WASHINGTON — The United States Treasury Department has decided not to enforce a regulatory initiative from the Biden administration aimed at curbing the formation of shell companies and fighting money laundering. On Sunday evening, the department revealed in a statement that businesses will not face penalties now or in the future if they fail to register for the beneficial ownership information database introduced under President Biden’s tenure.
Although small businesses have been challenging this rule in court, it remains in effect despite the lack of enforcement. Former President Donald Trump expressed his approval of halting the rule’s enforcement on his Truth Social platform, labeling the database as “outrageous and invasive.” He criticized the Biden administration’s decision, stating, “This regulation has been a disaster for small businesses across the nation,” and emphasized that the regulatory burden would soon dissipate.
However, concerns have risen among the database’s proponents. Ian Gary, the executive director of the FACT Coalition, which advocates for transparency in business and government, criticized the suspension. He remarked that the administration’s decision undermines bipartisan efforts to eliminate anonymous shell companies, frequently exploited by criminals, tax evaders, and global adversaries.
In September 2022, the Treasury commenced rulemaking to establish a database intended to store personal data of business owners across approximately 32 million U.S. companies. This measure aimed to prevent the misuse of shell companies and illicit financial activities. Under the rule, American businesses with fewer than 20 employees needed to register their proprietors with the government by January 1, 2024. Shell companies, typically associated with illegal activities, usually operate with minimal staff.
Former Treasury Secretary Janet Yellen stated the rule would impose a relatively low regulatory burden—estimated at around $85 per business—while providing significant advantages for law enforcement in tracking criminals like money launderers. By January 2024, over 100,000 businesses had already submitted their beneficial ownership information to the Treasury.
Nonetheless, the rule has been embroiled in legal battles. Enacted under the Corporate Transparency Act, an anti-money laundering statute from 2021, the regulation faced a lawsuit from a small business lobbying group challenging the registration requirement. Consequently, on February 27, the Treasury’s Financial Crimes and Enforcement Network declared it would not pursue enforcement actions against companies that failed to register beneficial ownership data.
Amid concerns regarding privacy and potential duplication with other governmental databases, business leaders contend that the database introduces unnecessary security risks. U.S. Secretary of the Treasury Scott Bessent praised the decision on Sunday, asserting, “This is a triumph for common sense.” He further elaborated, “Today’s action forms part of President Trump’s ambitious agenda to invigorate American prosperity by reducing burdensome regulations, particularly for small businesses that form the backbone of our economy.”
