Treasury eliminates requirement for small business owner reporting, potentially weakening accountability

From CNBC: 2025-03-25 14:20:00

The U.S. Treasury Department is eliminating the requirement for small businesses to report owner information to the federal government. The Corporate Transparency Act aimed to identify beneficial owners to prevent illicit finance, with penalties up to thousands of dollars for noncompliance. The new rule exempts U.S. citizens and companies, pending public feedback.

Experts warn that the FinCEN rule weakens the Corporate Transparency Act, potentially allowing criminals to launder money through U.S. entities. Foreign companies operating in the U.S. still need to report. This revised requirement affects about 20,000 entities, down from an estimated 32.6 million, aligning the U.S. with global standards.

The policy shift aligns with Trump’s deregulation push, with FinCEN suspending enforcement of the reporting requirement. Penalties could have included daily fines, criminal charges, and prison time. The Treasury reevaluated the balance between collecting beneficial ownership information and regulatory burdens, considering illicit finance risks and public interest.

Certain foreign companies operating in the U.S. must still report owner information under the interim rule. Entities with U.S.-based beneficial owners are not required to report, potentially creating loopholes for criminals. Observers warn that the new rule may allow easy evasion of national security laws, raising concerns about detecting illicit finance activities.

Read more: Treasury scraps reporting rule for U.S. small business owners