Latest CTA Update: FinCEN Narrows Corporate Transparency Act Scope

Latest CTA Update: FinCEN Narrows Corporate Transparency Act Scope

According to an article by Perkins Coie, the Financial Crimes Enforcement Network (FinCEN) issued an interim rule on March 21, 2025, significantly altering the Corporate Transparency Act (CTA). The rule excludes domestic reporting companies from reporting obligations and exempts foreign reporting companies from disclosing US beneficial owners. 

This follows prior announcements from FinCEN and the US Treasury Department stating that they would not enforce CTA requirements against US entities or individuals. The interim rule is set for publication on March 26, 2025, with a 30-day compliance window for affected foreign entities.

The rule defines foreign reporting companies as entities formed under foreign law that register to do business in the US via a state or tribal jurisdiction. While these entities must still comply, they are no longer required to report US persons as beneficial owners. The American Banker estimates this revision exempts over 99% of entities previously subject to reporting. A public comment period will remain open for 60 days, after which FinCEN is expected to finalize the amended rule later in 2025.

The article notes that legal challenges to this rollback are anticipated around whether FinCEN has exceeded its statutory authority. Courts may determine whether the exemption aligns with the CTA’s original intent. The rule’s impact on pending lawsuits against the CTA remains uncertain, potentially rendering some cases moot while allowing others, particularly those involving foreign entities, to proceed.

Looking ahead, Congress is considering two bills: one to repeal the CTA (H.R. 425) and another to extend its deadlines (H.R. 736). Additionally, states may introduce their own corporate transparency laws, complicating compliance further.

The key takeaway for risk and compliance professionals is to stay informed. While US companies are currently exempt from reporting, foreign reporting entities should ensure timely compliance with updated rules. Future litigation and potential shifts in the administration could reinstate stricter Corporate Transparency Act enforcement, underscoring the need for continued vigilance.