On March 21, 2025, the Financial Crimes Enforcement Network (FinCEN) issued a major revision to the Corporate Transparency Act (CTA), drastically narrowing the scope of companies required to report beneficial ownership information.

Originally designed to combat money laundering and financial crimes, the CTA was expected to affect over 32 million companies. However, the new interim final rule from the Treasury Department now applies to fewer than 12,000 companies annually, a shift many believe significantly undermines the law's intent.

WHAT CHANGED?

The interim rule limits the reporting requirement to foreign-reporting entities only. This means:

• Foreign companies doing business in the U.S. through domestic subsidiaries are now largely exempt.

• U.S. citizens who own foreign companies are not required to report.

• Millions of businesses that previously submitted ownership data to FinCEN may no longer be required to do so.

According to Treasury, the change aims to reduce the administrative burden on small businesses. However, many experts argue that it effectively guts the CTA, which was part of the 2020 Anti-Money Laundering Act and intended to bring the U.S. in line with international transparency standards.

What's next?

This unexpected revision may invite legal challenges from transparency advocates, state governments, or members of Congress. However, because the rule reduces compliance requirements, proving legal standing to challenge it could be difficult.

Without a robust federal database, individual states may step in with their own reporting requirements. New York, for example, has already passed its own beneficial ownership rule, which will take effect next year. This patchwork approach may increase costs and compliance complexity, especially for small businesses operating across state lines.

What Should Businesses Do?

While many are relieved by the lighter regulatory load, this is still an evolving area. Companies should:

• Stay up to date on any changes to the final rule, which FinCEN expects to issue later this year.

• Monitor state-level legislation for new reporting requirements that could impact operations.

• Consult advisors to ensure compliance with current rules and prepare for potential changes from future administrations.

We will continue to track developments and provide updates as more information becomes available. If you have questions about how this impacts your business or reporting obligations, please contact our team.