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The Trump administration has announced that US citizens and companies no longer need to file or update their beneficial ownership information (BOI) under the Corporate Transparency Act (CTA).
On March 2, 2025, the Treasury said it plans to issue a new rulemaking that will “narrow the scope” of the BOI reporting requirements to foreign companies only.
“Treasury takes this step in the interest of supporting hard-working American taxpayers and small businesses, and ensuring that the rule is appropriately tailored to advance the public interest,” the agency said.
If the Treasury’s proposed changes are adopted, the CTA will become almost unrecognisable from the law that Congress enacted, with bipartisan support, in 2021.
As the name suggests, the primary purpose of the CTA was to increase transparency across corporate structures operating in the US, in order to prevent their use in illicit finance schemes.
By mandating that certain companies report their beneficial owners to FinCEN, lawmakers hoped to enable US authorities to tackle money laundering, terrorist financing and other forms of illicit activity more effectively.
However, the CTA has been strongly opposed by small businesses in the US, primarily due to its broad scope, its “onerous” reporting requirements, and its tough penalties for non-compliance.
Key considerations
Under the original CTA, most small businesses would have been covered by the law, and their beneficial owners would have had to comply with the reporting requirements.
Most larger businesses were not covered, thanks to exemptions for companies that have more than 20 full-time employees, more than $5m in annual revenue, and a physical presence at a US office.
One of the key arguments used in court by those opposed to the CTA is that company formation is a state matter, not a federal matter.
Plaintiffs argued — successfully, in some cases — that the CTA and its reporting requirements violate the Tenth Amendment and the principle of federalism, and are therefore unconstitutional.
State laws on company formation vary significantly across the US, and some states offer particularly lenient laws in order to attract business and investment.
Delaware, for example, is known for its ease of company formation, requiring only a registered agent when forming a new corporation or limited liability company (LLC).
In the eyes of the state authorities, it is understood that the registered agent may just be an intermediary and have no stake in the company, while the real beneficial owners, such as shareholders and senior officers, may remain anonymous.
Other states, such as Wyoming and Nevada, have similar laws that allow owners to remain anonymous when forming new companies.
The bigger picture
In 2016, the Financial Action Task Force (FATF) rated the US as “largely compliant” and “partially compliant” with Recommendations 24 and 25, which cover transparency and beneficial ownership of legal persons and arrangements.
Despite subsequent investigations, these substandard ratings have remained in place, including in FATF’s most recent follow-up report in 2024.
As noted in the report, the CTA was enacted to address deficiencies relating to beneficial ownership information transparency, as per FATF’s Recommendations.
But with the Treasury now effectively promising to take the original law off the books, the Trump administration appears to have accepted that the US will continue to fall short on Recommendations 24 and 25.
FATF’s next mutual evaluation of the US is set to begin in early 2026, so this is not a distant possibility.
The Treasury’s plans would also see the US to diverge further from FATF-compliant examples set by frameworks in other jurisdictions, such as the EU’s Fifth Anti-Money Laundering Directive (AMLD5).
Why should you care?
Payments organisations operating in the US, or considering doing so, will need to keep in mind the changing state of AML regulation in the country.
The Treasury’s announcement that only foreign companies will be covered by the CTA marks a dramatic shift in US AML priorities.
Time will tell whether the Treasury is able to implement its plans, given the significant opposition, particularly from among those who crafted the original law.
Supporters of the CTA have long argued that anonymous company formation is a significant blind spot in US AML strategy, and that it must be closed to stop the flow of dirty money in and out of the country.
Several commentators, including the FACT Coalition, Main Street Alliance and Transparency International, have also noted that the new administration’s plans would subvert the original intention of the CTA.
This is likely to be the strongest argument that the Trump administration will have to respond to in the months ahead.
The separation of powers between Congress, the executive branch and the judiciary is a key element of the US Constitution.
It holds that the executive branch must enforce the laws passed by Congress, but does not have the authority to change or disregard the intent of those laws.
Appeals against the Treasury's plans are to be expected, and the courts’ handling of those appeals will offer a clear indication of the likely direction of US AML policy over the next four years.
In the meantime, the US will remain a relatively high-risk market for payment firms in terms of AML compliance.
Given the nature of US corporate structures and the country’s patchwork of lenient state laws, firms are advised to invest in customer due diligence to manage these risks.
Perhaps, at the end of President Trump’s second term, the CTA will return in its original form. But until then, navigating the opaque world of US corporate structures will remain an important AML challenge for firms.
