20 States and DC Sue Treasury and FinCEN Over CTA Ownership Exemptions
Twenty states and the District of Columbia have sued the Treasury and FinCEN over rules that sharply narrow beneficial ownership reporting, reviving a federalism fight over corporate transparency obligations.
On October 27, twenty states and the District of Columbia filed suit against the U.S. Department of the Treasury and the Financial Crimes Enforcement Network, challenging FinCEN's rules that sharply narrow beneficial ownership reporting under the Corporate Transparency Act. The complaint targets the exemptions that limit reporting for many domestic entities and for entities formed or registered in the United States, which FinCEN framed as reducing compliance burdens and protecting sensitive information.
Why sophisticated counsel care: beneficial ownership reporting is a foundational data point for anti-money-laundering enforcement, corporate transparency, and deal diligence. If the exemptions are vacated or narrowed by a court, tens of millions of entities could again face a filing obligation, and firms advising private equity sponsors, holding companies, and startup clients would face renewed formation, restructuring, and disclosure work. The suit also puts squarely before the courts the allocation of regulatory authority between federal AML regulators and the states, and may interact with separate litigation over the statute's constitutionality.
Next steps to watch: the docket in the challenging states' courts, any preliminary injunction or stay motion, the position of the remaining states, and the possible entry of a broader injunction or a government appeal. Compliance teams should track FinCEN's interim guidance and the rule's effective dates while assessing whether continued reliance on the exemptions remains safe.