Stop me if you’ve heard this old chestnut before: A legal entity walks into a bank.
The bank asks, “Who actually owns you?”
The entity looks around and whispers, “…Who wants to know?”
Alright, fine – not much of a joke (no one said federal regulatory humor was easy). But that, in miniature, is the problem the Corporate Transparency Act was supposed to help solve.
Instead of forcing banks – and, notably, law enforcement and investigators – to keep playing ownership detective one customer at a time, the law created a federal beneficial ownership registry at FinCEN, bringing the U.S. closer to the ownership-transparency framework already familiar across much of Europe and the world at large. It’s a simple-enough idea – anonymous shell companies are useful to criminals precisely because they are anonymous, so maybe the government should make them a little less so. After all, FinCEN’s self-described slogan is “follow the money,” and what better way to start than by making the company say who is behind it?
Then came Treasury’s 2025 reversal.
In March 2025, FinCEN issued an interim final rule that dramatically narrowed the BOI reporting program, exempting domestic companies and U.S. persons and leaving the reporting obligation largely to foreign companies registered to do business in the United States. A new U.S. Government Accountability Office (GAO) report translates that policy choice into stark numerical terms – more than 99 percent of the entities that previously would have had to report are now outside the rule.
Now, it’s no secret that Treasury’s stated rationale was burden reduction – to be sure, a valid concern. Anyone on the bank-compliance front lines knows that small businesses have spent the last few years trying to understand a rule that was delayed, challenged, revived, narrowed, and reworked enough times to make even seasoned professionals wake up in a cold sweat shouting “…substantial control!” Nobody can pretend that BOI reporting was frictionless.
But GAO’s point is that burden reduction came with a significant cost. The report notes that U.S.-based shell companies can pose significant illicit-finance risks, a fact that should likewise surprise no one in banking. Shell companies have long been used to obscure ownership, move illicit funds, evade sanctions, conceal fraud proceeds – overall, make “follow[ing] the money” a whole lot harder.
Treasury relieved millions of entities from reporting, but, of course, the ownership question didn’t disappear. It simply moved back into the slower, murkier downstream work – to law enforcement, to investigators, and, practically speaking, to banks.
Banks still have to understand customer ownership and control (see, generally: 31 CFR 1010.230). Banks still have to manage legal entity risk. And with that in mind, banks still have to investigate suspicious activity – particularly when the ownership structure looks like it was designed by someone trying very hard not to be found. So, the government may have reduced the reporting burden on businesses, but it hasn’t eliminated any of the underlying opacity – and that opacity was arguably always the real problem.
GAO recommended that Treasury identify potential actions to address the risks created by the domestic-company and U.S.-person exemptions and provide Congress and law enforcement with useful information to address those risks. And, as GAO curtly reported, “Treasury disagreed with the recommendation.”
GAO’s report can be found here: GAO-26-107967 – Corporate Transparency: Treasury Should Address Gaps in Ownership Information Resulting from Expanded Exemptions
Brett Goodnack, JD, CAMS
Compliance Advisor