U.S. Anti-Money Laundering Rule With Penalty of Thousands of Dollars Might Return

The regulation regarding disclosing the Ultimate Beneficial Owners (UBOs) has been halted by the U.S. District Court for the Eastern District of Texas; however, it could still penalize small businesses if overlooked. This regulation is implemented under the Corporate Transparency Act (CTA), mandating owners to register private information with the Financial Crimes Enforcement Network (FinCEN). 

After the court’s preliminary injunction of the rule, FinCEN has stated that registration is optional. Small business owners cannot afford to forget this anti-money laundering rule since it could return anytime and without warning.

The Act was basically an enforcement against shell companies that use complex and ambiguous ownership frameworks to carry out illicit activities such as money laundering. Businesses that were established before 2024 were required to register by 1 January 2025, while new companies were given 90 days to register.

Janet Yellen, Treasury Secretary, said, “The CTA is critical to stopping “criminals, organized crime rings, and other illicit actors” from exploiting shell companies.”

As per the analysis from the Womble Bond Dickinson, a transatlantic law firm, regarding this rule, “given the uncertainty surrounding the outcome of this case, reporting companies who have yet to file their initial beneficial ownership information reports should be prepared to file on short notice in the event the preliminary injunction is overturned.”

While the BOI reporting requirement is on hold, many small business owners may still think of registration to save them from the potential penalties.

As for progress on this rule, the Department of Justice’s appeal to the Fifth Circuit Court will decide whether the injunction will stay in place or whether the CTA will be implemented.

If the injunction is reversed, business owners may be required to register immediately; therefore, they should still be prepared. The rule is paused for now, but legal uncertainty looms, potentially exposing business owners to penalties as high as $10K.

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