The idea that the United States government should know who owns every company was once a very popular one.
A 2021 law that created a tool to track bad actors financing terrorism, paying bribes and hiding from the U.S. government passed with overwhelming bipartisan support. Then-Sen. Marco Rubio, who sponsored the proposal twice, called it “the most significant anti-corruption & money laundering law in decades” and pressed the Treasury Department to enforce the data collection as recently as 2023.
Six years in, the project is now all but dead, and the political consensus that led to the law’s creation has collapsed, leaving a major gap in the government’s ability to investigate financial crimes.
On Wednesday, the Treasury Department axed this requirement that most companies operating in the United States have to report who owns them — even shell companies, which can be used to hide their owners for the sake of illicit finance. The Trump administration also intends to delete all the information the government has already collected.
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The administration’s move to unravel these reporting requirements — even though the law technically remains in place — comes after a years-long lobbying effort from small businesses worried about compliance.
The Biden administration’s early implementation of the data collection rules was so unpopular with small businesses that bipartisan support had begun to crumble before President Donald Trump retook office.
Staff at the Treasury’s Financial Crimes Enforcement Network, or FinCEN, found themselves overstretched and underfunded as they met with countless small business owners across the country to try to assure them that reporting ownership would not be a burden.
“I did so many meetings with small businesses, so many meetings. I think that anxiety was real,” said Brian Nelson, who served as the under secretary for terrorism and financial intelligence at the Treasury during the Biden administration. “Lawmakers across the country were hearing from small businesses anxious about this requirement and how they were going to be able to meet it.”
Republican lawmakers were also targeted by small business groups like the National Federation of Independent Business, which as recently as June was running ads in the districts of members of Congress who have not publicly advocated for the reporting rule to be repealed.
By the time the Trump administration first suspended collecting ownership information for U.S. companies last year, many of the rule’s original advocates had switched sides.
There’s still some bipartisan support behind the transparency requirement. The Trump administration’s change prompted an immediate outcry from corporate transparency groups and the law’s remaining supporters in Congress.
Sen. Chuck Grassley (R-Iowa) and Sen. Sheldon Whitehouse (D-Rhode Island) put out a joint statement Thursday saying that the deletion of the data violates Congress’ intent and will make it more difficult to combat illicit financing. The final rule rolling back the reporting requirements “undermines the clear intent of the law,” they said in a statement.
“This is an abject failure of the executive branch to fulfill the will of Congress,” said Erica Hanichak, the co-director of The FACT Coalition, a group that advocates for corporate transparency reforms. “So there are certainly grounds for a legal challenge.”
Treasury Secretary Scott Bessent called the decision “a victory for common sense” that cuts away burdensome red tape on American small businesses. Treasury argued in the final rule implementing the change that focusing the collection on foreign entities would help it create a useful database without overwhelming small businesses.
Rubio, now the secretary of state, supports “Treasury fulfilling President Trump’s promise to cut red tape,” the State Department said in a statement.
This change, however, is expected to make it more difficult for law enforcement to root out bad actors hiding behind shell companies, even as the Trump administration says that combatting fraud is a top priority.
Shell companies have long been used by bad actors for illicit finance. By the Treasury Department’s own estimation, they’ve been used in recent years to evade sanctions, pay and get bribes, defraud health care programs and launder the proceeds of drug trafficking, cybercrime and fraud.
“It does seem quite hypocritical to be putting the fraud-prevention flag out there and saying this is one of your top priorities for your administration, but you’ve just taken away a tool that the financial crime community desperately needed to be able to fight this particular type of financial crime and fraud,” Linda Miller, president of the government-integrity-focused Program Integrity Alliance who previously worked at the Government Accountability Office for a decade, told NOTUS.
The GAO warned just months ago that the Trump administration’s change “may perpetuate the illicit finance risk posed by shell companies.”
Treasury said it did not agree with the watchdog’s recommendation to find alternative ways to address these risks. Instead, the department insisted to the GAO that it “appropriately focuses its resources on the highest-value national security priorities.”
“Reasonable people could disagree about whether creating one gigantic [Treasury] database was the right approach here,” Miller said.
“The open question here is, what are you going to do about all these businesses that we have no idea who owns them, and how many of them may be engaging in terrorist financing activity, human trafficking, drug smuggling, financial crime, fraud?” she asked. “What are you going to do now? If that was too onerous, what are you going to do about this problem?”
Now, fraud investigators that had anticipated the new data will have to find ownership information by looking at other sources like state-level data, interviews, commercial databases and court filings — which may be more labor intensive, Donna Pelham, an educational content director at the Association of Certified Fraud Examiners, said.
The central repository was “another tool in the toolbox,” she said. “This one happens to be one that the government doesn’t want to use.”
Treasury itself had previously called the lack of transparency around who owns businesses the United States’ “most significant and longstanding gap” in its work combatting money laundering and terrorism financing. The removal of the reporting requirements follows the resignation of FinCEN’s head, Andrea Gacki, who had been in the government for 25 years.
“At the end of the day, a little bit of transparency is a small price to pay for the benefits that businesses are afforded by incorporating in the U.S.,” Hanichak said.
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