Accounting
FinCEN rule removes CTA’s BOI requirements for US companies
The Treasury Department’s Financial Crimes Enforcement Network issued an interim final rule Friday removing the requirement under the Corporate Transparency Act for U.S. companies and people to report beneficial ownership information to FinCEN.
In the interim final rule, FinCEN revised the definition of “reporting company” in its implementing regulations to mean only those entities that are formed under the law of a foreign country and that have registered to do business in any U.S. state or tribal jurisdiction by the filing of a document with a secretary of state or similar office (formerly known as “foreign reporting companies”). FinCEN also exempts entities previously known as “domestic reporting companies” from BOI reporting requirements.
The move reflects an
Under the interim final rule, all entities created in the United States — including those previously known as “domestic reporting companies” — and their beneficial owners will be exempt from the requirement to report BOI to FinCEN. Foreign entities that meet the new definition of a “reporting company” and do not qualify for an exemption from the reporting requirements must report their BOI to FinCEN under new deadlines, detailed below. These foreign entities, however, will not be required to report any U.S. persons as beneficial owners, and U.S. persons will not be required to report BOI with respect to any such entity for which they are a beneficial owner.
Upon the publication of the interim final rule, the following deadlines will apply for foreign entities that are reporting companies:
- Reporting companies registered to do business in the U.S. before the date of publication of the interim final rule must file BOI reports no later than 30 days from that date.
- Reporting companies registered to do business in the U.S. on or after the date of publication of the IFR have 30 calendar days to file an initial BOI report after receiving notice that their registration is effective.
FinCEN said Friday it’s accepting comments on this interim final rule and intends to finalize the rule this year.
If finalized, the rule would exempt more than
“Treasury’s proposal contradicts decades of evidence that sanctions evaders, tax cheats, and fentanyl traffickers rely on anonymous U.S. companies to stash their illicit cash in the U.S. financial system,” said Ian Gary, executive director of the FACT Coalition, in a statement Friday. “This decision is tantamount to nullifying the statute and is very unlikely to be upheld in court. Treasury must take these legal and constitutional considerations into account as part of the rulemaking.”
The interim final rule is designed to formalize unusually abrupt announcements made earlier this month by the Treasury Department and President Trump that the Treasury would halt enforcement of the CTA, advocates noted. The announcements were made despite the fact that the law passed with the support of the first Trump administration.
“District attorneys around the country strongly support the Corporate Transparency Act as an indispensable tool for combating the fentanyl epidemic, transnational crime, terrorism financing, and other illicit activities,” said Nelson Bunn, Executive Director of the National District Attorneys Association, in a statement. “Access to beneficial ownership information is a necessity for prosecuting crimes. Treasury’s interim final rule threatens to deny law enforcement the vital information they need to pursue illegitimate business fronts that jeopardize U.S. national security and public safety. If finalized without amending, this proposal will undermine Congress’s intent and stunt efforts to achieve justice across the nation.”
The CTA was signed into law as part of the National Defense Authorization Act of 2021 and requires individuals with an ownership interest in a limited liability company to disclose personal data to the Treasury Department’s Financial Crimes Enforcement Network as a way to deter illicit activity such as money laundering, tax fraud, drug trafficking and terrorism financing by anonymous shell companies. Failure to comply could result in up to two years of jail time and a $10,000 fine per violation.
Under the CTA
“Today’s decision threatens to make the United States a magnet for foreign criminals across the world,” said Scott Greytak, director of advocacy for Transparency International U.S., in a statement. “The decision tells criminals — fentanyl traffickers, human traffickers, terrorist organizations, corrupt officials — that they can evade the most powerful anti-money laundering law since the PATRIOT Act by choosing to set up a shell company for their criminal operations anywhere in the United States.”
The National Federation of Independent Business, a small business advocacy organization that had sued to stop the Corporate Transparency Act, praised the interim final rule.
“NFIB has been steadfast since the beginning that this onerous requirement is a massive intrusion into small businesses’ privacy and creates an unprecedented new government database on Americans. We agree with President Trump that requirements from the Corporate Transparency Act are ‘outrageous and invasive,'” said NFIB president Brad Close in a statement. “NFIB will continue to work with Congress to put the Administration’s actions into law and repeal the CTA fully. Furthermore, Congress should direct FinCEN to immediately destroy all of the data that was already submitted by small businesses out of fear they would face fines and prison time.”
The International Auditing and Assurance Standards Board is proposing to tailor some of its standards to align with recent additions to the International Ethics Standards Board for Accountants’ International Code of Ethics for Professional Accountants when it comes to using the work of an external expert.
The
- ISA 620, Using the Work of an Auditor’s Expert;
- ISRE 2400 (Revised), Engagements to Review Historical Financial Statements;
- ISAE 3000 (Revised), Assurance Engagements Other than Audits or Reviews of Historical Financial Information;
- ISRS 4400 (Revised), Agreed-upon Procedures Engagements.
The IAASB is asking for comments via a digital response template that can be found on the
In December 2023, the IESBA approved an exposure draft for proposed revisions to the IESBA’s Code of Ethics related to using the work of an external expert. The proposals included three new sections to the Code of Ethics, including provisions for professional accountants in public practice; professional accountants in business and sustainability assurance practitioners. The IESBA approved the provisions on using the work of an external expert at its December 2024 meeting, establishing an ethical framework to guide accountants and sustainability assurance practitioners in evaluating whether an external expert has the necessary competence, capabilities and objectivity to use their work, as well as provisions on applying the Ethics Code’s conceptual framework when using the work of an outside expert.
President Donald Trump’s tariffs would effectively cause a tax increase for low-income families that is more than three times higher than what wealthier Americans would pay, according to an
The report from the progressive think tank outlined the outcomes for Americans of all backgrounds if the tariffs currently in effect remain in place next year. Those making $28,600 or less would have to spend 6.2% more of their income due to higher prices, while the richest Americans with income of at least $914,900 are expected to spend 1.7% more. Middle-income families making between $55,100 and $94,100 would pay 5% more of their earnings.
Trump has
Economists have warned that costs from tariff increases would ultimately be passed on to U.S. consumers. And while prices will rise for everyone, lower-income families are expected to lose a larger portion of their budgets because they tend to spend more of their earnings on goods, including food and other necessities, compared to wealthier individuals.
Food prices could rise by 2.6% in the short run due to tariffs, according to an
The Yale Budget Lab projected that the tariffs would result in a loss of $4,700 a year on average for American households.
Artificial intelligence is just getting started in the accounting world, but it is already helping firms like technology specialist
Schellman CEO Avani Desai said there have definitely been some shifts in headcount at the Top 100 Firm, though she stressed it was nothing dramatic, as it mostly reflects natural attrition combined with being more selective with hiring. She said the firm has already made an internal decision to not reduce headcount in force, as that just indicates they didn’t hire properly the first time.
“It hasn’t been about reducing roles but evolving how we do work, so there wasn’t one specific date where we ‘started’ the reduction. It’s been more case by case. We’ve held back on refilling certain roles when we saw opportunities to streamline, especially with the use of new technologies like AI,” she said.
One area where the firm has found such opportunities has been in the testing of certain cybersecurity controls, particularly within the SOC framework. The firm examined all the controls it tests on the service side and asked which ones require human judgment or deep expertise. The answer was a lot of them. But for the ones that don’t, AI algorithms have been able to significantly lighten the load.
“[If] we don’t refill a role, it’s because the need actually has changed, or the process has improved so significantly [that] the workload is lighter or shared across the smarter system. So that’s what’s happening,” said Desai.
Outside of client services like SOC control testing and reporting, the firm has found efficiencies in administrative functions as well as certain internal operational processes. On the latter point, Desai noted that Schellman’s engineers, including the chief information officer, have been using AI to help develop code, which means they’re not relying as much on outside expertise on the internal service delivery side of things. There are still people in the development process, but their roles are changing: They’re writing less code, and doing more reviewing of code before it gets pushed into production, saving time and creating efficiencies.
“The best way for me to say this is, to us, this has been intentional. We paused hiring in a few areas where we saw overlaps, where technology was really working,” said Desai.
However, even in an age awash with AI, Schellman acknowledges there are certain jobs that need a human, at least for now. For example, the firm does assessments for the FedRAMP program, which is needed for cloud service providers to contract with certain government agencies. These assessments, even in the most stable of times, can be long and complex engagements, to say nothing of the less predictable nature of the current government. As such, it does not make as much sense to reduce human staff in this area.
“The way it is right now for us to do FedRAMP engagements, it’s a very manual process. There’s a lot of back and forth between us and a third party, the government, and we don’t see a lot of overall application or technology help… We’re in the federal space and you can imagine, [with] what’s going on right now, there’s a big changing market condition for clients and their pricing pressure,” said Desai.
As Schellman reduces staff levels in some places, it is increasing them in others. Desai said the firm is actively hiring in certain areas. In particular, it’s adding staff in technical cybersecurity (e.g., penetration testers), the aforementioned FedRAMP engagements, AI assessment (in line with recently becoming an ISO 42001 certification body) and in some client-facing roles like marketing and sales.
“So, to me, this isn’t about doing more with less … It’s about doing more of the right things with the right people,” said Desai.
While these moves have resulted in savings, she said that was never really the point, so whatever the firm has saved from staffing efficiencies it has reinvested in its tech stack to build its service line further. When asked for an example, she said the firm would like to focus more on penetration testing by building a SaaS tool for it. While Schellman has a proof of concept developed, she noted it would take a lot of money and time to deploy a full solution — both of which the firm now has more of because of its efficiency moves.
“What is the ‘why’ behind these decisions? The ‘why’ for us isn’t what I think you traditionally see, which is ‘We need to get profitability high. We need to have less people do more things.’ That’s not what it is like,” said Desai. “I want to be able to focus on quality. And the only way I think I can focus on quality is if my people are not focusing on things that don’t matter … I feel like I’m in a much better place because the smart people that I’ve hired are working on the riskiest and most complicated things.”
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