U.S. states challenge Treasury rollback of ownership reporting rules
A coalition of 21 U.S. states and the District of Columbia is suing the Trump administration over a rule that exempts U.S. companies and individuals from federal beneficial ownership reporting. The legal challenge targets an August change to the 2021 Corporate Transparency Act framework and argues it removes disclosure requirements for more than 99.9% of affected companies.
Highlights
- Several U.S. states filed a lawsuit in the District of Oregon challenging the Treasury's August rollback of Corporate Transparency Act reporting requirements for certain companies.
- States argue the revised rule exempts domestic companies and U.S. owners of foreign companies from ownership disclosure, potentially undermining anti-money laundering efforts.
- Senator Elizabeth Warren and state attorneys general warn the rollback increases risks related to sanctions evasion, fraud, and other organized criminal activities.
Legal challenge to August rule
As reported by Reuters, the lawsuit was filed on Tuesday in the U.S. District Court for the District of Oregon against Treasury Secretary Scott Bessent, the Department of the Treasury, the Financial Crimes Enforcement Network, and the heads of the U.S. Departments of Justice and Homeland Security.The states argue the administration cannot undo a law through rulemaking and say the revised regulation effectively guts the Corporate Transparency Act, which was enacted in 2021 to help combat illicit finance. Court filings state that the rollback exempts domestic companies and U.S. owners of foreign companies from the law's disclosure requirements.
Bessent said in August that the rule removes a burdensome reporting requirement for millions of law-abiding business owners without compromising national security. The Treasury Department did not respond to a request for comment.
Anti-money laundering and enforcement concerns
State attorneys general leading the case say the rollback allows the true owners of foreign and domestic shell companies to remain anonymous, weakening a framework designed to help authorities track financial crime.New York Attorney General Letitia James said in a statement that the administration has effectively overturned the law through the exemption. In August, Senator Elizabeth Warren, the top Democrat on the Senate Banking, Housing and Urban Affairs Committee, said the rollback increases the risks of sanctions evasion, fraud, drug trafficking, sex trafficking and organized criminal activity.
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