In a significant development, the U.S. Treasury Department announced on Sunday that it will no longer enforce a rule established during the Biden administration aimed at combating money laundering and the formation of shell companies. This decision marks a pivotal moment for small businesses across the nation, as the Treasury confirmed in a news release that it would not impose penalties for companies that fail to register with the agency's beneficial ownership information database.
Initially rolled out in September 2022, the rule was part of the Corporate Transparency Act, a legislative measure designed to enhance transparency in business ownership. The act mandated that most American businesses with fewer than 20 employees register their owners with the government by January 1, 2024. This initiative aimed to address the growing issue of shell companies, which are often utilized to conceal illicitly obtained assets due to their minimal employee count.
Former President Donald Trump expressed his approval of the enforcement suspension via his Truth Social media platform, labeling the database as “outrageous and invasive.” He stated, “This Biden rule has been an absolute disaster for Small Businesses Nationwide,” asserting that the “economic menace of BOI reporting will soon be no more.”
Despite the Treasury's announcement, the rule remains in effect while ongoing litigation continues. In 2022, a small business lobbying group filed a lawsuit to challenge the requirement for tens of millions of small businesses to register with the government. The issue of privacy and security concerning the database has been raised by business leaders, who argue that it creates unnecessary duplication with existing corporate databases maintained by other government agencies.
Officials from the Treasury, including former Secretary Janet Yellen, previously defended the rule by stating that the regulatory burden would be minimal, estimating costs at around $85 per business. They emphasized the benefits of having such a database for law enforcement agencies aiming to track down money launderers and other criminals. By January 2024, it was reported that over 100,000 businesses had already filed their beneficial ownership information with the Treasury.
On February 27, the Financial Crimes Enforcement Network of the Treasury announced that it would refrain from taking enforcement actions against companies that do not submit their beneficial ownership data. This decision was hailed by U.S. Secretary of the Treasury Scott Bessent, who described it as a “victory for common sense.” He noted that the action aligns with President Trump's agenda to reduce burdensome regulations, particularly those impacting small businesses, which are considered the backbone of the American economy.
The U.S. Treasury Department's decision to halt enforcement of the beneficial ownership rule is a notable shift in policy that reflects ongoing tensions between regulatory efforts and the concerns of small business owners. As the situation develops, small businesses across the nation will be watching closely to see how this decision impacts their operations and the broader economic landscape.
