US Treasury Department Ends Enforcement of Beneficial Ownership Information Reporting

Image credits: Samuel Corum / Bloomberg via Getty Images file

The US Treasury Department has announced that it will no longer enforce the penalties associated with the beneficial ownership information (BOI) reporting requirements for millions of domestic businesses. This decision comes after the department had previously set a March 21 deadline for businesses to comply with the reporting requirements, which were enacted as part of the Corporate Transparency Act in 2021 to fight illicit finance and shell company formation. The BOI reporting requirements mandate that small businesses identify who directly or indirectly owns or controls the company and report this information to the Treasury's Financial Crimes Enforcement Network (FinCEN).

The Treasury Department's decision not to enforce the penalties associated with the BOI reporting requirements has been met with both praise and criticism. President Donald Trump praised the decision, describing the reporting rule as "outrageous and invasive" and "an absolute disaster" for small businesses. On the other hand, experts have raised concerns that the decision could have ramifications for national security, with some arguing that it could make the United States a magnet for foreign criminals, including drug cartels, fraudsters, and terrorist organizations. The decision has also been criticized by anticorruption and financial transparency advocates, who argue that it undermines the efforts to combat money laundering and shell company formation.

The Corporate Transparency Act, which was passed in 2021, aims to make it harder for bad actors to hide or benefit from their ill-gotten gains through shell companies or other opaque ownership structures. The law requires millions of companies and trusts to file beneficial ownership information with FinCEN, which could apply to roughly 32.6 million businesses, according to federal estimates. The reporting requirements could help law enforcement officials track down money launderers and other criminals, but small business advocacy groups have raised concerns about the regulatory burden and the potential risks to privacy and security.

In addition to not enforcing BOI penalties and fines, the Treasury Department has also announced that it will issue a proposed regulation to apply the rule to foreign reporting companies only. This decision has been welcomed by small business advocacy groups, who argue that the reporting requirements are burdensome and duplicative of other government agencies that maintain corporate databases. However, anticorruption and financial transparency advocates have expressed concerns that the decision could undermine the efforts to combat money laundering and shell company formation, and could have significant implications for national security.

The implementation of the Corporate Transparency Act has faced a roller-coaster ride in recent months, with revolving deadlines stemming from various court rulings in response to lawsuits that challenge the constitutionality of the law. The decision by the Treasury Department to end the enforcement of the BOI reporting requirements is likely to be met with further litigation and debate, as experts and advocacy groups continue to argue about the implications of the decision for national security, financial transparency, and the regulatory burden on small businesses. Some of the key points to consider include: * The Corporate Transparency Act was passed in 2021 to combat money laundering and shell company formation * The law requires millions of companies and trusts to file beneficial ownership information with FinCEN * The reporting requirements could apply to roughly 32.6 million businesses, according to federal estimates * The Treasury Department has announced that it will no longer enforce the penalties associated with the BOI reporting requirements * The decision has been met with both praise and criticism, with some arguing that it could undermine the efforts to combat money laundering and shell company formation, while others argue that it is a victory for common sense and a reduction in burdensome regulations.