FinCEN Announces Major Reversal on Beneficial Ownership Reporting, Record-Keeping Requirements for U.S. Firms
In a significant shift away from what was once a highly-anticipated piece of anti-money laundering (AML) reform, the U.S. Department of Justice’s Financial Crimes Enforcement Network (FinCEN) recently announced sweeping drawbacks related to beneficial ownership reporting requirements for U.S. companies and persons. In addition to an announcement made in March 2025 that saw the removal of the requirement for reporting beneficial ownership information (BOI) to the regulator as part of the Corporate Transparency Act (CTA), FinCEN also announced new plans to erase nearly all of the data already collected in its BOI database from millions of legal entities since January 2024, while dramatically reducing future collection requirements. This move, outlined during a congressional hearing on September 9th, has sparked further debate over the balance between regulatory burdens for financial institutions and additional covered parties and the growing movement towards the prevention of illicit finance nationwide.
The Corporate Transparency Act (CTA), enacted in 2021 as part of the National Defense Authorization Act, aimed to combat money laundering activity by requiring companies to formally disclose their true ownership details to FinCEN. Starting January 1st, 2024, tens of millions of U.S. legal entities were required to submit BOI reports regarding the composition of their respective firms, creating a massive database of ownership details to help authorities better identify and track those operating behind shell companies often being used to facilitate crimes such as drug trafficking and terrorism financing. At the time the measure was announced, it was widely heralded as one of the most significant steps forward by the U.S. government in the fight against financial crime. However, amid legal challenges, political pressure, and concerns over privacy and compliance costs, FinCEN ultimately exempted U.S. companies and U.S. persons from these requirements little over a year after the measure came into effect.
Under FinCEN’s interim final rule, the definition of a “reporting company” was narrowed to include only foreign entities formed under international laws and registered to do business in the U.S. by filing with a state secretary or similar office. This exempted all domestically-formed entities – coined “domestic reporting companies” – and their beneficial owners from BOI filing obligations, while foreign entities submitting reports no longer need to include U.S. persons listed as owners. For these qualifying foreign companies, filing deadlines remain tight: those registered before the rule’s publication must report within 30 days, while new ones have 30 days after registration notice. This change followed Treasury Department mandates seen in early March calling for greater focus on enforcement on foreign-owned entities presenting specific money laundering risks, effectively pausing broader CTA compliance amid ongoing litigation and newly-proposed legislation.
FinCEN Director Andrea Gacki addressed the implications of this rollback, and detailed the regulator’s future plans during a two-hour hearing before the House Financial Services Subcommittee on National Security, Illicit Finance, and International Financial Institutions earlier this month. She announced that the bureau is currently “working through comments” on the interim rule and intends to “resolve questions around the data that we gained and dispose of data that is no longer legally required to be filed,” with completion expected by year’s end.1 This means erasing ownership details collected from U.S. entities since early 2024, while permanently scaling back the database to focus less on domestic institutions and moreso on foreign risks. Gacki emphasized that FinCEN will solicit public comments and issue a final rule by the close of 2025, potentially reinstating requirements for U.S. companies with foreign owners if AML threats persist.
Thus far, the move has drawn sharp criticism from lawmakers concerned that it undermines the CTA’s core purpose. Subcommittee members highlighted how exempting domestic companies further limits efforts to guard against money laundering, with some arguing it restores major loopholes for illicit actors to capitalize on. On the other end of the spectrum, those falling under the scope of the previous measures, including U.S. small business owners who were forced to comply with this legislation or be subjected to fines and additional penalties, have rejoiced. The opposition of the legislation viewed the CTA as oppressive and invasive, and have called for the updated final rule to be expedited to rid themselves of current regulatory burdens.
The hearing also touched on additional FinCEN priorities, including the growth of cryptocurrency mixers. Two years after proposing to label these platforms as a “primary money-laundering concern” under the USA Patriot Act, Gacki indicated that tangible actions against these outlets may soon follow. Amid the growth in mainstream investment into cryptocurrencies, crypto mixers have grown immensely in popularity – particularly amongst bad actors and politically exposed persons – as a tool to obscure the origin of funds of the potentially-illicit variety. Mixers (or blenders) function to effectively blend individual crypto units together before redistributing them into an individual’s wallet, with the potential to mix ill-gotten crypto proceeds with “clean” coins on behalf of users. Thus far, Gacki has stressed a “delicate” approach to handling these platforms to not hamper further investment in this space. She stated “We have to make sure that we tailor any approach here to be really directed at illicit activity, and that we are not sweeping in any legitimate transactions.”1
As FinCEN navigates these changes, the BOI overhaul represents a pivotal development for U.S. AML policy, at least in the short term. While the rollback eases burdens on American businesses, the move does raise additional questions regarding gaps in enforcement with respect to use of shell companies by domestic entities. Experts anticipate that the upcoming final rule could be recalibrated based on comments and congressional input, with ongoing monitoring of CTA-related developments remaining essential for compliance professionals. For now, the database purge signals a drastic pivot, prioritizing targeted foreign oversight over broad domestic collection.
Citations
Passut, Charlie. “FinCEN Pledges to Empty Almost Entire Beneficial Ownership Database.” ACAMS Money Laundering, 9 Sept. 2025.