Accounting
Treasury suspends Corporate Transparency Act enforcement
The Treasury Department announced it would no longer enforce the Corporate Transparency Act, nor enforce any penalties or fines associated with beneficial ownership reporting under the existing regulatory deadlines.
The Treasury also said Sunday it would not enforce any penalties or fines against U.S. citizens or domestic reporting companies or their beneficial owners after forthcoming rule changes take effect either. The Treasury plans to issue a proposed rulemaking that would narrow the scope of the rule to foreign reporting companies only. The Treasury said it’s taking this step “in the interest of supporting hard-working American taxpayers and small businesses and ensuring that the rule is appropriately tailored to advance the public interest.”
“This is a victory for common sense,” said Treasury Scott Bessent in a statement Sunday. “Today’s action is part of President Trump’s bold agenda to unleash American prosperity by reining in burdensome regulations, in particular for small businesses that are the backbone of the American economy.”
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.
The law has been the subject of a series of lawsuits that have gone back and forth in recent months, leaving businesses unsure of whether they needed to comply. The law was support to take effect for new businesses on Jan. 1, 2024 and for existing businesses on Jan. 1, 2025, but that deadline has been pushed back as a result of the court appeals. Last month, a federal appeals court in Texas
Last week, FinCEN confirmed that it would “not issue any fines or penalties or take any other enforcement actions against any companies based on any failure to file or update beneficial ownership information (BOI) reports pursuant to the [CTA] by the current deadlines,” essentially pausing CTA compliance for all covered entities indefinitely.
“FinCEN finally did the right thing and hit the reset button on CTA compliance,” said Joseph Lynyak, a banking partner at the law firm Dorsey & Whitney, in a statement Friday. “Besides the current overhang of litigation challenging the CTA regulations, FinCEN’s responses to injunctions issued by courts arising from that litigation compounded confusion regarding compliance. For example, indicating that reporting entities had approximately 30 days to complete initial filings was both naive and impractical. Further, although FinCEN has repeatedly indicated that completing beneficial ownership reports was a simple matter, legal practitioners have filed numerous requests for interpretative guidance that generally has been ignored.”
The move by the Treasury Department to no longer enforce the Corporate Transparency Act was criticized by corporate transparency advocates.
“With one tweet, the Administration has contradicted 15 years of bipartisan work by Congress to end the scourge of anonymous shell companies — which are a favorite tool of our nation’s global adversaries and criminals including fentanyl traffickers, money launderers, and tax cheats,” said Ian Gary, executive director of the FACT Coalition, in a statement Monday. “Hollowing out the Corporate Transparency Act is an unconstitutional subversion of Congress’ intent that will not survive judicial scrutiny.”
“This decision threatens to make the United States a magnet for foreign criminals, from drug cartels to fraudsters to terrorist organizations,” said Scott Greytak, director of advocacy for Transparency International U.S., the U.S. branch of the world’s oldest and largest anticorruption organization, in a statement. “Inexplicably, it tells foreign criminals–fentanyl traffickers, illegal arms dealers, corrupt foreign officials—that they can evade the most powerful anti-money laundering law passed since the PATRIOT Act by choosing to set up their criminal operations inside the United States.”
He pointed out that the U.S.’s national security, intelligence, and law enforcement communities strongly supported the bipartisan Corporate Transparency Act because it stopped criminals from hiding behind anonymous shell companies, regardless of where those companies happened to be formed
“Now, criminals can evade this national security law by simply starting and running those front companies inside the United States,” Gretak added. “A notorious Chinese drug trafficking organization, for example, used front companies formed in Massachusetts to distribute deadly fentanyl analogues and 250 other drugs to some 37 U.S. states. Anonymous companies in the U.S. have also been used by Iran to evade sanctions and by terrorist-affiliated groups to gain access to U.S. defense contracts.”
He anticipates that criminals will exploit the loophole by relocating to the U.S.
“Narrowing the scope of the Corporate Transparency Act to exclude U.S.-based companies creates a clear loophole for criminals to exploit, and risks making the U.S. a haven for illicit financial activity,” Greytak added. “It also ensures that the United States will be found noncompliant with baseline, globally accepted anti-money laundering and counter-financing of terrorism standards. We emphatically urge the U.S. Treasury Department to reverse this decision with expediency.”
Small businesses were seen as being subjected to unnecessary and onerous reporting requirements by the CTA, but they might be harmed by nonenforcement, according to one small business advocacy group.
“Small businesses suffer when they are forced to compete with fraudulent and criminal enterprises that exploit anonymous shell corporations to evade accountability,” said Richard Trent, Executive Director of the small business network Main Street Alliance, in a statement. “The Trump Administration’s reckless efforts to undermine the Corporate Transparency Act’s beneficial ownership reporting requirements threaten to roll back critical protections. Weakening these rules would allow bad actors to continue exploiting loopholes, harming honest small business owners and distorting the marketplace in favor of corruption. That’s why MSA stands firmly in defense of transparency and fairness—because Main Street businesses deserve better.”
Sen. Ron Wyden, D-Oregon, the top Democrat on the Senate Finance Committee, also criticized the move. “The takeaway here is that Trump is a rich financial criminal, and he’s running his administration for the benefit of other rich financial criminals,” Wyden said in a statement Monday. “In particular, this is another gift to shadowy Russian oligarchs and money launderers, who have a lot of reasons to celebrate these days thanks to Donald Trump.”
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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