The suspension of the Corporate Transparency Act enforcement reflects a broader debate over balancing regulatory oversight with business-friendly policies. As the Treasury moves forward with rulemaking, financial institutions, compliance officers, and policymakers will closely watch how the new framework affects both corporate compliance and the integrity of the U.S. financial system.
The U.S. Treasury Department has announced it will not enforce a key anti-money laundering (AML) law that requires millions of businesses to disclose their beneficial owners. The decision effectively suspends penalties under the Corporate Transparency Act (CTA) for U.S. citizens and domestic reporting companies.
The CTA, enacted during the Biden administration, was designed to combat illicit financial activities by increasing transparency in corporate ownership. However, it has faced strong opposition from the Trump administration, which argues that the law imposes unnecessary compliance burdens on low-risk entities, such as small businesses. Ongoing legal challenges have further complicated its implementation.
In its statement, the Treasury justified its decision by emphasizing support for American taxpayers and small businesses, stating that it intends to issue a rule narrowing the law’s application exclusively to foreign reporting companies.
The Treasury’s move has drawn mixed reactions from financial and regulatory experts. Supporters of the CTA argue that the United States has increasingly become a global hub for money laundering due to its relatively lax disclosure requirements compared to other developed economies. By not enforcing the CTA, they contend, the Treasury is undermining efforts to prevent illicit financial activities, including tax evasion and terrorism financing.
On the other hand, critics of the law, including business advocacy groups, have welcomed the suspension, arguing that compliance costs would disproportionately impact small businesses that pose minimal risk for financial crimes. Some have also raised concerns about the administrative complexity of implementing the act, given the broad scope of entities required to report under the original legislation.
While the Treasury’s statement signals a regulatory retreat for domestic businesses, the decision does not eliminate the law entirely. The Biden administration may seek alternative ways to strengthen financial transparency without imposing excessive burdens on businesses.
Financial crime experts also warn that exempting domestic entities from disclosure requirements could create new vulnerabilities in the U.S. financial system, potentially inviting scrutiny from international regulatory bodies.