• Coalition of 21 US states sues Trump administration in attempt to overturn rollback
• GAO warns rollback limits ownership checks in federal contracting
• FinCEN eases digital-asset oversight as part of broader deregulatory agenda
• Sanctions-driven foreign policy increases incentives to obscure asset ownership

Less than three years after the Corporate Transparency Act’s (“CTA”) beneficial ownership reporting regime was launched, the US Treasury Department has sought to dismantle it by exempting US companies from the disclosure requirements. By reversing a move towards greater ownership transparency, the federal government’s rollback would effectively shift responsibility back to investors, lenders and counterparties to identify illicit actors and understand who they are dealing with.

But on 27 October, a coalition of 21 mostly Democratic-led US states and the District of Columbia filed a lawsuit in the US District Court for the District of Oregon, claiming that “the executive branch cannot repeal a law by rulemaking” and asking the court to overturn the rule.

The CTA was enacted by Congress “in response to a problem that has long plagued law enforcement and tax administration in the United States: the existence of secretive shell corporations, arranged in complex, layered structures designed to hide information about the individuals who own or control them,” the lawsuit argues.

The CTA was passed into law in 2021 as part of the National Defense Authorization Act, but its reporting requirements did not take effect until 2024. The law required companies within its reporting scope to disclose their beneficial owners to the Financial Crimes Enforcement Network (“FinCEN”), creating a nonpublic database accessible to law enforcement, national security and intelligence agencies, and other authorized users. Beneficial owners were defined as shareholders owning at least 25% of a reporting company or individuals exerting “significant control.”

Implementation was quickly met with legal challenges, including claims that the reporting requirements exceeded the federal government’s constitutional authority and violated protections against unreasonable searches and seizures. As courts reached differing conclusions about the law, the administration also began narrowing its enforcement scope.

In March 2025, FinCEN issued an interim final rule exempting US companies, which accounted for approximately 99% of previously covered entities, and requiring foreign companies to disclose only foreign ownership. On August 11, 2026, FinCEN made the rollback permanent, issuing a final rule formally exempting US companies and US persons and ordering previously reported beneficial ownership information from US persons to be deleted.

The plaintiff states now seek a judgment that “declares unlawful and vacates the Interim Exemptions Rule and the Final Exemptions Rule, as well as immediate relief to prevent the impending destruction of the beneficial ownership information that Congress directed FinCEN to collect and preserve.”

Conflicting policy priorities

The rollback came before the CTA had much time to demonstrate whether the database it created could deliver on its goal of improving corporate transparency in a country where forming a company proverbially requires disclosing less personal information than obtaining a library card.

It is part of a broader shift in the administration’s approach to financial regulations, which has emphasized reducing regulatory compliance burdens on businesses while promoting US competitiveness.

In April 2026, FinCEN proposed an overhaul of financial institutions’ anti-money laundering and counter-terrorism financing programs, arguing that banks should focus resources on higher-risk customers and sectors. Digital assets have been a particularly prominent focus of this broader policy shift, with the White House explicitly directing agencies to pursue US leadership in digital financial technology and to review regulations that could impede the sector. On 4 October 2026, FinCEN withdrew proposed rules that would have imposed additional recordkeeping, verification, and reporting requirements on certain digital-asset transactions, citing the administration’s deregulatory agenda in its announcement.

At the same time, the administration has made combating cartels and transnational criminal organizations (“TCOs”) a major policy priority, while continuing to rely heavily on sanctions and other economic measures in its foreign policy. Shielding US markets from criminal organizations, sanctions evaders, and other illicit actors who exploit opaque corporate structures to conceal and transfer money requires detailed accounts of ownership frameworks, which the CTA was designed to provide.

As the US government steps away from asking companies who owns them, responsibility falls to corporates, investors and due diligence providers to follow connections and assess the risk potential.

Beneficial ownership in practice

In many cases, determining beneficial ownership is relatively straightforward. In certain cases, however, it can be highly complex and requires investigators to meticulously piece together a company’s ownership and control structure, using regulatory filings, media reports, court records, and corporate registries.

Through corporate records alone, it can be hard to determine the extent of control one company in the chain exerts on another, if any at all. Ownership interests can be divided among shareholders, while control can be exercised through voting rights, financing arrangements, board or management positions, or other arrangements.

Consider a fictional US logistics company, Acme Logistics LLC (“Acme”). The company is incorporated in Delaware, operates as a legitimate business, and is owned by a US holding company. That holding company is owned by three individuals whose public profiles do not indicate that they have any connections to criminal activity or sanctioned entities.

However, research using publicly available corporate records reveals that the holding company shares an address with several other businesses. One of its owners previously served as a director of a foreign company that was involved in a corruption investigation. Another provided financing to Acme through a separate private company whose own ownership is difficult to establish. Public records also show overlapping directors and addresses across several entities in the ownership chain.

These findings, on their own, do not support the conclusion that Acme is being used for illicit financial activity or that its stated owners are not its true beneficial owners. But together, they should raise questions about who actually owns and controls the company and what the nature of the ownership structure suggests about its operations.

How opacity is exploited

The layered ownership structure that makes Acme worth a closer look are similar to those that cartels and TCOs use to place illicit funds into the financial system, to then return them as legitimate-looking income. An operating business can mix illicit money with ordinary revenue, and a chain of holding companies makes it harder to determine who ultimately owns and benefits from the business. Beneficial ownership reporting gave US investigators a way to start untangling these chains and provided a valuable reference point against other sources of information. For US companies, that starting point has now been phased out.

This places the CTA rollback in tension with the administration’s stated priorities. Combating cartels and TCOs and pursuing economic pressure on adversaries both depend on determining who owns and controls companies that may be involved in their operational apparatus. Beneficial ownership provided by CTA reporting requirements was one source of that information. Without it, investigators must interrogate these relationships through other leads, and investors and counterparties will have less certainty about whether an entity’s ownership and control structure are accurately represented.

Meanwhile, enforcement elsewhere in the financial system has not paused. In the April 2026 proposal to reform anti-money laundering programs, the Treasury reinforced its view that financial institutions are best positioned to identify and evaluate their own illicit finance risks, and on October 13 the Treasury, along with the Office of the Comptroller of Currency, announced more than USD 1.2bn in penalties against Bank of America for anti-money laundering and sanctions violations. The violations included failing to mitigate and report risks tied to Chinese money laundering networks and illicit finance along the US southern border.

For private actors, the challenge lies in assembling a reliable picture from the sources that remain available, without the backstop of a federal database that could be accessed by law enforcement in an investigation. Corporate registries can establish formal ownership but may not explain control. Court records can reveal relationships and disputes that provide further context to information found in corporate registries. Property records, regulatory filings, financing announcements, and past corporate affiliations can help fill in informational gaps.

The usefulness of the constructed ownership picture relies on following any connections between information presented in public records research. Connections between directors and entities can reveal relationships with other companies, government officials, or sanctioned entities. A seemingly unrelated individual may emerge repeatedly across the corporate records of several entities, raising questions about their role and their own associations.

Long term implications

The long-term significance of the CTA rollback may depend partly on how future administrations assess the tradeoff between regulatory burden and ownership transparency. In addition to the states’ lawsuit, several US government officials from both parties have publicly opposed the decision to end enforcement for US companies.

In a US economy in which private capital increasingly intersects with public policy, the deprioritization of corporate transparency comes at a time when questions about the separation between public office and private business have become more acute, particularly as members of the president’s family have expanded their financial interests in industries directly impacted by the administration’s domestic and foreign policy.

The consequences also extend to the government’s own evaluation of private companies in contracting processes. A 2026 Government Accountability Office (GAO) review found that federal award processes generally lack access to beneficial ownership information and identified cases in which companies obscured their ownership to fraudulently obtain government contracts or other federal benefits.

As private companies become increasingly intertwined with government policy and spending, the question of who ultimately owns and benefits from those companies becomes relevant not only to financial crime and sanctions risks, but also to conflicts of interest and the use of political influence for private gain. The GAO also noted that the CTA rollback had made the federal beneficial ownership database of limited use for identifying ownership of companies pursuing government contracts and grants.

As the US approaches the 2026 midterm elections, political spending provides another example of how lack of transparency can be leveraged to exert undetected influence. The scale of money entering the US political system has grown substantially, from just under USD 15bn in the 2024 cycle compared to USD 8.5bn in 2016. Corporate and nonprofit structures can make it difficult to identify the individuals or interests ultimately providing or directing that money. In the 2024 election cycle, OpenSecrets estimates that more than USD 1bn in dark money flowed to Super Political Action Committees (PACs) and other groups that spend independently of candidates. Dark money refers to political spending by organizations that are not required to disclose their donors. Federal law prohibits foreign nationals from contributing or spending in relation to US elections, and the Federal Election Commission has recognized the potential for foreign actors and foreign-owned entities to obscure the source of political funding.

The CTA stood as a mechanism to make certain ownership information available to the government and regulators in a standardized database. Its rollback leaves an environment that is more vulnerable to illicit exploitation.