The US Department of the Treasury announced on Sunday the suspension of the Corporate Transparency Act (CTA), a key anti-money laundering (AML) law.
The move by the Treasury is part of an effort to narrow its scope to foreign reporting companies.
The decision, which halts enforcement of beneficial ownership reporting requirements for domestic entities, has sparked debate over its implications for financial crime prevention and small business regulation.
Background on the Corporate Transparency Act
Enacted to combat money laundering and illicit financial activities, the CTA required corporate entities to report their beneficial ownership information to the Financial Crimes Reporting Network.
The law aimed to differentiate legitimate small businesses from anonymous “shell companies” often used by foreign entities for illegal transactions, including arms deals, drug trafficking, and human trafficking.
By suspending the Act, the Treasury Department will no longer enforce outstanding fines or penalties related to beneficial ownership reporting, nor will it impose future penalties once the rule change takes effect.
This move is framed as a relief for American taxpayers and small businesses, which have long argued that compliance with the CTA placed undue administrative burdens on them.
Legal and Constitutional Challenges
The suspension follows a March 2024 ruling by a federal judge in the US District Court for the Northern District of Alabama, which declared the CTA unconstitutional.
The court argued that Congress overstepped its authority under the Commerce Clause by regulating business entities in this manner, stating that “sometimes Congress enacts smart laws that violate the Constitution.”
However, in January 2025, the US Supreme Court issued a nationwide stay, affirming the government’s authority to regulate business reporting under the Commerce Power. The Court stated that the need to prevent financial crimes outweighed the administrative burden of compliance.
Reactions from Stakeholders
US Secretary of the Treasury Scott Bessent hailed the suspension as a “victory for common sense,” aligning it with President Trump’s agenda to reduce regulatory burdens and boost economic prosperity.
“Today’s action is part of President Trump’s bold agenda to unleash American prosperity by reining in burdensome regulations, in particular for small businesses that are the backbone of the American economy,” Bessent said.
On the other hand, critics warn that the suspension could weaken efforts to prosecute financial crimes and harm consumers who unknowingly engage with fraudulent enterprises. Richard Trent, Executive Director of the Main Street Alliance (MSA), a small business advocacy group, expressed concern in a press release:
“Small businesses suffer when they are forced to compete with fraudulent and criminal enterprises that exploit anonymous shell corporations to evade accountability.”
Implications for Financial Crime Prevention
The suspension of the CTA raises significant concerns about the US government’s ability to track and prosecute financial crimes involving shell companies.
Without robust reporting requirements, law enforcement agencies may face greater challenges in identifying and holding accountable entities engaged in money laundering and other illicit activities.
The Treasury’s decision to suspend the Corporate Transparency Act reflects a broader tension between regulatory efficiency and the need for transparency in corporate ownership. While the move is celebrated by small business advocates, its long-term impact on financial crime prevention and consumer protection remains uncertain.
