The Potential Impact of Repealing the Corporate Transparency Act
On April 21, 2026, the House Financial Services Committee voted to advance a bill that would effectively repeal the Corporate Transparency Act (CTA). The bill, titled “Repealing Big Brother Overreach Act,” would repeal critical sections of the CTA and Title LXV of the Anti-Money Laundering Act of 2020.
The CTA was enacted in 2021 to combat money laundering and other illicit activities. It requires corporations and limited liability companies (LLCs) to report information about their beneficial owners to the Financial Crimes Enforcement Network (FinCEN). It took effect January 1, 2024.
The Trump administration has already limited the law’s regulatory scope by exempting domestic entities from the CTA’s reporting requirements. The House bill would codify those exemptions.
Gutting the CTA would eliminate a critical law enforcement tool to combat money laundering through shell companies with opaque ownership. It would also put the U.S. out of sync with international laws and regulations regarding corporate transparency.
The Massive Scope of Money Laundering
Money laundering in the U.S. is a massive, systemic issue. The FBI and U.S. Treasury estimate that about $300 billion is laundered in the U.S. annually, making it one of the largest economic activities in the country. Chinese money laundering networks alone were associated with approximately $312 billion in suspicious transactions reported between 2020 and 2024.
The U.S. financial system is a primary target for launderers due to its size, stability, and global reach. In 2023, U.S. regulators fined financial institutions more than $5 billion for inadequate anti-money laundering (AML) controls. Major banks, such as TD Bank, have faced penalties as high as $3 billion for enabling laundering networks tied to drug cartels and fentanyl.
Cash-intensive businesses such as restaurants, laundromats, and casinos remain traditional favorites for injecting illegal cash into the system. Commercial and residential real estate are also major conduits. Most real estate transactions must comply with AML requirements, but 22% are cash deals with minimal oversight.
Social and Economic Consequences of Money Laundering
Money laundering is rarely a standalone crime. It is usually tied to drug trafficking, fraud, human trafficking, or terrorism. It provides the funding for these organizations to expand their operations.
Hundreds of millions in untaxed income result in less government revenue for infrastructure and public services, shifting the tax burden to law-abiding citizens. Money laundering can drive up real estate prices, making housing less affordable for legitimate buyers. It also erodes public trust in banks and can destabilize the economy by distorting interest rates and inflation.
Money laundering is rising due to the rapid digitalization of finance, allowing criminals to exploit fintech, cryptocurrencies, and peer-to-peer apps for faster, anonymous transactions. In fiscal year 2024, there were 1,095 cases involving money laundering reported to the U.S. Sentencing Commission, a 45% increase since 2020. Convictions carry heavy consequences, with an average sentence of 62 months. Nearly 90% of convicted offenders serve prison time.
The Role of Shell Companies
It’s impossible to estimate how much money is laundered through shell companies because these entities are designed to be opaque. However, recent high-profile cases illustrate the massive scale at which they operate.
In 2018, approximately $230 billion in suspicious funds flowed through an Estonian branch of Danske Bank, largely via shell companies. Between 2010 and 2014, a network of shell companies and banks moved as much as $80 billion out of Russia. Between 2009 and 2015, more than $4.5 billion was diverted from the Malaysian sovereign wealth fund, 1Malaysia Development Berhad, through offshore shell companies.
In 2016, the Panama Papers revealed a global network of more than 214,000 offshore shell companies that the wealthy, celebrities, politicians, and criminals used to hide assets, evade taxes, and circumvent international sanctions. The scandal spurred major international efforts to increase tax transparency, including the creation of beneficial ownership registers in various countries to identify the true owners of companies.
How the CTA Was Meant to Combat Money Laundering
The CTA’s primary goal is to prevent criminals, corrupt officials, and terrorists from using anonymous U.S. shell companies to launder money or hide assets. It requires that certain corporations disclose the identities of their beneficial owners and applicants to FinCEN. Beneficial owners include those owning 25% or more or exercising control over the company. Applicants are those who file paperwork to form the company.
Financial institutions in the U.S. and Canada spend more than $60 billion per year on AML compliance. The CTA was designed to reduce the burden on these entities by having the federal government collect ownership information. By requiring reports on beneficial owners, the Act brings accountability to corporate structures and provides law enforcement agencies with crucial information to identify individuals behind legal entities.
The CTA was modeled after existing international regulations. The U.S. was considered a laggard, and the CTA brought U.S. law into compliance with global standards.
International Laws Focus on Public Access
While the CTA directed FinCEN to create a centralized, nonpublic database for law enforcement, some international laws create public-facing registers of company ownership. The level of access to these databases varies, but the overall objective is to deter criminal activity and promote public oversight.
The U.K. has established a longstanding, publicly accessible register managed by Companies House. U.K. companies must report individuals who hold more than 25% of shares or voting rights or who otherwise exercise significant control.
The EU’s 5th Anti-Money Laundering Directive requires all EU member states to establish central registers of beneficial ownership. The registers must be accessible to competent authorities, financial intelligence units, and to some extent the public.
Canada has introduced requirements for corporations to maintain “registers of individuals with significant control” and is moving toward a public, centralized registry to combat tax evasion and money laundering. The Cayman Islands and Turks and Caicos Islands have established beneficial ownership registries, offering private access to law enforcement to align with international standards and reduce their status as tax havens.
Other U.S. Laws and Regulations
Several U.S. regulations require disclosure of beneficial ownership outside the CTA. Under the FinCEN Customer Due Diligence Rule, financial institutions must identify and verify beneficial owners when opening accounts for legal entity customers.
Investors acquiring more than 5% of a voting class of a company’s equity securities must disclose their identity, purpose, and control to the Securities and Exchange Commission. Certain government contracts and real estate transactions require disclosure of ownership for security or AML purposes.
New York requires nonexempt LLCs formed or operating in the state to file beneficial ownership disclosure statements with the Department of State. In the District of Columbia, companies must disclose individuals with direct or indirect ownership exceeding 10% or those controlling financial and operational decisions.
Several states, including California, Maryland, and Massachusetts, have considered or proposed bills similar to the federal CTA. Some states, such as South Dakota, have passed narrower legislation focusing on specific areas, such as reporting foreign ownership of agricultural land.
Conclusion
Money laundering is sometimes considered a victimless white-collar crime, but it has direct social and economic consequences. Disclosure of beneficial ownership provides law enforcement with a useful tool for investigating money laundering activities. Even if the CTA is repealed, businesses should work with counsel to analyze federal regulations and state and international laws to ensure compliance.
Businesses Face an Increasingly Complex Regulatory Landscape
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