The Corporate Transparency Act in 2026: What the Rollback Means for Beneficial-Ownership Diligence

What the Corporate Transparency Act was meant to do — and what is left of it

The Corporate Transparency Act was enacted on 1 January 2021 as part of the National Defense Authorization Act for FY2021, and it was, on paper, the most consequential corporate-transparency measure in modern U.S. history. FinCEN finalized the implementing reporting rule in September 2022, with obligations taking effect on 1 January 2024. The regulatory impact analysis behind that rule identified 32,556,929 existing reporting entities, plus roughly five million new companies expected to file an initial report every year thereafter. For the first time, the people behind American shell companies were supposed to be on file.

That is not what exists today. On 21 March 2025, FinCEN announced an interim final rule redefining a "reporting company" for beneficial ownership information (BOI) reporting to mean only entities formed under the law of a foreign country and registered to do business in a U.S. state or tribal jurisdiction. Every company created in the United States was exempted, along with every U.S. person — and foreign reporting companies are not required to report beneficial owners who are U.S. persons. On 11 August 2026 FinCEN adopted that position as a final rule, effective on its publication in the Federal Register on 14 August 2026, and made it permanent. The final rule goes slightly further: foreign reporting companies also no longer report U.S.-person company applicants, and U.S. persons who obtained a FinCEN identifier no longer have to keep it updated.

The scale of that change is not a matter of interpretation. In a report published on 29 May 2026, the Government Accountability Office found the exemption removed reporting obligations from more than 99 percent of the entities previously covered, leaving a registry that expects roughly 20,000 filers and about 5,000 new reporting companies a year. GAO recommended that Treasury address the resulting gap in ownership information. Treasury declined, and the August 2026 final rule kept the exemptions in place.

FinCEN's own analysis in that rule revised the estimate to about 28,000 foreign reporting companies, roughly 13,000 of which had filed by the end of 2025. The practical consequence for anyone screening counterparties is that ownership has to be traced rather than looked up — the gap that vendor due diligence investigations are built to close, and the reason a screening platform alone cannot carry the investigative layer of a third-party risk program.

The registry was never complete, even at its peak

It is worth being precise about the baseline, because the rollback is often discussed as though it dismantled a functioning system. It did not. The system was still filling up when it was suspended.

GAO reported that FinCEN officials put the number of companies that had filed beneficial-ownership reports at more than six million as of 29 October 2024 — against the 32.6 million ultimately expected. That is roughly one in five. Filings were still arriving in volume when enforcement was suspended in early 2025; FinCEN's August 2026 final rule puts the reports received from domestic companies before the March 2025 rule at approximately 15 million, fewer than half of those expected.

The practical consequence for anyone running diligence is that the registry was never a complete answer, and is now not even a partial one for domestic entities. FinCEN has also said it will delete the beneficial-ownership information previously reported by U.S. persons, so even the filings that arrived before the rollback are not a record a diligence team can expect to draw on. A search that returns nothing tells you almost nothing: the company may have no reportable owners, may have been exempted, or may simply never have filed. Absence of a record is not evidence of absence — a distinction that matters enormously when the record is the thing you were relying on.

It was not struck down — it was narrowed by regulation

The most common misreading of the last two years is that courts killed the CTA. They did not, and the distinction matters for anyone trying to plan around what comes next.

The litigation was real. In March 2024, a federal district court in Alabama held in National Small Business United v. Yellen that the CTA exceeded Congress's enumerated powers, enjoining enforcement as to the plaintiffs. In December 2024, the Eastern District of Texas issued a nationwide preliminary injunction in Texas Top Cop Shop, Inc. v. Garland; the Supreme Court granted the government's application to stay that injunction in January 2025. But on 16 December 2025, the Eleventh Circuit reversed the Alabama decision, holding that the CTA is a constitutional exercise of Congress's Commerce Clause power and does not facially violate the Fourth Amendment. On 5 October 2026 the Supreme Court declined to review that decision.

So the statute survived its constitutional challenge and was then narrowed by the executive branch. The registry shrank by regulation, not by judicial invalidation — and the underlying law remains on the books. That is a materially different situation from repeal, because a rule can be revised far more easily than a statute can be re-enacted. Ownership questions the register was built to answer now fall back to investigative due diligence.

Is BOI reporting still required? The August 2026 final rule

The March 2025 rule was issued as an interim final rule, with a comment period that closed in May 2025. FinCEN indicated a final rule would follow by the end of 2025, and it slipped into 2026. On 11 August 2026 FinCEN announced the final rule, and it took effect on publication in the Federal Register on 14 August 2026. In FinCEN's words, it "permanently removes the requirement for U.S. companies and U.S. persons to report beneficial ownership information." A reporting company is now only an entity formed under the law of a foreign country, registered to do business in a U.S. state or tribal jurisdiction, and not covered by another exemption — and such an entity does not report its U.S.-person beneficial owners.

FinCEN said the same day that it will delete previously reported information by U.S. persons from the beneficial-ownership database. For domestic companies the federal record is therefore not merely frozen: FinCEN says it will remove it, as much as practicable, and announce on its website when that is done.

Congress had been moving in the same direction. In April 2026 the House Financial Services Committee narrowly advanced H.R. 425, which would write the domestic exemption into statute and direct FinCEN to delete domestic data; it was reported to the House in June 2026 but has not been enacted. A Senate bill introduced the same month, S. 4419, would limit reporting to foreign entities and delete U.S.-person data. It was the final rule, not legislation, that settled the position.

For a general counsel or compliance officer, the planning question has changed. Until August the risk was that the March 2025 rule might be replaced in either direction; now the exemption for domestic companies is the settled regulatory position: the federal registry receives no new beneficial-ownership information on U.S. companies, and FinCEN has said it will delete what they filed before. The statute remains law, so a future rulemaking could revisit the scope, but a diligence process built for today should assume that, for a U.S. counterparty, the beneficial owner has to be found rather than looked up.

The real-estate channel closed at the same time

The second place investigators looked for beneficial ownership was residential real estate, and that route narrowed on almost the same timeline. Since 2016, FinCEN's Geographic Targeting Orders had required title companies to identify the natural persons behind shell companies in non-financed home purchases — a program that began as a two-market pilot in Manhattan and Miami-Dade and expanded across major metros, most recently at a $300,000 threshold. Those orders ran through 28 February 2026.

They expired because a permanent successor was arriving: FinCEN's Residential Real Estate Rule, finalized in August 2024 and — after a postponement — effective 1 March 2026, requiring reports on non-financed transfers of residential property to entities and trusts nationwide. Eighteen days later, on 19 March 2026, the Eastern District of Texas vacated that rule in its entirety in Flowers Title Companies, LLC v. Bessent, holding FinCEN had exceeded its authority under the Bank Secrecy Act by treating all non-financed residential transfers as categorically suspicious.

The courts are divided. A month before the Eastern District of Texas ruling, on 19 February 2026, a federal court in Florida upheld the same rule in Fidelity National Financial, Inc. v. Bessent, finding it within FinCEN's statutory authority; on 25 February 2026 the Northern District of Texas also upheld it, against a constitutional challenge, in Corley v. U.S. Department of the Treasury (a case later closed after the Eastern District ruling); the Florida plaintiffs have appealed to the Eleventh Circuit. FinCEN filed its own appeal of the Eastern District decision to the Fifth Circuit on 11 May 2026, and both appeals are pending. Because the Eastern District court vacated the rule nationwide, the agency's guidance confirms that reporting persons are not currently required to file Real Estate Reports while that vacatur stands. The result is that the entity-held, all-cash residential purchase — the single channel U.S. authorities have most consistently identified as a laundering risk, and a defining feature of markets like South Florida — currently sits outside an operative federal beneficial-ownership reporting framework.

Abroad, access narrowed too — with one exception

It would be convenient to treat this as a purely American problem and rely on foreign registers instead. That does not work either, because Europe moved first and in the same direction.

On 22 November 2022, the Court of Justice of the European Union, in the joined Luxembourg Business Registers and Sovim cases, declared invalid the anti-money-laundering provision guaranteeing that beneficial-ownership information be accessible in all cases to any member of the general public, holding it a disproportionate interference with the privacy and data-protection rights in the EU Charter. It is worth being precise: the Court did not abolish the registers, nor restrict access by competent authorities and regulated firms — it struck down guaranteed public access. Several member states nonetheless suspended public access outright.

The EU's 2024 anti-money-laundering package restores access on a narrower "legitimate interest" basis, expressly including journalists and civil-society organizations. Member states had to bring the new register-access rules into force by 10 July 2026; on 25 September 2026 the European Commission opened infringement proceedings, with letters of formal notice, against 18 of them, including France, Germany, Luxembourg and the Netherlands, that had not notified full transposition. Most of the wider regime applies from 10 July 2027.

The United Kingdom is the instructive counter-example. Rather than reducing collection, it moved toward verifying it: under the Economic Crime and Corporate Transparency Act 2023, identity verification at Companies House became mandatory for new directors and persons with significant control from 18 November 2025, with existing directors required to verify by a longstop of 18 November 2026 — an estimated six to seven million individuals. The contrast is stark. One jurisdiction is checking that the names on file are real; another has stopped collecting most of them.

What this means for diligence in practice

The operating conclusion is straightforward, if uncomfortable: in 2026 no public registry — American or European — is a reliable primary source for who ultimately owns a company. A registry search remains a necessary first step and a useful corroborator. It is no longer an answer.

For a U.S. company there is no longer a FinCEN beneficial-ownership filing to rely on: the requirement is gone, and FinCEN has said it will delete what U.S. persons already reported. Ownership in a U.S. deal therefore has to be established the way it was before the CTA promised otherwise: investigatively. That means correlating corporate filings across jurisdictions; reading the documents entities produce for other purposes — litigation exhibits, financing statements, regulatory and licensing filings, procurement records; mapping property and asset holdings; analyzing the timing of incorporations and transfers against the events in a transaction; and identifying nominee patterns, where the same handful of names sit atop unrelated companies. It is the same discipline that underpins piercing ownership in a cross-border asset trace, applied before a deal rather than after a loss.

For deal teams, three practical adjustments follow. Stop treating a clean registry search as a cleared diligence item, and record what it did and did not establish. Budget for ownership work on any counterparty where control actually matters — before you sign, not after. And where a counterparty is foreign-formed or the funds cross a border, treat it as international due diligence from the outset. Foreign companies registered to do business in a U.S. state are now the one category the U.S. registry still reaches, which matters to foreign investors entering U.S. deals and to cross-border transactions; but those filings are not public and leave out U.S.-person owners, so they corroborate an ownership trace rather than replace it. This is the substance of a due diligence investigation and corporate intelligence — and in a period when the public record is contracting, it is what the record no longer does for you.

This article is informational and is not legal advice. Whether a particular entity must file, and what it must report, is a question for its counsel.