As we recently reported, the Financial Crimes Enforcement Network (FinCEN) has been chipping away at the CTA, including through a recent notice. Now, Treasury has dramatically changed the CTA landscape with respect to U.S. citizens, domestic reporting companies, and their beneficial owners.
After FinCEN delayed the reporting deadline for most companies to March 21, 2025, the agency announced on February 27th that it would not issue fines or penalties or take enforcement actions against any companies until a forthcoming interim rule goes into effect.
FinCEN suspended the rule, but in a series of posts on X (formerly Twitter) and a press release on March 2, 2025, Treasury effectively ended CTA enforcement of penalties and fines against U.S. citizens, as well as domestic reporting companies and their beneficial owners. Treasury stated its intention to make this change permanent by promising to use the forthcoming rule to narrow the reporting requirements to foreign reporting companies only. Treasury indicated that the development is part of a government‑wide effort to reduce burdensome regulations.
These developments remove the risk for noncompliance with statutory obligations. With that said, investors should be mindful of any contractual obligations they may have to provide beneficial ownership information to portfolio companies in which they have invested. Although Treasury’s announcement may void the underlying purpose of any such agreements, those commitments likely remain in effect. Investors should consider contacting their counterparties and confirm their counterparties’ expectations now that CTA compliance for U.S. citizens and domestic reporting companies is no longer required.
Further, Treasury’s announcement does not address all scenarios involving U.S. citizens. For example, it remains unclear whether a U.S. citizen who is a beneficial owner of a foreign reporting company, is exempt from enforcement. With luck, ambiguous cases such as this one will be clarified in the upcoming rule.
For more information, please reach out to your usual MoFo contacts or the authors of this alert. You may also refer to MoFo’s CTA Resource Center.