The New CTA: Calling Foreign Reporting Companies Only

Takeaways:

• The Financial Crimes Enforcement Network (FinCEN) has released an interim final rule (IFR) limiting the Corporate Transparency Act (CTA) reporting requirements to foreign reporting companies only.
• Under the IFR, foreign reporting companies must file beneficial ownership information reports with FinCEN within 30 days of the IFR’s publication in the Federal Register or 30 days after their registration to do business in the United States, whichever comes later.
• Domestic reporting companies and U.S. persons are exempt from reporting, effective immediately.
• FinCEN is accepting comments and intends to finalize the rule within the year.

Recap

Since early December of last year, the CTA has been in a state of flux. As we recently reported, FinCEN announced it would delay the reporting deadline for most companies to March 21, 2025, and that it would provide any update on further deadline extensions before then. In addition, FinCEN indicated plans to revise the CTA regulations with an interim final rule and noted that CTA enforcement actions were suspended until such rule would go into effect.

The U.S. Department of Treasury (“Treasury”) went further than FinCEN, which is a bureau within Treasury. In a press release on March 2, 2025, Treasury indicated that it would - permanently – not take enforcement action against U.S. citizens or domestic reporting companies and their beneficial owners. Treasury committed to making this change permanent in FinCEN’s forthcoming rule, which would limit the CTA to foreign reporting companies and their non-U.S. person beneficial owners.

The Interim Final Rule

A Limited Reporting Requirement

In the very late afternoon on March 21, 2025, FinCEN did indeed release the promised rule. As expected, the IFR limits the CTA reporting requirement to foreign reporting companies only. Specifically, the new definition of “reporting company” only captures entities formed under the law of a foreign country and which have registered to do business in a U.S. state or tribal jurisdiction by the filing of a document with the secretary of state or similar office.

Thus, domestic reporting companies and their beneficial owners are now excluded from the reporting requirement, including the requirement to update or correct previously filed beneficial ownership information. For further clarity, FinCEN revised its regulations to explicitly state that domestic reporting companies are exempt from reporting. In the IFR, FinCEN also stated that the exemption for domestic reporting companies and U.S. persons suspends any reporting requirements during the period until the final rule is issued.

U.S. persons for purposes of the IFR are citizens and residents of the United States. If a foreign reporting company’s beneficial owners are all U.S. persons, the company is exempt from reporting its beneficial owners.

FinCEN also revised their regulations to exempt foreign pooled investment vehicles from having to report the beneficial ownership information of U.S. persons exercising substantial control over the entity and limited the reporting requirement under the “control prong” to the individual who exercises the greatest authority over the strategic management of the entity and is not a U.S. person. If every individual with substantial control is a U.S. person, the foreign pooled investment vehicle does not need to report any beneficial owners.

Foreign Reporting Company Filing

Foreign entities meeting the definition of reporting company and which do not qualify for an exemption must report their information to FinCEN within 30 days of the IFR’s publication . or 30 days after their registration to do business in the United States, whichever comes later. the IFR’s publication in the Federal Register. Going forward, reporting companies registered to do business in the United States on or after the date the rule is published will have 30 days to file after receiving notice that their registration is effective.

These foreign reporting companies will not need to report any U.S. persons as beneficial owners, nor will U.S. persons need to provide their beneficial ownership information to the foreign reporting company for which they are beneficial owners.

Previously Reported Information

The IFR does not provide for a process requesting the deletion of previously filed beneficial ownership information, nor does the IFR address how this information will be treated.

Bigger Picture

When FinCEN first released their CTA reporting rules in 2022, it did so despite noting the excessive burdens it would impose on businesses. In issuing this IFR under a new presidency, FinCEN emphasized that the CTA directs the Secretary of the Treasury to minimize burdens on reporting companies. Specifically, the CTA directs the Secretary to focus on collecting beneficial ownership information that serves the public interest and which is useful in national security, intelligence, and law enforcement agency efforts in fighting financial crime.

In the IFR, FinCEN explicitly points to the new administration in explaining the change, noting, “[o]n January 20, 2025, there was a change in presidential administrations, which has resulted in a reassessment of [. . . the reporting rules].” FinCEN noted President Trump’s Executive Order 14192, Unleashing Prosperity Through Deregulation, which pronounced a policy “to alleviate unnecessary regulatory burdens placed on the American people.” The IFR also points to case studies in a 2018 report from the Financial Action Task Force (FATF), according to which most shell companies used for money laundering in complex structures across multiple companies in multiple jurisdictions were located in a foreign jurisdiction. The IFR, thus, concludes that foreign companies registered to do business in the United States therefore pose a heightened risk to U.S. national security. Ultimately, the Treasury Secretary, together with the Attorney General and Secretary of Homeland Security, determined that the beneficial ownership information of domestic companies was not highly useful in combating illicit financial activity.

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.