The Regulatory Whirlwind for Business Owners
Business owners navigating federal compliance requirements may feel caught in a shifting landscape of rules. With the Corporate Transparency Act (CTA) currently paused, many are left wondering: if the CTA is on hold, why do banks continue asking for beneficial ownership information?
The Evolution of Transparency Rules
2018 – The Final CDD Rule
In 2018, FinCEN implemented the Customer Due Diligence (CDD) Rule. This regulation required banks to gather information on individuals owning 25% or more of a business entity, along with identifying a single “control person.” The primary goal was to bring shell companies into the light and fight illicit financial activity.
2024 – The Corporate Transparency Act (CTA)
Congress introduced the CTA in 2024, aiming to centralize beneficial ownership disclosures by having businesses report this information directly to FinCEN. For many, this appeared somewhat redundant, since financial institutions were already collecting similar data under the CDD Rule.
The Pause on the CTA
March 2025 – CTA Paused
Legal challenges and shifting regulatory priorities led the Treasury Department to pause enforcement of the CTA in March 2025. While a new framework has been hinted at, there is currently no finalized rule in place.
Why Are Banks Still Asking?
Despite the pause in the CTA, banks continue to request beneficial ownership information. This ongoing requirement is tied to existing regulations and the need for continued vigilance in financial transparency and anti-money laundering efforts.