- Key insight: The final rule issued Wednesday permanently exempts domestic companies and U.S. persons from beneficial ownership reporting requirements.
- Expert quote: "This is bad for banks … the banking industry supported the law because it makes it much easier to know your customer. How are you supposed to know your customer when they're anonymous?" — Brookings Institution fellow Aaron Klein.
- Forward look: The move could knock the U.S. out of step with its international peers, drawing scrutiny from international anti-money-laundering coordination bodies.
The Trump administration's
The resulting status quo — praised by business groups, which have long argued that the reporting requirement imposed unnecessary compliance costs and privacy concerns — leaves financial institutions to conduct their own anti-money-laundering checks while law enforcement loses access to a federal database that could have helped identify illicit actors.
"This is bad for banks," said Brookings Institution fellow Aaron Klein. "The banking industry supported the law because it makes it much easier to know your customer. How are you supposed to know your customer when they're anonymous?"
In the final
The CTA was enacted in 2021 as part of the National Defense Authorization Act, even after a veto by President Donald Trump, which Congress successfully overrode. The law requires the creation of the national beneficial-ownership information database to track basic identifying information such as names, birthdays and addresses of beneficial owners of companies to combat money laundering. The rule defined beneficial owners as anyone who controls at least 25% of, or has substantial control over, a company.
While Fincen's final rule leaves foreign businesses on the hook for disclosing information about their foreign owners, foreign companies will not have to report U.S. company applicants and U.S. persons who previously obtained Fincen identifiers will not have to update or correct that information.
The final rule follows a year-and-a-half of legal uncertainty over the CTA's reporting requirements. The Biden administration's implementation of the law faced pushback from lawmakers and business groups challenged the reporting requirements in court, saying the reporting regime was overly complex, burdensome and invasive.
The decision also makes unclear how the Treasury will address the relationship between beneficial-ownership reporting and Fincen's customer due-diligence, or CDD, rule, which requires financial institutions to identify and verify owners of businesses they serve. The CTA directed the Treasury to revise the CDD rule to allow banks to use the beneficial-ownership database to comply. This largely leaves banks' compliance burdens in place, according to Michael Joseph, a compliance expert at Napier AI.
"Banks still have to know who owns their legal entity customers, and they have always built that picture themselves, because the registry was designed around law enforcement and never opened to financial institutions," Joseph wrote in an email. "The United States will now have no federal record of who owns its companies.
"The record each bank builds is the only one there is, and its accuracy comes down to how well an institution sources ownership data and resolves it to the right people, because sanctions and [Politically Exposed Persons] screening can only be as good as the names it runs," Joseph said.
Klein, a longtime proponent of technical fixes to ease banks' anti-money-laundering regulatory burden without sacrificing transparency, argued the move further scrambles the signal for firms already
Klein argues the administration is using AML as a political tool to punish their enemies and reward their friends.
"Banks are caught in the middle between following the law, doing the right thing, and you know, an administration who's changing the rules to suit their political desires," Klein said. "This is the same administration that is demanding banks consider citizenship when determining credit risk, but saying it's OK not to know who owns the corporate bank account when considering AML."
Himamauli Das, Fincen's former acting director and now senior managing director and counsel at K2 Integrity, said Treasury and law enforcement agencies have repeatedly emphasized the importance of beneficial ownership information in investigating financial crimes.
"U.S. Treasury and law enforcement officials have consistently over the past 20 years reinforced the importance of beneficial ownership information to investigate and prosecute fraudsters, cartels and drug traffickers, terrorists, and other criminals that abuse the U.S. financial system," Das wrote in an email. "As we approach the 25th anniversary of the 9/11 attacks, it's important that the U.S. government and financial institutions do not lose sight of their critical role in protecting U.S. taxpayers, businesses, and ultimately the integrity of the financial system [as well as] ensuring that private sector resources are leveraged in an efficient and cost-effective manner."
Das says the "writing was on the wall" for the beneficial-ownership regime following the 2025 interim final rule, but it's less clear what will happen to banks' customer due-diligence requirements.
"The CTA also directs Treasury to revise the customer due diligence rule to conform to BOI rule implementation – and there's an open question now as to how or whether Treasury will amend the CDD rule in a way that helps financial institutions effectively combat financial crime," Das said.
Others welcomed the rule, calling it practical regulatory relief. Defense Credit Union Council President and CEO Anthony Hernandez said the decision recognizes that financial institutions need rules that protect national security while allowing them to focus resources on serving their members.
"This final rule is an important recognition that America's financial institutions, small businesses, and military-connected communities need regulatory frameworks that are both effective and practical," said Hernandez, a retired U.S. Air Force colonel. "DCUC will continue advocating for policies that protect national security and the integrity of our financial system while ensuring credit unions can focus their resources on serving the financial needs of their members, our military, and their families."
The National Federation of Independent Business, which sued in Texas to overturn the Biden-era BOI rule, welcomed the Treasury's decision to halt it and called for Congress to repeal the underlying anti-money-laundering legislation.
"Small businesses greatly appreciate President Trump and Secretary Bessent standing up for Main Street," said NFIB President Brad Close. "The final rule protects American small and independent businesses from this onerous reporting mandate and requires the destruction of previously submitted personal data[, but] Congress needs to finish the fight."
Sen. Elizabeth Warren, D-Mass., called the rule a giveaway to illicit actors.
"This is a gift to cartels, criminals, and U.S. adversaries that exploit shell companies to move millions through our financial system," Warren said in a press release. "The Trump Administration has dismissed law enforcement warnings, ignored the role that shell companies play in crimes ranging from drug trafficking to fraud to sanctions evasion, and gutted a statute that Secretary Rubio once championed as 'the most significant anti-corruption and money laundering law in decades.'"
"Secretary Bessent should reverse this decision," Warren continued, demanding he testify before the Senate Banking Committee, of which she is the ranking member.
Advocates at the Financial Accountability and Corporate Transparency Coalition decried the move to rollback BOI reporting.
"This final rule keeps the floodgates open for criminals to launder money through U.S. shell and front companies," said Erica Hanichak, co-director of the FACT Coalition. "By failing to fulfill Congress' mandate for greater financial integrity, the Treasury Department has handed a major victory to U.S. adversaries, corrupt officials, fraudsters, and tax evaders who use our financial system to move and hide illicit wealth."
The rollback could also draw scrutiny internationally, according to Das, who said the Financial Action Task Force, the global anti-money-laundering standard setter, is likely to continue raising concerns about U.S. implementation of beneficial ownership standards.
"It's likely that FATF — which requires countries to implement BOI regimes — will continue to have concerns about U.S. implementation of this recommendation in its ongoing mutual evaluation," Das concluded.
