Overview
What Is a Shell Company?
A shell company is a legal entity, such as a corporation or limited liability company (LLC), that exists on paper, with no active business operations. Shell companies can be formed without providing much information about who actually owns or controls it. While many companies are created for legitimate purposes, anonymous shell companies have long been exploited by criminals and corrupt actors to hide illicit funds and assets.
Anonymous companies have been linked to money laundering, fraud, drug trafficking, sanctions evasion, corruption, tax crimes, human trafficking, organized crime, terrorist financing, and other forms of illicit activity. Because the true owners often remain hidden, law enforcement and financial institutions can struggle to identify the individuals behind suspicious transactions.
What Is the Corporate Transparency Act?
The Corporate Transparency Act (CTA) was enacted by Congress under the Trump Administration as part of the Anti-Money Laundering Act of 2020. The law is designed to curb the abuse of anonymous shell companies by requiring certain companies to report information about their beneficial owners, the real people who own or control a company, to the U.S. Department of the Treasury’s Financial Crimes Enforcement Network (FinCEN).
The CTA represents one of the most significant reforms to the U.S. anti-money laundering framework in decades, offering law enforcement a long-sought-after tool and bringing the United States closer to international standards on corporate transparency.
Why is the CTA Needed?
The United States has long been one of the easiest places in the world to create an anonymous company. It takes more information to get a library card in all 50 states than it does to open a company that can be used to facilitate crime or launder money.
Law enforcement officials, national security experts, financial institutions, anti-corruption organizations, human rights advocates, and others have long supported reforms to end anonymous company ownership in the United States. Without this information, criminals have the upper hand while investigators are flying blind in investigating crimes ranging from fraud, drug trafficking, human trafficking, corruption, tax evasion, terrorist financing, sanctions evasion, and environmental crimes.
What Does the CTA Do?
The CTA requires companies to name their true “beneficial” owners to a secure directory housed in the Financial Crimes Enforcement Network (FinCEN), which is part of the Treasury Department.
The law requires reporting companies to provide basic identifying information about their beneficial owners, including just four pieces of readily available information – a name, address, date of birth, and driver’s license or other identification number. For most small businesses, filing takes 20 minutes or less. No financial information or details about business purpose or operation is required.
The information is reported to FinCEN and is not publicly available. Access is limited to authorized government agencies and certain financial institutions for legally required anti-money laundering purposes.
More than 100 countries around the world have already implemented disclosures similar to the CTA.
What Is the Status of the CTA?
The Corporate Transparency Act remains federal law. In December 2025, the U.S. Court of Appeals for the Eleventh Circuit upheld the law in National Small Business United v. U.S. Department of the Treasury, finding that the CTA is a constitutional exercise of Congress’s authority under the Commerce Clause. Other courts have likewise rejected broad challenges to the law, and the CTA remains in effect.
Nevertheless, FinCEN has yet to fully implement the statute since Congress enacted the legislation in January 2021. Though the CTA is still the law of the land, in August 2026, FinCEN issued a Final Rule that exempts almost all entities that Congress mandated to report their true owners under the law. The rule eliminates reporting requirements for U.S. entities and individuals, and only requires reporting by certain foreign entities registered to do business in the United States.
The FACT Coalition and numerous law enforcement, national security, small business, and anti-corruption organizations have criticized the Final Rule, asserting that it contradicts the law as enacted by Congress and reopens U.S. markets to illicit finance and abuse by anonymous shell companies. A May 2026 report from the U.S. Government Accountability Office (GAO) similarly warned that the expanded exemptions create significant gaps in beneficial ownership information available to law enforcement and recommended that Treasury address the risks posed by the new exemptions.
Certain members of Congress have pressed to codify these exemptions or repeal the law altogether. In April 2026, the House Financial Services Committee advanced H.R. 425, legislation that would effectively repeal the CTA’s beneficial ownership reporting requirements for U.S. companies. The bill narrowly cleared committee in a vote of 26-25, facing bipartisan opposition. The bill has not been enacted into law.
Will Corporate Transparency Make a Difference?
Beneficial ownership transparency is widely recognized as an important tool for combating money laundering and organized crime, preventing sanctions evasion, protecting the integrity of financial markets, assisting law enforcement investigations, deterring the misuse of anonymous shell companies, and protecting U.S. national security.
The May 2026 report from the GAO underscored the risks created by recent exemptions to the CTA’s reporting requirements. GAO warned that the expanded exemptions in FinCEN’s March 2025 Interim Final Rule, made permanent in the August 2026 Final Rule, create gaps in beneficial ownership information and recommended that Treasury identify actions to address the risks posed by domestic reporting exemptions.
GAO noted that shell companies have long been used to obscure ownership and facilitate illicit finance, and that the lack of timely access to high-quality beneficial ownership information remains a major vulnerability in U.S. anti-money laundering and counter-terrorist financing efforts. Experience in the United States and abroad has demonstrated that beneficial ownership information can help investigators identify the individuals behind suspicious transactions and corporate structures, follow the money, and better protect the financial system from abuse.
Is the CTA Burdensome for Small Businesses?
The CTA’s reporting requirements were designed to minimize the burden on legitimate small businesses. FinCEN estimated that companies with simple ownership structures would spend approximately $82 to prepare and submit an initial report, and that the filing itself could take 20 minutes or less. A survey of early filers by Small Business Majority found that 68 percent described the process as “easy,” while only 6 percent found it very difficult.
For most small businesses with simple ownership structures, compliance involves providing only basic information they already have readily available. FACT Coalition and Transparency International U.S. have addressed these and other misconceptions about the CTA in greater detail.