How Changes to the Corporate Transparency Act Impact Investment Managers

In a major regulatory reversal, the U.S. Department of the Treasury and the Financial Crimes Enforcement Network (FinCEN) have announced sweeping changes to the Corporate Transparency Act (CTA), drastically scaling back the scope. Based on the interim final rule effective March 21, 2025, domestic entities are no longer required to report beneficial ownership information (BOI) to FinCEN. This marks a decisive shift from what was once expected to be a sweeping new compliance mandate for businesses nationwide. Foreign entities that fall under the revised definition of a “reporting company” and are not covered by any exemption must now comply with FinCEN’s updated filing deadlines.

This change follows months of legal challenges, delayed enforcement, shifting regulatory guidance, and mounting industry pressure. The update brings welcomed clarity for investment managers who have closely tracked this evolving rule, though not without ongoing implications.

Background on the Corporate Transparency Act

As we covered in our March article, the CTA’s path to implementation has been anything but linear. Enacted in January 2021, it was designed to combat illicit financial activity by requiring certain entities to disclose information about their true ownership to FinCEN. The goal was to enhance transparency, create a centralized ownership registry, and prevent the misuse of shell companies for money laundering, tax evasion, and other financial crimes.

However, the rollout was turbulent from the start. In December 2024, a court in Texas stopped the law nationwide. While the Supreme Court briefly lifted this hold in January 2025, another case (Samantha Smith) kept the rules paused through February. These legal battles, along with Congress not taking action, created uncertainty until February 18, when the legal blocks were finally removed. This allowed FinCEN to make its March changes.

CTA Changes Announced

On March 21, 2025, FinCEN issued an interim final rule that significantly narrows the CTA’s scope:​

• U.S. Companies Exempt: American businesses no longer need to report their owners.
• Only Foreign Companies Report: Only companies created under foreign laws that do business in the U.S. must report ownership information.
• No Reporting of U.S. Owners: Foreign companies don’t need to report information about American owners.
• New Deadlines: Foreign companies registered before March 21, 2025, must file within 30 days. New foreign companies have 30 days from when they register. The narrowed scope reflects a strategic shift by the Treasury Department, which has emphasized the heightened illicit finance and national security risks posed by foreign entities. According to FinCEN, corrupt actors, sanctions evaders, and criminal networks have used shell companies with foreign ties to exploit gaps in U.S. financial transparency. By maintaining reporting requirements for foreign entities but only for non-U.S. owners, the revised rule aligns with directives from the Financial Action Task Force (FATF) and national security guidance while easing compliance for U.S.-based firms.

Key Takeaways for Investment Managers

For investment managers, the latest changes to the CTA bring both relief and continued responsibility. U.S.-domiciled managers are no longer required to report BOI, easing the operational and administrative burdens that had been anticipated under the original rule. This effectively removes a key compliance item that had been at the top of firms’ minds when preparing for 2025 deadlines.

However, firms with foreign entities registered to do business in the U.S. must still comply with the updated rule. These managers should confirm that their foreign entities meet the new requirements and prepare to report non-U.S. beneficial owners accordingly.

The interim rule’s open comment period and ongoing legislative discussions suggest that further changes are still possible. Managers should remain engaged, update compliance programs thoughtfully, and ensure teams understand how the scope and application of the CTA may evolve over the coming months.

Congress also retains the authority to shape the CTA’s future. Lawmakers may choose to codify or challenge the recent revisions, amend definitions, adjust compliance thresholds, or introduce new exemptions. Additionally, they may respond to ongoing court rulings or influence policy through oversight or future anti-money laundering legislation. As these dynamics play out, investment firms and reporting companies must monitor developments closely to stay aligned with emerging expectations.

The Bottom Line

The final CTA rule represents a significant policy shift, rebalancing the need for transparency with practical considerations for businesses. For now, domestic investment managers can set aside BOI reporting preparations, while foreign-reporting obligations warrant immediate attention. With further changes still on the horizon, staying proactive and informed will be key to navigating this evolving regulatory landscape.

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