Fentanyl Traffickers, U.S. Adversaries Biggest Winners in New Treasury Proposal

Gutting of Corporate Transparency Act Unlikely to Withstand Judicial Scrutiny

Washington, DC – Today, the Treasury Department announced an interim final rule to exempt domestic companies as well as U.S. owners of foreign companies from filing information under the bipartisan Corporate Transparency Act (CTA), a landmark anti-money laundering law that requires certain U.S. entities to provide basic identifying information to the Treasury Department about their true, or “beneficial”, owners. If finalized, the rule would exempt more than 99 percent of entities from reporting their ownership information under the statute.

“Treasury’s proposal contradicts decades of evidence that sanctions evaders, tax cheats, and fentanyl traffickers rely on anonymous U.S. companies to stash their illicit cash in the U.S. financial system,” said Ian Gary, executive director of the FACT Coalition. “This decision is tantamount to nullifying the statute and is very unlikely to be upheld in court. Treasury must take these legal and constitutional considerations into account as part of the rulemaking.”

The interim final rule is designed to formalize unusually abrupt announcements made earlier this month by the Treasury Department and President Trump that Treasury would halt enforcement of the CTA. These announcements were made despite the fact that the law passed with the support of the first Trump Administration.

“District attorneys around the country strongly support the Corporate Transparency Act as an indispensable tool for combating the fentanyl epidemic, transnational crime, terrorism financing, and other illicit activities,” said Nelson Bunn, Executive Director of the National District Attorneys Association. “Access to beneficial ownership information is a necessity for prosecuting crimes. Treasury’s interim final rule threatens to deny law enforcement the vital information they need to pursue illegitimate business fronts that jeopardize U.S. national security and public safety. If finalized without amending, this proposal will undermine Congress’s intent and stunt efforts to achieve justice across the nation.”

“The Corporate Transparency Act is one of the most pivotal advancements made by the U.S. government to confronting the exploitation of the U.S. financial system driven by illegitimate and anonymous companies,” said Albert Torres, Senior Program Manager of the George W. Bush Institute. “Foregoing enforcement would hinder tackling some of the most pressing issues today, including fentanyl trafficking, terrorism financing, and foreign corruption. The proposed rule made by Treasury would hinder the efforts of law enforcement and the administration in addressing these issues of utmost importance and should be considered during the rulemaking process.”

Under the CTA statute, Treasury has the authority to make reporting exemptions only with concurrence from the Department of Homeland Security and Attorney General that reporting by the entities in question “would not serve the public interest” and “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.” Two decades of evidence compiled by Congress and Treasury’s own risk assessments that “[s]hell companies and the lack of timely access to beneficial ownership information…are distinct vulnerabilities in the U.S.” anti-money laundering system would suggest that the proposal violates the plain language of the Act.

###

Notes to the Editor:

The full text of the interim final rule can be found here.
Over the coming year, the United States will undergo its fifth round mutual evaluation by the Financial Action Task Force (FATF), the international anti-money laundering standard setting body. With the Corporate Transparency Act’s implementation underway, the U.S. was upgraded to largely compliant under Recommendation 24 in 2024. Backtracking on what entities are covered risks U.S. censure, including “grey-listing” by FATF and its related economic consequences.
Recent polling from conservative polling firm McLaughlin and Associates details widespread support for the Corporate Transparency Act, with 81 percent of respondents agreeing with the statement that “Asking some small businesses to do 20 minutes of paperwork identifying their true owner is a small price to pay for keeping our communities safe from drug trafficking, terrorist financing, and other financial crimes.”