MVA White Collar Defense, Investigations, and Regulatory Advice Blog

The Financial Crimes and Enforcement Network of the U.S. Treasury Department (FinCEN) on March 21, 2025 announced an interim final rule (the “Interim Rule”) which, if finalized in its current form, exempts all domestic entities from the requirement to report beneficial ownership information (“BOI”).  It further exempts foreign entities registered to do business in the United States from the obligation to report BOI of U.S. citizens who own or exercise substantial control over such foreign entities.  While public comment on the Interim Rule will be solicited before a final rule is issued, in the meantime, FinCEN has used authority granted in the Corporate Transparency Act (“CTA”, 31 U.S.C. 5336) to suspend the reporting requirements for domestic reporting companies until January 1, 2026.[1] Assuming the Interim Rule becomes the final rule, the end result of this suspension coupled with the updated rule is the same: FinCEN will require no entity formed in the U.S. to file any report  under the CTA. The modified regulatory regime drastically reduces the number of entities and individuals subject to the CTA. 

Foreign reporting companies[2]  are still obligated to report BOI with respect to those non-U.S. persons who exercise substantial control over such reporting companies, but the deadline for filing will be 30 days after the date the Interim Rule is issued in the Federal Register or 30 days after the foreign reporting company registers to do business in the United States, whichever comes first. As of the morning of March 25, 2025, the Interim Rule had not yet been published in the Federal Register, but we anticipate publication this week.  Assuming that is the case, the new filing deadline for currently existing foreign reporting companies will fall in the last week of April, 2025.

New Exemptions

The previous final rule which implemented and codified the CTA’s reporting requirements effective January 1, 2024 (31 CFR 1010.380, the “Reporting Rule”) required (1) domestic reporting companies and foreign reporting companies created or registered to do business in the United States before the Reporting Rule’s effective date of January 1, 2024 to file initial BOI reports by January 1, 2025, and (2) all reporting companies created or registered thereafter to report within 90 days of creation or filing (if formed in 2024) or within 30 days of creation or filing (if formed in 2025).[3]  FinCEN’s Interim Rule removes the term “domestic reporting company” from the definition of “reporting company”[4] and in tandem adds a new exemption for “any entity that is (A) a corporation, limited liability company or other entity and (B) created by the filing of a document with a secretary of state or  any similar office under the law of a State or Indian tribe.” [5]

The Interim Rule adds two further exemptions to relieve foreign reporting companies (which would be the only reporting companies if the Interim Rule becomes effective) and their U.S. person beneficial owners of the obligation to provide the BOI of any U.S. persons who are beneficial owners of such foreign reporting companies.  The two new exemptions, to be added at 31 CFR 1010.380(d)(4)(i) and (ii) respectively, read:

“Reporting companies are exempt from the requirement in 31 U.S.C. 5336 and this section to report the beneficial ownership information of any U.S. persons who are beneficial owners”; and

“U.S. persons are exempt from the requirement in 31 U.S.C. 5336 and this section to provide beneficial ownership information with respect to any reporting company for which they are an owner.”

Foreign pooled investment vehicles would also benefit from a change in 31 CFR 1010.380(a)(b)(2) subpart (iii) to exempt such vehicles from reporting the BOI of U.S. persons who exercise substantial control over the pooled vehicle.  If there is no individual with substantial control over the foreign pooled investment vehicle who is not a U.S. person, the vehicle is not required to report any beneficial owners.

FinCEN Authority to Modify

FinCEN derives its right to make the modifications contained in the Interim Rule from two sources: (i) the final exemption to the CTA’s enacted definition of reporting company and (ii) the authority granted in Section 5318(a)(7) of the Bank Secrecy Act (“BSA”) (of which the CTA’s Beneficial Ownership Information Reporting Requirements are a part),which empowers the Secretary of the Treasury to make “appropriate exemptions from a requirement in the BSA or the regulations prescribed under the BSA.”[6] 

The exemption in the reporting company definition speaks directly to the Treasury Department’s ability to create additional exemptions to the CTA.  A reporting company does not include “any entity or class of entities that the Secretary of the Treasury, with the written concurrence of the Attorney General and the Secretary of Homeland Security, has, by regulation, determined should be exempt from the requirements of subsection (b) because requiring beneficial ownership information from the entity or class of entities (I) would not serve the public interest and (II) would not be highly useful in national security, intelligence, and law enforcement agency efforts to detect, prevent, or prosecute money laundering, the financing of terrorism, proliferation finance, serious tax fraud, or other crimes.”[7]

In determining that BOI reporting by domestic reporting companies would not serve the public interest or be highly useful in the efforts described above, the Interim Rule notes that:

• Most domestic companies not already covered by a statutory exemption are legitimate small businesses “owned by hard working Americans who are not engaged in illicit activity.”
• Alternative sources of information such as the continued requirement for covered financial institutions to collect a legal entity’s BOI at the time the entity opens a bank or investment account mitigate illicit finance risk.
• President Trump’s Executive Order 14192, issued January 31, 2025, reassesses the balance of interests originally struck in the Reporting Rule and cites the Administration’s policy to reduce “the private expenditures required to comply with Federal regulations … to alleviate unnecessary regulatory burdens placed on the American people.”

The Interim Rule suggests that Congress had heightened concerns about foreign ownership or control of entities from the inception of the CTA, pointing to the applicability of reporting company exemptions for tax-exempt entities and inactive entities only if not “owned by a foreign person, whether directly or indirectly, wholly or partially.”[8]  The Interim Rule also cites a 2018 report by the Financial Action Task Force[9] which found that the majority of shell companies used for illicit purposes included in their structure a corporation located in a foreign jurisdiction.[10]  As a result of these and other statements made regarding foreign companies and the need to balance the burdens of reporting with the public interest in fighting illicit activity, the Treasury Secretary and FinCEN determined to maintain reporting requirements for foreign reporting companies.  Note,  however, that domestic companies owned by foreign companies will not be required to report.

The Secretary of the Treasury has received written concurrences from the Attorney General and the Secretary of Homeland Security, and thus has the authority to issue the Interim Rule, subject to public comment, with the intent to issue a final rule in 2025.  Public comments on the issues raised in the Interim Rule should be submitted within 60 days of the date the Federal Register publishes the Interim Rule.

The full text of the Interim Rule as submitted to the Federal Register is available here.

[1] 31 U.S.C. 5336(b)(1)(B): “In accordance with regulations prescribed by the Secretary of the Treasury [31 CFR 1010.380, effective January 1, 2024], any reporting company that has been formed or registered before the effective date of the regulations prescribed under this subsection shall, in a timely manner, and not later than 2 years [January 1, 2026] after the effective date of the regulations prescribed under this subsection, submit to FinCEN a report that contains the information described in paragraph (2).”

[2] A “foreign reporting company” is an entity created under the laws of a foreign jurisdiction which is registered to do business in the United States.

[3] 31 CFR 1010.380(a)(1)(iii).

[4] Modification of 31 CFR 1010.380(c)(1).

[5] To be inserted as 31 CFR 1010.380(c)(2)(xxiv).

[6] See Treasury Order 180-01, paragraph 3(a) (Jan. 14, 2020, available at BSA Enforcement Delegation. 

[7] 31 USC 5336(a)(ii)(xxiv).

[8] 31 U.S.C. 5336(a)(11(B)(xx) and (xxiii).

[9] Per the Interim Rule, the FATF is an international, inter-governmental task force whose purpose is the development and promotion of international AML/CFT standards and the effective implementation of legal, regulatory and operational measures to combat money laundering, terrorist financing, the financing of proliferation and other related threats to the integrity of the international financial system.

[10] See p. 29 of 2018 Concealment of Beneficial Ownership Report.