Significant Changes to Beneficial Ownership Requirements: FinCEN Exempts Domestic Entities

The Treasury’s Financial Crimes Enforcement Network (FinCEN) has announced an interim final rule that significantly narrows the Corporate Transparency Act (CTA) scope regarding beneficial ownership reporting requirements. Released on March 21, 2025, the new rule limits reporting obligations to foreign entities and foreign nationals while exempting domestic entities. This means that only entities formed under foreign laws registering to do business in the U.S. must report their beneficial ownership information.

The rule also relaxes requirements for foreign pooled investment vehicles, allowing exemptions if no non-U.S. person exercises substantial control over them. Additionally, reporting deadlines for foreign entities have been extended. Currently, registered foreign entities must file within 30 days of the rule’s publication in the Federal Register, while newly registered entities will have 30 days from their effective registration notice to comply.

FinCEN justifies this change by highlighting alternative sources for tracking beneficial ownership, such as financial institutions’ customer due diligence requirements—furthermore, the Treasury points to data indicating that foreign shell companies pose higher risks to national security. Cost concerns were also a factor in this decision, with FinCEN estimating the change could save approximately $9 billion per year in compliance expenses.

Reactions to the rule have been mixed. Business groups like the National Small Business Association and the American Institute of CPAs support the exemptions, arguing the CTA’s original requirements placed undue burdens on businesses. However, transparency advocates caution that this move weakens anti-money laundering efforts and makes it easier for criminals to exploit the U.S. financial system. Critics argue the rollback could hinder law enforcement efforts and may result in the U.S. failing to meet international anti-money laundering standards. Public comments on the rule are due 60 days after publication in the Federal Register.

McGuire Sponsel’s Global Business Services practice will continue to monitor this situation and provide additional information as it becomes available.