The U.S. Treasury Department is facing mounting backlash from watchdog groups, lawmakers, national security experts, and law enforcement officials over a move critics say guts one of the most important anti-money laundering laws in U.S. history.
At issue is the Corporate Transparency Act (CTA)—a bipartisan 2021 law requiring certain U.S. companies to report their “beneficial” owners, or true individuals behind the business, to a federal database. The law was designed to prevent criminals and corrupt actors from anonymously funneling illicit money through U.S. shell companies.
But a recent interim final rule from the Treasury’s Financial Crimes Enforcement Network (FinCEN) sharply limits who must comply. It exempts nearly all domestic companies and U.S. owners of foreign entities, dramatically narrowing the law’s scope.
Joining lawmakers, law enforcement, national security experts, anti-corruption advocates, and small business groups, the Financial Accountability and Corporate Transparency (FACT) Coalition submitted formal comments condemning the Treasury Department’s drastic narrowing of the CTA.
“The widespread denunciation of Treasury’s illegal move recognizes and reaffirms a simple truth: destroying the Corporate Transparency Act will make Americans less safe,” said Ian Gary, executive director of FACT. “For decades, anonymous companies have been used to defraud American consumers, smuggle drugs into our communities, and enable hostile regimes to move money into the U.S. financial system with impunity.”
Critics say the rule contradicts the law’s text and intent, which was shaped over more than a decade with near-universal consensus. Transparency International U.S. (TI-US) called the exemptions “a simple and binary roadmap for complete evasion of this landmark law,” warning they “threaten core U.S. national security interests—including the U.S.’s fight against foreign corruption.”
In a joint comment, the Transparency International Secretariat and 56 global TI chapters said that “the promise of U.S. engagement was a transformative moment in the fight against illicit finance. That promise is now in jeopardy.” They warned the rule “actively undermines the global fight against corruption” and undercuts the U.S.’s potential leadership in corporate transparency and cross-border enforcement.
Senators Sheldon Whitehouse (D-R.I.) and Chuck Grassley (R-Iowa) blasted the move, saying it “contravenes Congress’s intent” and undermines national security and public safety.
Law enforcement groups including the National District Attorneys Association and the National Narcotic Officers’ Associations’ Coalition (NNOAC) expressed alarm, warning the rule would curtail their ability to investigate shell companies linked to drug trafficking, money laundering, and other crimes. “It is the criminal enterprises… who stand to gain if this law is weakened,” the NNOAC said.
The Treasury defended the move as a way to ease compliance for small businesses, but the Main Street Alliance, representing over 30,000 small firms, pushed back. “Simply put, gutting the CTA will make it riskier for our members to operate,” it wrote.
Transparency International stressed that over 12 years of debate, “not a single member of Congress, not a single Treasury or other Executive Branch official… nor any other stakeholder whatsoever, ever articulated the possibility that the CTA would not apply to domestic reporting companies or U.S. beneficial owners of foreign reporting companies.”
The public comment period on the rule has closed. The Treasury is expected to release a final version in the coming months as calls intensify to withdraw the current rule and restore the law’s full intent.
