21 US States Sue Treasury and FinCEN Over Corporate Ownership

A coalition of 21 Democratic attorneys general in the United States has filed a lawsuit in the District Court of Oregon, challenging the Trump administration's decision to narrow the scope of beneficial ownership information reporting. The lawsuit targets a rule issued by the Treasury Department's Financial Crimes Enforcement Network (FinCEN) last August.

The new rule eliminated the requirement for US companies and individuals to report beneficial ownership information under the Corporate Transparency Act. The agency also announced plans to delete previously reported information from the beneficial ownership database.

The attorneys general stated that the administration "cannot repeal a statute by issuing a regulation," and asked the court to vacate the FinCEN rule, preserve previously reported data, and require the agency to resume collecting ownership information. The lawsuit noted that the law mandated both domestic and foreign companies to report ownership information to the Treasury Department, and that the new rule exempts all domestic companies, representing over 99.9% of the entities originally covered.

The dispute represents a test of a regulatory agency's authority to modify obligations imposed by Congress. The plaintiffs are also asking the court to block the deletion of the database, preserve what was previously reported, and compel the agency to resume collecting information.

What do these terms mean?

Beneficial Ownership: The natural person who ultimately owns or controls a company, even if registered under the name of another person or entity.

Corporate Transparency Act: A US law requiring companies to report their beneficial owners to the Department of the Treasury to curb the use of shell companies.

Financial Crimes Enforcement Network: A bureau of the US Department of the Treasury responsible for collecting and analyzing financial information to combat money laundering and terrorism financing.