CTA Hollowed Out for Domestic Entities — Shell Company Risk Persists as Foreign Reporting Remains Active

The Corporate Transparency Act’s (CTA) beneficial ownership reporting requirements have been effectively suspended for virtually all U.S. domestic companies following FinCEN’s March 2025 interim final rule, which narrowed the definition of ‘reporting company’ to cover only foreign entities registered to do business in the United States. As of March 2026, this policy remains in force, leaving what transparency advocates describe as an $80 trillion-scale gap in the U.S. AML framework — anonymous domestic shell companies remain outside federal disclosure requirements.

From a financial crime compliance standpoint, this creates elevated due diligence obligations for financial institutions, who must now compensate for the absence of a centralised federal beneficial ownership database by enhancing their own KYB procedures. Banks, securities firms, and fintech platforms that relied on or anticipated CTA-generated FinCEN data as a customer identification resource must revert to private-sector beneficial ownership verification tools. Meanwhile, foreign reporting companies — those formed abroad but registered in a U.S. state — remain subject to CTA obligations, creating an asymmetry that may incentivize domestic structuring to avoid disclosure.

For AML program managers, the practical response should include enhanced beneficial ownership documentation requirements for high-risk entity types (LLCs, trusts, holding companies), particularly where the underlying transaction involves real estate, large value transfers, or cross-border payments.