GAO Warns Treasury Rollback of Corporate Transparency Act Could Increase Illicit Finance Risks
By CU Today Staff —
WASHINGTON—The U.S. Government Accountability Office is warning that the Treasury Department’s decision to scale back beneficial ownership reporting requirements under the Corporate Transparency Act (CTA) could leave significant gaps in the government’s ability to detect money laundering, fraud and other illicit financial activity conducted through anonymous shell companies.
In a new report, GAO said certain entities exempt from beneficial ownership reporting can pose “significant illicit finance risks” and recommended Treasury take additional steps to monitor those risks. The watchdog agency specifically urged Treasury to develop a process for identifying and reporting on emerging risks associated with exempt entities and ownership structures that may be used to conceal the identities of individuals involved in illegal activity. Treasury agreed with the recommendation, according to the report.
The findings come after the Treasury Department and its Financial Crimes Enforcement Network (FinCEN) sharply narrowed the scope of CTA reporting requirements in 2025. Treasury announced it would no longer enforce beneficial ownership reporting requirements for U.S. citizens and domestic companies and later issued a rule limiting reporting obligations primarily to certain foreign entities. As a result, domestic corporations, LLCs and other U.S.-formed entities are largely exempt from reporting beneficial ownership information.
The Corporate Transparency Act was originally enacted as part of the Anti-Money Laundering Act of 2020 to make it more difficult for criminals, fraudsters and other bad actors to use anonymous shell companies to hide assets, launder money or finance illicit activities. GAO noted that the lack of ownership transparency has long been viewed by law enforcement and anti-money laundering experts as a vulnerability within the U.S. financial system and said Treasury should continue assessing whether exempt entities present significant risks that warrant additional oversight.
Originally reported by CU Today.