In a move that has drawn widespread criticism from transparency advocates and financial watchdogs, the US Treasury Department has announced that it will not enforce a crucial provision of the Corporate Transparency Act (CTA). This provision, which requires both domestic and foreign companies to disclose their true owners, was designed to curb money laundering, tax evasion, and illicit financial activities. The decision to drop enforcement has alarmed critics, who argue that it will weaken national security and create new avenues for financial crime.

The Corporate Transparency Act was enacted in 2021 under the first Trump administration as part of a broader initiative to enhance financial transparency and prevent bad actors from exploiting anonymous shell companies. The law mandates that certain businesses provide a beneficial ownership information (BOI) report to the Treasury Department’s Financial Crimes Enforcement Network (FinCEN). This measure was seen as a groundbreaking step in the US’s efforts to combat money laundering and illicit financial flows.

The reporting requirements officially took effect on January 1, 2024, giving businesses a year to file their BOI reports. However, opposition from small business groups and legal challenges stalled the law’s implementation. A Supreme Court ruling in late January briefly allowed the requirements to proceed, but a separate federal injunction halted the creation of the ownership database, raising constitutional questions about the Act.

A federal judge in Texas issued a stay on FinCEN’s implementation of the reporting rules in January, citing concerns over the law’s constitutionality. The Department of Justice appealed the ruling and initially succeeded in having the injunction........

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