adopt changes that will limit the submission of reports on beneficial owners to foreign reporting companies only.
It is important to understand that a foreign reporting company under the CTA is a term that is solely applied to legal entities established in accordance with foreign laws and registered to conduct business activities in the USA or within tribal jurisdictions. It does not include American companies actually owned by foreign individuals or organizations.
If the suggested changes are accepted, a considerable part of US companies owned by foreigners will no longer be subject to CTA requirements and will not have to disclose its beneficial owners.
These measures make the regulatory burden imposed on American businesses considerably more relaxed and show the endeavor of the Treasury Department to focus the law on combating money laundering through foreign companies rather than companies with foreign capital registered in the USA.
Business and Public Response
The decision to suspend CTA enforcement was taken due to threats that the requirements of the act may impose an excessive burden for small businesses and violate the privacy of company owners. In addition, there were questions as to whether the act efficiently achieved its goals related to combating financial crimes.
Many small business representatives expressed their gratitude to the administration for the protection of their interests. The National Cattlemen’s Beef Association (NCBA) noted that the suspension of CTA enforcement will help protect small businesses from excessive regulatory requirements.
The National Federation of Independent Business (NFIB) that filed a lawsuit against the Corporate Transparency Act earlier also welcomed the changes which protect the interests of small businesses in the USA. The organization announced on March 3 that it will continue cooperation with the Congress. It wants the Congress to abolish the act and related regulatory acts: in their opinion, they interfere with private lives of small business owners and create a large public database of data about Americans.
Scott Bessent, US Treasury Secretary, noted that this decision will contribute to the country’s prosperity as it lifts considerable burden from small businesses that form the basis of the American economy.
At the same time, the representatives of the anti-corruption community voiced criticism. Ian Gary, Executive Director of the Financial Accountability and Corporate Transparency Coalition (FACT), called CTA weakening “unconstitutional subversion of the Congress’ intent” and expressed confidence that this decision will not survive court review.
What Next?
In the near future, reporting details on beneficial owners will be absolutely voluntary under the Corporate Transparency Act. It means that companies are under no obligation to submit this information before new rules take effect, and the absence of reporting will not entail fines or other enforcement measures.
Next steps:
- Temporary rule: FinCEN is planning to implement a transition rule that will become the first step toward CTA reconsideration.
- Final rule: the first step will be followed by elaboration and adoption of the final modified rule which, based on latest news, will only be applicable to foreign reporting companies.
As soon as the new rule takes effect, the obligation to submit and update the reports on beneficial owners will only cover the foreign companies registered to conduct business in the USA.
Thus, CTA requirements are actually suspended for an indefinite term for the majority of American companies, including those that have foreign owners. This decision shows the evident intent of the Treasury Department to limit the sphere of CTA application. It will become an instrument that controls foreign legal entities rather than domestic businesses.
New rules will be discussed and finally approved afterwards, which means that the situation is still in the air and companies should monitor the updates by FinCEN and the Treasury Department.In the end, the suspension of CTA enforcement gives us a possibility to reconsider the approaches to corporate transparency in the USA. It is important to agree on the rules that would take into account the interests of all parties and contribute to the establishment of a fair business environment.
06 March 2025 