Gutting of Landmark Anti-Money Laundering Law Will Enable Fentanyl Traffickers and Other Criminals

WASHINGTON, DC – On Sunday, the Treasury Department announced via social media post that it no longer intends to “enforce any penalties or fines against U.S. citizens or domestic reporting companies or their beneficial owners” under the Corporate Transparency Act (CTA). This announcement was followed on Monday by an official Treasury press release, and was echoed by President Trump on his social media platform Truth Social, where he claimed that “(beneficial ownership information) reporting will soon be no more.”

The CTA – which requires certain legal entities to provide basic identifying information on their true, or “beneficial”, owners – passed with the support of the first Trump Administration and represents the most substantial improvement to the U.S. anti-money laundering framework in a generation.

“With one tweet, the Administration has contradicted fifteen years of bipartisan work by Congress to end the scourge of anonymous shell companies – which are a favorite tool of our nation’s global adversaries and criminals including fentanyl traffickers, money launderers, and tax cheats,” said Ian Gary, executive director of the FACT Coalition. “Hollowing out the Corporate Transparency Act is an unconstitutional subversion of Congress’ intent that will not survive judicial scrutiny.” 

”Small businesses suffer when they are forced to compete with fraudulent and criminal enterprises that exploit anonymous shell corporations to evade accountability,” said Richard Trent, Executive Director of the small business network Main Street Alliance (MSA). “The Trump Administration’s reckless efforts to undermine the Corporate Transparency Act’s beneficial ownership reporting requirements threaten to roll back critical protections. Weakening these rules would allow bad actors to continue exploiting loopholes, harming honest small business owners and distorting the marketplace in favor of corruption. That’s why MSA stands firmly in defense of transparency and fairness—because Main Street businesses deserve better.”

“This decision threatens to make the United States a magnet for foreign criminals, from drug cartels to fraudsters to terrorist organizations,” said Scott Greytak, Director of Advocacy for Transparency International U.S. “Inexplicably, it tells foreign criminals–fentanyl traffickers, illegal arms dealers, corrupt foreign officials—that they can evade the most powerful anti-money laundering law passed since the PATRIOT Act by choosing to set up their criminal operations inside the United States.”

“It is a basic principle that U.S. law enforcement and intelligence agencies should be able to check who is using U.S. shell companies to move money within and across our own borders,” said Nate Sibley fellow and director of Hudson Institute’s Kleptocracy Initiative. “This action weakens the Trump Administration’s ability to investigate cartel finances and target the profit incentives driving the deadly fentanyl and human trafficking trade across the southern border. Terrorist organizations like Hamas and Hezbollah, as well as major U.S. adversaries like Communist China, also rely on shell companies to conceal activities that threaten American security and prosperity. America’s retreat from leading efforts to uncover these shadowy financial networks is an unforced error that enriches and empowers our worst enemies.”

The Treasury Department’s sudden announcement contradicted a recent notice on beneficial ownership reporting requirements released by FinCEN just two days earlier. It also runs counter to a recently filed Department of Justice legal brief defending the constitutional power of Congress to enact the CTA, which made clear that “The absence of company-ownership information in the United States…(is) ‘mak[ing] the United States a jurisdiction of choice for those wishing to create shell companies’” The move is also a reversal of the strong support of the law by the first Trump administration. 

The timing of the news, coming shortly after DOGE chief Elon Musk promised on the social media website X (formerly Twitter) to “look into” beneficial ownership reporting requirements, additionally raises questions about the Treasury’s independence.

Sunday’s unusual and hasty decision against enforcing the CTA must be followed by a more accountable and transparent rulemaking process, offering the public the opportunity to comment. FACT and its members look forward to contributing comments, as it has done in each of the past Treasury rulemakings to implement the CTA. Past comments demonstrate strong support from law enforcement groups, national security experts, and small business associations.

Any future rule that fails to account for public input is subject to invalidation by a court that finds it “arbitrary, capricious, an abuse of discretion.” In addition, Treasury’s failure to enforce the law as adopted by Congress and signed into law can be challenged as violating the President’s constitutional duty to “take care that the laws be faithfully executed.” 

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Notes to the Editor: 

• Read the Treasury Department’s official press release detailing the suspension of enforcement of beneficial ownership information reporting requirements under the Corporate Transparency Act for domestic filers here. 
• The initial announcement came in the form of a post by the official Treasury Department account on the social media platform X (formerly Twitter). 
• Treasury’s FinCEN had previously announced that it would not be enforcing CTA filing requirements until it had issued an interim final rule extending the BOI reporting deadlines and providing new guidance and clarity, “while ensuring that BOI that is highly useful to important national security, intelligence, and law enforcement activities is reported.”
• On February 4, the White House issued a national security memorandum laying out its maximum pressure campaign on Iran, noting that “beneficial ownership” was valuable “to ensure sanctions deny Iran all possible illicit revenue.” Limiting beneficial ownership reporting requirements to only foreign entities would directly undermine this goal, however, as evidenced by recent alleged use of U.S. entities to circumvent sanctions on Iranian oil and other assets. In one 2024 case, a Chinese national, Shaoyun Wang, allegedly used a U.S. front company to facilitate the sale of Iranian oil to China.
• 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.”