Presidential Power and Its Impact on Corporate Transparency

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August 19, 2026
Politics

The executive branch has once again expanded its powers. Recently, the Financial Crimes Enforcement Network (FinCEN), part of the U.S. Treasury Department, issued a regulation that weakens the Corporate Transparency Act enacted by Congress. This action contrasts sharply with the views of the Supreme Court’s conservative majority, which has previously opposed such executive maneuvers.

On August 14, FinCEN issued a final rule that significantly reduces the reporting requirements initially mandated by Congress. This move raises major constitutional concerns. Imagine how a drug trafficking organization might use anonymous limited liability companies (LLCs) to mask illegal activities. These LLCs can buy various businesses, from apartments to restaurants, to disguise drug money as legitimate income. Their owners remain hidden, using complex corporate structures, making it tough for law enforcement to uncover illegal financial activities.

To combat such issues, Congress enacted the Corporate Transparency Act in 2021. The law requires corporations and LLCs to report “beneficial ownership information.” This includes domestic and foreign entities. Congress believed this data would help identify and prosecute money laundering and criminal enterprises. While the Act places obligations on regular entrepreneurs, legislators decided it was crucial to expose the true owners of criminal shell companies.

Congress listed 23 types of organizations exempt from reporting, such as banks. They also gave the Treasury Secretary, with colleagues’ consent, the power to add exemptions. However, the authority was supposed to apply on a case-by-case basis. Instead, FinCEN’s regulation excludes all domestic LLCs from reporting, focusing only on foreign entities. This change impacts around 32.6 million entities, many of which are domestic.

These adjustments by the Trump administration go against Congress’s intentions. The rules weaken the law’s reach, targeting only foreign structures. The administration argued that reporting costs were too high, leading to the removal of existing data on domestic entities. This decision contradicts the 2021 Supreme Court’s stance in West Virginia v. EPA, which requires clear congressional authorization for wide-ranging regulations.

Senator Ron Wyden (D-Ore.) highlighted the necessity of the Act. He provided examples of shell companies laundering money, financing terrorism, and avoiding taxes. Such cases included Viktor Bout’s use of shell corporations to sell arms to the Taliban and a U.S. company linked to payments for Iran’s nuclear program. Domestic shell companies have also been involved in Medicare fraud. Law enforcement officials have struggled with foreign officials laundering money through these entities, facing challenges since ownership details weren’t disclosed.

The recent FinCEN regulation jeopardizes the intent behind the Corporate Transparency Act. It disregards the genuine need for transparency in corporate ownership to prevent financial crimes. As a result, criminals might find it easier to exploit these loopholes, posing a continued threat to the economy and public security.

Kimberly Wehle is a professor of law and author of several books on constitutional rights and legal thinking. She also writes the Substack newsletter, “The Little Law School.”