Beneficial ownership reporting rules that once applied to more than 30 million corporate entities in the US now have just 28,000 in scope. But is this the end or just another fork in the road for BOI reporting under the Corporate Transparency Act? CCI’s Jennifer L. Gaskin explores the turbulent journey of the rules and how corporate leaders should proceed now.
FinCEN last week finalized an interim rule issued early during President Donald Trump’s second term that exempted US individuals and companies from reporting their beneficial ownership information (BOI) under the Corporate Transparency Act (CTA). Now, FinCEN estimates, only about 28,000 entities, all foreign-registered, will have to comply with the rules.
This is a stunning turnabout from a rule that, when it went into effect in 2024, applied to more than 30 million individuals and corporate entities, from LLCs to S-corps, from mom-and-pop shops to Byzantine real-estate holding structures.
What happens now? For companies that complied with the rules while they were in effect, a number estimated at about 16 million, the agency said it would commence a one-time deletion process to destroy those records. And, critics say, the US will remain an attractive place to hide ill-gotten gains in opaque shell companies, which is the precise reason the CTA was enacted in the first place.
“Law enforcement needs financial tools to investigate and stop criminal networks operating in the shadows,” Frank Russo, senior policy adviser at CPAC and partner at Modern Fortis, a public safety strategic advocacy firm, said in a statement published by the FACT Coalition, a non-partisan anti-corruption organization. “The underlying transparency law is still valuable, but Treasury‘s rule has failed to strike the appropriate balance in implementing it, crippling public safety officers’ ability to protect and serve their communities.”
But that doesn’t mean US corporations and their leadership can disregard AML practices, compliance and legal experts told CCI. The CTA is off the table for now, but beneficial ownership information wasn’t just for that FinCEN database, Richard Weber, a partner at Haynes Boone who leads the firm’s financial services investigations and enforcement practice, told CCI via email.
To the extent that companies needed that information for rules around things like customer due diligence, sanctions, AML controls, third-party risk management, M&A diligence and more, beneficial ownership information remains important.
“Companies should therefore distinguish between CTA-specific reporting processes and broader governance or compliance practices that continue to serve legitimate business and regulatory purposes” Weber said.
Assuming the CTA itself is not repealed or overturned — efforts to do both are underway — similar rules could come back under a different resident of the White House, and for companies with global footprints, beneficial ownership reporting remains very much on the table.
But in the short term, some question whether what remains of the CTA does anything at all.
Michelle Cox, a partner at law firm Moses Singer, noted that the narrowed rule is easily sidestepped. A foreign national who wants to do business in the US need only form a domestic entity — directly or through an intermediary — to fall outside the CTA’s reach, and investing through a foreign pooled fund without exercising substantial control has the same effect.
“Given the relative ease of these workarounds, it is difficult to see how the CTA, as currently configured, meaningfully captures foreign beneficial ownership in a way that advances US anti-money laundering objectives,” Cox told CCI.
A bumpy ride
A decade ago, the leak of a trove of documents that became known as the Panama Papers shone a light on the use of offshore tax havens by the wealthy, including celebrities and politicians as well as drug dealers and weapons traffickers. All told, nearly 12 million documents from the now-defunct law firm Mossack Fonseca were leaked by a still-unknown whistleblower.
The scandal sparked calls for legal reforms around the world, including in the US. Citing the Panama Papers revelation, Sen. Ron Wyden, D-Ore., and then-Sen. Marco Rubio, R-Fla., introduced the Corporate Transparency Act of 2017, which required the beneficial owners of US-registered shell companies to disclose their identities.
That bill didn’t become law, but a similar one, the Corporate Transparency Act of 2019, was introduced two years later. The later version of the CTA established FinCEN as the primary regulator for the BOI database, and like its predecessor, it drew bipartisan support.
Through negotiations in Congress, the measure was attached to a massive defense spending bill that passed both chambers in December 2020. On Dec. 23, 2020, Trump vetoed the measure, citing grievances unrelated to corporate transparency or money laundering. More recently, Trump called the BOI rule “an economic menace.”
Congress overrode the veto by wide margins in both chambers, and the CTA became law.
The rules were published in 2022, and virtually the moment they went into effect in 2024, they faced multiple and vigorous legal challenges, with varying degrees of success. Here are the highlights:
- March 2024: A federal district court in Alabama rules the CTA unconstitutional as to the plaintiffs in National Small Business United v. Yellen; an appeal follows.
- November 2024: Trump is elected president again.
- December 2024: A Texas federal court issues a preliminary nationwide injunction of the rules, which would have required some in-scope entities to make their initial reports by the first of the coming year. On Dec. 23, the Fifth Circuit Court of Appeals’ motions panel overturns that injunction, putting the rules back in play, but FinCEN delays the reporting deadline from Jan. 1 to Jan. 13. Three days later, the merits panel of that same court reinstates the injunction, again halting BOI reporting.
- January 2025: The Second Eastern District of Texas issues its own nationwide injunction, and later that month the US Supreme Court allows an injunction to remain in place, effectively putting reporting on hold. Between the two rulings, Trump is inaugurated as president.
- February 2025: A judge’s ruling effectively reinstates reporting, and FinCEN quickly announces it won’t penalize any entities that missed the filing deadline, and the government still defends the rules in court.
- March 2025: In a rapid about-face, the Treasury Department says the government will no longer enforce the rule for US entities or individuals and late in the month issues the interim rule that narrowed reporting to foreign individuals or entities.
- August 2026: FinCEN issues a final rule eliminating the BOI requirement for US individuals and entities.
The requirements were vast in their application — more than 30 million corporate entities and individuals were in scope — and the decision to essentially delete them entirely for US-based individuals and entities is big, too, Weber said.
“Given the litigation, political debate and practical concerns raised by the business community, some recalibration was foreseeable,” he said. “What is perhaps more striking is that the solution ultimately adopted was not merely refinement of the reporting regime but a near-complete exemption for domestic entities.”
But given the volume of pushback from the start, it’s clear that while the law itself may have had support, the same could not be said for the rules themselves, Crystal Trout, managing director with Baker Tilly’s risk advisory practice, told CCI.
“The controversy surrounding beneficial ownership reporting was evident from the beginning. The reporting population was extraordinarily large, compliance costs were high, and concerns about privacy, data security and the burden on small businesses persisted,” Trout said. “Legal challenges and political pushback showed that there was never broad consensus on the implementation approach.”
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Read moreDetailsNow what?
Companies with no other reason to collect beneficial ownership information are off the hook, but, of course, the CTA was not the only game in town. And that’s relevant for a large number of companies in an increasingly volatile global economy.
“Many countries maintain ownership disclosure regimes,” Weber said, “and regulators around the world continue to view transparency into corporate ownership structures as an important tool in combating money laundering, corruption, sanctions evasion and other illicit activity.”
The landscape is more fractured now, Trout said, given those international efforts toward corporate transparency.
“In many respects, the United States is now moving in a different direction than several peer jurisdictions, at least on centralized beneficial ownership reporting requirements,” she said.
As with most compliance and risk issues, industry matters. For financial services firms and banks, little will change operationally, Michael Joseph, compliance expert at Napier AI, told CCI.
“The federal register could have provided the government with a broader source of domestic ownership information and eventually given [financial institutions] another way to check what customers were telling them,” he said. “You could argue losing that potential capability is a step backwards for transparency. But that is different from dismantling the controls that FIs actually use to prevent and detect money laundering. Banks still have to know their customers, identify UBOs, monitor activity, screen for sanctions exposure and file SARs. None of those controls depended on the federal register because banks never had access to it.”
As to whether these rules or some version of them could return under a different president, the journey is likely to be a difficult one, the experts and analysts told CCI. The Loper Bright ruling in 2024 that overturned Chevron deference could play a role here, Trout said.
“Under Loper Bright, courts are expected to exercise independent judgment when determining whether an agency’s interpretation is consistent with congressional intent,” she said. “That does not mean a future administration could not expand reporting requirements, but it does mean courts would likely scrutinize more carefully whether the statute authorizes the scope of any future rule.”
And if some version of the rules do come back, if they are to survive (or avoid) legal challenges, they’ll probably need to be very different from the ones FinCEN originally finalized four years ago, Trout said.
“The debate going forward will likely focus less on whether beneficial ownership transparency has value and more on whether the CTA’s original reporting model was the right mechanism to achieve that objective.”
Jennifer L. Gaskin is editorial director of Corporate Compliance Insights. A newsroom-forged journalist, she began her career in community newspapers. Her first assignment was covering a county council meeting where the main agenda item was whether the clerk's office needed a new printer (it did). Starting with her early days at small local papers, Jennifer has worked as a reporter, photographer, copy editor, page designer, manager and more. She joined the staff of Corporate Compliance Insights in 2021 and also hosts the CCI-produced podcast "Queering Compliance." 
