The US Treasury Department has decided to suspend enforcement of the Corporate Transparency Act. It means that reporting obligations and transparency measures will be modified from now on. In this article, we examine the implications of this decision, the rationale behind it, and what businesses should anticipate moving forward.
Corporate Transparency Act: Background and Purpose
The Corporate Transparency Act (CTA) was enacted in 2021 with the goal of combating financial crimes, such as money laundering and terrorist financing, by increasing transparency in corporate ownership structures. The law required businesses to disclose information about their beneficial owners to the Financial Crimes Enforcement Network. It will prevent illicit activities that exploit anonymous corporate entities and ensure accountability in business practices.
Treasury Department’s Decision to Suspend CTA Enforcement
On March 2, 2025, the US Treasury Department officially announced the suspension of fines and other enforcement actions related to non-compliance with the CTA for US citizens and domestic businesses. This decision was accompanied by a statement from FinCEN, which clarified that enforcement of the act would be paused until a new transition rule is introduced. Furthermore, the regulator confirmed that draft amendments to the law would be published before March 21, 2025.
The Treasury Department assured businesses that even after the new rules take effect, the CTA would no longer apply to:
- US citizens
- Domestic reporting companies
- Beneficial owners of American companies
This decision significantly alters the original scope of the CTA, which impacts around 32 million businesses. With the enforcement now suspended for domestic entities, only a fraction of originally covered businesses will remain subject to reporting obligations.
Changes to the Scope of CTA Application
Another crucial aspect is the narrowing of the CTA’s application. The proposed changes would restrict the submission of beneficial ownership reports exclusively to foreign reporting companies.
Under the CTA, a foreign reporting company is the one incorporated under foreign laws and registered to conduct business in the United States or within tribal jurisdictions. This definition excludes companies based in the US whose owners are non-resident individuals or legal entities.
If these suggested changes are adopted, a large number of US companies with foreign ownership will no longer be subject to CTA requirements. This is a strategic move made by the Treasury Department, and efforts will now be concentrated on preventing money laundering through foreign entities and not on imposing broad corporate reporting requirements on all companies that operate in the US.
Public and Business Reactions
A lot of stakeholders responded to the suspension whose primary aim was to lift unnecessary burden from small businesses. Those who criticized the act said that it was not effective in preventing financial crimes.
Support from Small Businesses and Trade Groups
The decision of the Treasury Department was welcomed by many small business owners. In particular, it was highly appreciated by NCBA, the National Cattlemen’s Beef Association. This move is expected to stop excessive regulatory pressure on small businesses.
The revisions were also supported by the National Federation of Independent Business, which filed a lawsuit against the CTA a little earlier. The NFIB expressed its readiness to cooperate with Congress. The result of their work will include repealing the CTA and other regulations that had no other results but excessive compliance costs.
Scott Bessent, the US Treasury Secretary, noted that the suspension will bring more new businesses to life. This consequence is very important for the American economy as small businesses are its lifeblood.
Criticism from Transparency and Anti-Corruption Advocates
Not everybody was in favor of the decision, though. Organizations advocating for financial accountability and anti-corruption measures have criticized the suspension, arguing that it undermines the original intent of the CTA. Ian Gary, Executive Director of the Financial Accountability and Corporate Transparency Coalition (FACT), denounced the move as an unconstitutional weakening of legislative efforts to enhance corporate transparency. He expressed confidence that the decision would face legal challenges in the courts.
Changes to the CTA and Their Future Impact
The CTA is no longer effective, so companies are under no obligation to submit beneficial ownership reports anymore. The changes to the Corporate Transparency Act modify compliance expectations. Here is a roadmap for future modifications made by the Treasury Department:
- Temporary Transition Rule: FinCEN is working on an interim rule, and businesses expect new reporting guidelines to be set.
- Final Revised Rule: The final regulation will limit reporting requirements to foreign reporting companies registered in the US.
Once these revised rules are enacted, the responsibility to disclose and update beneficial ownership information will primarily affect foreign entities doing business in the United States. As a result, the vast majority of American businesses—including those with foreign owners—will no longer be required to comply with CTA reporting mandates.
What can we expect following these changes? First of all, it means that the Treasury Department will refine corporate transparency regulations. They will no longer be focused on absolutely any business in the US. The CTA will apply to the financial risks that are typically associated with foreign companies which operate in the USA.
What’s Next for Businesses?
Even though the CTA has been suspended, businesses should keep their finger on the pulse of updates. The Treasury Department is expected to come up with new rules in the next few months, and companies may have to quickly adapt to new obligations and routines.
Key takeaways for businesses:
- No Immediate Reporting Requirements: Beneficial ownership reporting remains voluntary until new regulations are enacted.
- Ongoing Legal and Political Debates: The future of the CTA remains uncertain; discussions in Congress continue, and we may face potential legal challenges from advocacy groups.
- Focus on Foreign Reporting Companies: If the revisions are finally adopted, disclosure requirements will only apply to foreign entities registered in the US.
US Corporate Transparency
The regulatory policy in the US will change considerably if a decision to suspend the CTA is made. It will drift away from the “disclosure for all” requirement towards foreign entities. Discussions are still going on, as it is important to strike a balance between transparency and business interests.
On the one hand, future regulations should meet the goals set by the stakeholders. On the other hand, companies should not be too overburdened for no reason.
The best strategy for businesses is to follow the updates and be prepared for possible changes in the regulatory landscape.