How Weakening U.S. Beneficial Ownership Transparency will Affect the Fight against Corruption

Executive Director of the Financial Accountability and Corporate Transparency (FACT) Coalition Ian Gary has been clear about his view of the move by the US Treasury Department to weaken enforcement of the Corporate Transparency Act (CTA). Following a March 21 rule from Treasury’s Financial Crimes Enforcement Network, US companies and US owners of foreign companies – essentially 99.9 percent of covered entities – will no longer need to file beneficial ownership information with the US Government.

Gary called these developments “extremely unfortunate and dangerous,” with implications for everyday Americans, given that fentanyl and human trafficking are enabled by the use of anonymous shell companies. He noted that these moves appear to run counter to the Administration’s own stated objectives. In fact, he pointed out, a March 31 announcement of sanctions against alleged drug traffickers even mentions the use of “front companies and shell corporations.”

I asked Gary to speak specifically to the anti-corruption implications of these changes to CTA enforcement. In his view, the worst case scenario is that “the US moves from a dirty money destination by default to a dirty money destination by design,” opening “the floodgates for money from criminals, foreign governments, and other actors.” He also drew a through line to staffing cuts at the IRS, pointing out that those who seek to hide assets and want to avoid taxes may use anonymous companies. He notes that many recent IRS hires targeted by cuts were involved in complex financial investigations and audits.

According to Gary, the stated rationale for weakening the CTA was to unburden businesses from onerous regulation. But he doesn’t buy that argument. First, as he notes, the law was passed in a bipartisan fashion, and enjoyed broad support from diverse organizations ranging from the US Chamber of Commerce to Greenpeace. Second, the law evolved through a painstaking process over many years, the result of numerous compromises and extensive regulatory input. Last, in his view, compliance is free, straightforward, and simple, pointing out that for sole proprietors of an LLC, it should take about 20 minutes to file.

Gary closed by pointing out that 2026 will see the US reviewed through the mutual evaluation process of the Financial Action Task Force, so we will know soon what the rest of the world thinks of these changes. In the meantime, there are a number of circuit court cases pertaining to the CTA in progress that could be impacted by Treasury’s new rule. But Gary hopes that the Administration will continue to defend the law’s constitutionality given its value for fighting crime, particularly as the law enforcement community has spoken out in favor of the law. For now, he says, it will be hard to know where to look for immediate evidence of the impact of a weakened CTA, given that the public usually lacks information about ongoing investigations, and open source indicators are scarce.

Marc Schleifer