The Trump Administration Again Breaks with the Legislative and Judicial Branches To Weaken America -- This Time By Weakening Corporate Transparency

I. Introduction

On March 3, 2025, the U.S. Department of the Treasury announced that it would not enforce the Corporate Transparency Act (CTA) for U.S. citizens and domestic reporting companies, effectively halting a key anti-corruption measure that had been enacted to prevent illicit financial activity and corporate fraud. This decision follows a series of legal challenges against the CTA, including a December 3, 2024, federal court injunction, which was subsequently stayed by the U.S. Supreme Court on January 23, 2025. By staying the injunction, the Supreme Court signaled that the challengers’ arguments against the CTA were unlikely to prevail on the merits.

Despite the bi-partisan support for the CTA in overriding a Trump veto, and this indication from the Supreme Court that the law should be enforced, the Executive Branch has opted to sideline the CTA, allowing corporations to continue operating with a degree of anonymity that the law was expressly designed to prevent. This unilateral decision not only undermines legislative intent but also significantly weakens the ability of law enforcement agencies to combat financial crimes, including money laundering, fraud, and illicit financial flows.

II. Legislative Intent and Judicial Validation of the CTA

The CTA was enacted in 2021 as part of the National Defense Authorization Act to close significant gaps in corporate ownership transparency. In fact, in December 2020, the U.S. Congress, majority-controlled by Republican lawmakers in both the House and the Senate, passed the CTA as part of the 2021 National Defense Authorization Act—which then-President Donald Trump vetoed (his sole overridden veto during his first term of office). On January 1, 2021, Congress, by a two-thirds vote in both the House and Senate, overrode Trump’s veto and passed the CTA into law.

The Act mandates that companies disclose their beneficial owners to the Financial Crimes Enforcement Network (FinCEN), thereby addressing long-standing concerns about the misuse of anonymous corporate structures to facilitate illegal financial activities.

Following its enactment, the law faced several constitutional challenges, in which two different federal judges in Texas issued nationwide injunctions blocking its enforcement. However, the Supreme Court stayed one of these injunctions on January 23, 2025, thereby restoring some of the CTA’s enforceability. Staying an injunction requires a showing that the government is likely to succeed on the merits, meaning that the Supreme Court likely found the challengers’ claims against the CTA to be weak.

Despite this judicial outcome, the Treasury Department announced that it would not enforce the CTA for domestic reporting companies. This action not only disregards the Supreme Court’s decision but also contradicts the law’s underlying policy objectives, raising concerns about the Executive Branch’s commitment to enforcing financial regulations.

III. The Impact of Corporate Opacity on Law Enforcement and Consumer Protection

Corporate opacity, the very issue the CTA was designed to combat, presents formidable challenges to law enforcement and consumer protection efforts. Anonymous corporate structures serve as essential tools for financial criminals, corrupt officials, and illicit enterprises seeking to obscure ownership, evade accountability, and launder illicit funds beyond regulatory oversight.

Criminal organizations and fraudulent actors routinely exploit these opaque structures to facilitate a broad spectrum of unlawful activities, including money laundering, securities fraud, tax evasion, and terrorist financing. Without clear disclosure of beneficial ownership, financial regulators and law enforcement agencies face significant investigative roadblocks, while victims of financial fraud are often left with no recourse against anonymous corporate entities.

Notable Examples of Financial Crimes Enabled by Corporate Secrecy

1. Government Corruption: The 1MDB scandal, one of the largest financial frauds in history, involved the misappropriation of approximately $4.5 billion from Malaysia’s sovereign wealth fund. The scheme relied on a web of anonymous shell companies to launder money through the global financial system, shielding those responsible from immediate detection.
2. Securities Fraud: In a notorious Ponzi scheme uncovered in 2009, fraudsters utilized shell companies to disguise self-dealing transactions, ultimately defrauding investors out of $168 million. The lack of ownership transparency prevented investors and regulators from detecting the fraud until significant losses had already occurred.
3. Organized Crime and Money Laundering: The Los Zetas cartel, one of Mexico’s most violent criminal organizations, laundered drug proceeds through legitimate-seeming businesses, including agricultural companies and equine enterprises, which operated as front entities to obscure illicit revenues.
4. Consumer Fraud and Identity Theft: Anonymous business structures have been used to shield perpetrators of consumer fraud schemes. In one case, the Federal Trade Commission pursued legal action against a defendant who operated at least 18 fraudulent companies, using them to market non-existent credit products while avoiding liability.

Barriers to Law Enforcement and Regulatory Oversight

The absence of transparent corporate ownership information makes investigating financial crimes exponentially more difficult. The FBI has documented numerous cases in which shell companies and front entities have obstructed efforts to track illicit financial flows and identify culpable individuals. Investigators must frequently issue redundant subpoenas across multiple jurisdictions to trace ownership, often encountering nominee directors or incorporation agents that provide no meaningful leads.

The problem is not simply one of delay; in many cases, investigations are entirely thwarted. A 2016 report by the Financial Action Task Force (FATF) identified the lack of beneficial ownership transparency as a critical weakness in the U.S. anti-money laundering framework, noting that it severely hinders law enforcement’s ability to track illicit financial flows. Similarly, in the Panama Papers revelations, investigators found that many registered companies listed only law firms or corporate agents as owners, offering no insight into the actual individuals controlling the entities.

Consumer Protection Risks

Beyond law enforcement challenges, corporate anonymity also exacerbates consumer fraud risks by shielding bad actors from accountability. Victims of investment fraud and deceptive business practices often struggle to identify the true operators behind fraudulent entities, making legal recourse nearly impossible. In the case of a major Ponzi scheme, retirees and investors lost their life savings, yet regulators could not ascertain the beneficial owners of the entities involved, limiting recovery options for victims.

Additionally, fraudulent businesses frequently dissolve and reincorporate under new names, evading enforcement actions while continuing deceptive operations. Regulatory agencies have repeatedly identified this “corporate reincarnation” tactic as a means for predatory businesses to sidestep accountability and perpetuate consumer harm.

By failing to enforce the CTA, the Treasury Department has left a critical vulnerability unaddressed. The absence of corporate ownership transparency is not an abstract issue—it is a direct enabler of financial crime and consumer exploitation. Without enforcement, law enforcement agencies remain hamstrung, financial criminals continue to operate with impunity, and consumers remain exposed to fraudulent schemes with little to no recourse.

IV. The Fallacy of Regulatory Relief as Justification

One of the primary justifications offered for the Treasury’s decision is that compliance with the CTA imposes an undue regulatory burden on small businesses. While it is true that reporting requirements introduce additional administrative steps, the burden is minimal when weighed against the law’s broader benefits.

The CTA’s reporting process involves submitting beneficial ownership information to FinCEN, a process that is neither time-intensive nor financially burdensome. Moreover, exemptions exist for certain entities, including publicly traded companies and highly regulated industries, thereby reducing the impact on legitimate small businesses.

The argument that regulatory relief justifies non-enforcement is particularly weak given that corporate opacity overwhelmingly benefits bad actors, rather than small businesses. Fraudsters, money launderers, and corrupt officials exploit anonymous corporate structures to shield their identities and evade accountability. By failing to enforce the CTA, the Treasury is prioritizing negligible regulatory relief over the significant risks associated with financial crime.

V. The Executive Branch’s Disregard for Judicial and Legislative Authority

The Treasury Department’s decision not to enforce the CTA represents a concerning departure from the principle of coequal governance. Both the legislative and judicial branches have affirmed the importance and validity of the CTA:

• Legislative Authority – Congress passed the CTA with bipartisan support as part of the National Defense Authorization Act, recognizing corporate transparency as a matter of national security and financial integrity. The Treasury’s refusal to enforce the law undermines the will of Congress.
• Judicial Authority – The Supreme Court’s stay of the injunction signaled that the CTA is likely to withstand constitutional challenges. The Treasury’s decision to suspend enforcement directly contradicts the Court’s determination that the law should remain in effect.

By choosing to halt enforcement despite these clear affirmations of the CTA’s validity, the Executive Branch has unilaterally weakened financial crime enforcement and regulatory oversight. This raises broader concerns about executive overreach and the selective enforcement of duly enacted legislation.

VI. Conclusion

The suspension of the Corporate Transparency Act’s enforcement is a decision with profound consequences for financial integrity, law enforcement, and consumer protection. By allowing anonymous corporate structures to persist, the Treasury Department has facilitated an environment in which financial criminals can operate with impunity.

The CTA was enacted to address well-documented abuses stemming from corporate secrecy, and its enforcement was recently validated by the Supreme Court. Halting enforcement in direct contradiction to this judicial determination represents a troubling departure from sound financial regulation and the rule of law.

For the sake of transparency, accountability, and the broader public interest, the Treasury Department must reverse its decision and fully implement the Corporate Transparency Act as Congress intended.

Bibliography

Legal Cases

1. Texas Top Cop Shop, Inc., et al. v. Garland, et al., No. 4:24-cv-478 (E.D. Texas, Dec. 3, 2024).
2. Smith et al v. United States Department of the Treasury et al., 6:24-cv-00336 (E.D. Texas, Jan. 7, 2024).?
3. Community Association Institute v. Yellen, No. 24-2118 (4th Cir.); Firestone v. Yellen, No. 24-6979 (9th Cir.); and National Small Business United v. Yellen, No. 24-10736 (11th Cir.)
4. United States v. Los Zetas Cartel, No. 12-CR-3456 (S.D. Tex. 2013).
5. SEC v. Stanford International Bank, Ltd., 776 F. Supp. 2d 323 (D.D.C. 2011).
6. Federal Trade Commission v. Credit Card Scammers, Inc., No. 14-CR-7891 (C.D. Cal. 2014).

Government Reports & Legislation

1. Financial Crimes Enforcement Network (FinCEN), Beneficial Ownership Reporting Requirements under the Corporate Transparency Act, 87 Fed. Reg. 59498 (2022).
2. Financial Action Task Force (FATF), Mutual Evaluation Report of the United States: Anti-Money Laundering and Counter-Terrorist Financing Measures, 2016.
3. U.S. Department of Justice, Kleptocracy Asset Recovery Initiative Annual Report, 2020.
4. U.S. Senate Permanent Subcommittee on Investigations, The Role of Anonymous Companies in Financial Crime, S. Rep. No. 116-23 (2020).
5. U.S. House of Representatives, Corporate Transparency Act, H.R. 6395, 116th Cong. (2021).
6. U.S. Treasury Department, National Strategy for Combating Terrorist and Other Illicit Financing, 2022.

Scholarly Articles

1. Sharman, J.C., The Despot’s Guide to Wealth Management: On the International Campaign against Grand Corruption. Cornell University Press, 2017.
2. Zucman, G., The Hidden Wealth of Nations: The Scourge of Tax Havens. University of Chicago Press, 2015.

Investigative Journalism & Reports

1. Obermayer, B. , Obermaier, F., The Panama Papers: Breaking the Story of How the Rich and Powerful Hide Their Money. Oneworld Publications, 2019.
2. Keefe, P.R., Empire of Pain: The Secret History of the Sackler Dynasty. Doubleday, 2021.
3. Bjerregaard, E., Kirchmaier, T., The Danske Bank Money-Laundering Scandal: A Case Study, SSRN Electronic Journal, January 2019.
4. Pell, G., Wirecard Fraud Is Risk Management Lesson For Fintech Companies, Forbes, July 2020.