Twenty-one US states and the District of Columbia sued President Donald Trump’s administration on Tuesday over its rollback of corporate ownership reporting requirements introduced under a 2021 law aimed at combating illicit finance.
The administration finalised a rule in August exempting US companies and individuals from reporting beneficial ownership information to the Treasury Department’s Financial Crimes Enforcement Network (FinCEN), reversing key requirements under the Corporate Transparency Act.
In their lawsuit, the coalition of mostly Democratic-led states asked a federal court to overturn the rule, which they said formed part of a broader effort by the administration to weaken anti-corruption measures.
“The executive branch cannot repeal a law by rulemaking. That fundamental principle resolves this case,” the lawsuit said. It was filed in the US District Court for the District of Oregon.
The complaint argued that the administration had effectively gutted the 2021 law by exempting more than 99.9% of the companies originally required to disclose information about their owners.
The defendants include US Treasury Secretary Scott Bessent, the Treasury Department and FinCEN. The heads of the Justice and Homeland Security departments were also named.
When the rule was announced in August, Bessent described it as a measure to eliminate a burdensome reporting requirement for millions of law-abiding business owners without compromising national security.
New York Attorney General Letitia James, one of the officials leading the legal challenge, said the administration had effectively overturned the law by exempting domestic companies and US owners of foreign companies from its requirements.
She said the changes would allow the actual owners of domestic and foreign shell companies to remain anonymous.
US Senator Elizabeth Warren of Massachusetts, the senior Democrat on the Senate Banking, Housing and Urban Affairs Committee, warned in August that the rollback could increase the risks of sanctions evasion, fraud, drug trafficking, sex trafficking and organised crime.
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