The U.S. Department of Treasury has scrapped a key requirement for small businesses to report ownership details to the federal government, reversing course on a measure meant to combat financial crimes.
The decision, announced on March 21 by the Financial Crimes Enforcement Network (FinCEN), greatly weakens the Corporate Transparency Act (CTA)- a law passed in 2021 to curb illicit finance through shell companies.
Originally set to take effect in March, the rule would have required millions of businesses to disclose their “beneficial owners”—those with substantial control or financial stake in a company. However, FinCEN’s interim final rule now exempts all U.S. citizens and companies from reporting obligations. This leaves only a small number of foreign firms subject to the requirement.
In addition, the move marks a major shift in policy and aligns with President Donald Trump’s broader deregulatory agenda. Earlier this month, his administration had already suspended enforcement of the rule, which carried civil penalties of up to $591 per day, along with criminal fines of up to $10,000 and potential prison time.
However, legal experts argue that eliminating the reporting mandate creates major loopholes for bad actors.
Under the revised rule, FinCEN estimates that only 20,000 entities will need to submit ownership reports in the first year. This represents a significant reduction from the 32.6 million businesses that were initially expected to comply. While some foreign firms operating in the U.S. will still have to report, companies with U.S.-based owners will not.
Most Western nations have already implemented similar ownership disclosure rules, but the U.S. rollback signals a different approach. FinCEN Director Andrea Gacki defended the decision, stating that officials weighed illicit finance risks against the regulatory burden on businesses.
Currently, the rule is open for public comment, and officials expect to finalize it later this year. However, unless reversed, experts warn it could weaken efforts to track financial crimes and corporate fraud in the U.S.
