The Fight for Financial transparency: how the Corporate Transparency Act is Being Tested
For years, advocates on both sides of the aisle have championed a simple, yet powerful idea: knowing who owns a company. This seemingly basic principle is crucial in combating financial crime, from drug trafficking and human exploitation to terrorism financing. The passage of the Corporate transparency Act (CTA) in January 2021 felt like a watershed moment, a significant stride towards peeling back the layers of anonymity that allow illicit funds to flow freely. But the path to true financial transparency is proving to be far from straightforward.
“There was a real sense that transparency was gaining unstoppable momentum,” explains Ian Bowers, a veteran in the fight against financial crime. “We thought things would fall into place logically. But the landscape shifted.”
A Bipartisan Victory, Now Under Fire
The CTA initially garnered support from an unlikely source: then-President donald Trump, who signed it into law at the close of his first term. The Act requires companies to disclose their beneficial owners – the real people who ultimately control them – to the Financial Crimes Enforcement Network (FinCEN), a bureau of the U.S. Department of the Treasury. This information is intended to be a powerful tool for law enforcement, helping them trace illicit funds and hold criminals accountable.
however, the subsequent actions of the second Trump management, and continuing under the current administration, have cast a shadow over this landmark legislation. Recent rule changes and legal challenges are actively undermining the very transparency the CTA aimed to achieve.
The Treasury Department, in a March press release, justified suspending enforcement of the CTA against domestic companies as a measure to support “hard-working American taxpayers and small businesses.” Treasury Secretary Scott Bessent framed it as “a victory for common sense.”
But experts and advocates strongly disagree. They point to mounting evidence that U.S. companies are routinely exploited for illegal activities. A recent financial trends analysis released by FinCEN on August 28th revealed that Chinese money laundering networks are actively utilizing domestic shell companies to purchase real estate.
“This is a direct contradiction of the administration’s stated priorities,” argues Gary,a representative from the FACT Coalition,a global initiative promoting corporate transparency.”Law enforcement needs more tools to combat drug trafficking, human trafficking, and othre crimes impacting Americans, not fewer.”
The Danger of Erasing Critical Data
Perhaps the most concerning development is the move to perhaps destroy data already collected under the CTA. Critics, like kalman, a leading expert in financial intelligence, argue this isn’t just potentially illegal, but profoundly counterproductive.
“Deleting 10 or 12 million records without knowing if they contain vital links to criminal activity is reckless,” Kalman states. “It undermines the stated goal of dismantling cartels and transnational criminal organizations.”
The hope, Kalman adds, is that these recent setbacks are merely temporary. investigations like the FinCEN Files – a massive leak of suspicious activity reports (SARs) that exposed the role of major banks in facilitating illicit financial flows – have underscored the critical importance of transparency initiatives.
“There’s a growing understanding of how easily money can be moved across borders and the urgent need to strengthen our financial intelligence units,” he explains. “This isn’t just about following the money; it’s about cutting off the funding that fuels dangerous and illicit networks.”
A Silver Lining: Strengthening fincen
The FinCEN Files inquiry also had a significant, positive impact: it galvanized bipartisan congressional support for increased funding for FinCEN itself. Prior to the investigation, FinCEN was woefully under-resourced, operating with a budget smaller than its counterpart in Australia, despite the immense scope of its responsibilities.
“FinCEN was massively overmatched,” Kalman explains. “Congress now recognizes the importance of its role in following the money and cracking down on illicit finance.That’s a huge achievement in a politically polarized environment.”
The Fight Continues
While the weakening of the Corporate Transparency Act and the rollback of other transparency regulations are disheartening, the work done to expose financial crime remains powerful. Leopold, a key figure in the FinCEN files investigation, emphasizes the lasting impact of their reporting.
“Our work revealed the vast scale of financial crimes and how Western banks handled suspicious activity,” he says. “We held institutions accountable and demonstrated the real-world harm caused by illicit finance.”
The future of the Corporate Transparency act remains uncertain. But one thing is clear: the fight for financial transparency is far from over. The revelations from investigations like the FinCEN Files have laid bare the vulnerabilities in the global financial system, and the demand for accountability and transparency will
