n a press release dated March 2, 2025, the U.S. Department of Treasury ("Treasury") announced it will eventually restrict the CTA's scope to "foreign reporting companies only." With this ultimate goal in mind, Treasury will not enforce any penalties or fines against U.S. citizens or domestic reporting companies or their beneficial owners for missing new deadlines to be set in an upcoming "interim final rule" (scheduled for release by March 21, 2025). Treasury's press release supplements an earlier FinCEN announcement stating that FinCEN will not enforce the CTA against any reporting company (foreign or domestic) for any failure to meet deadlines currently in effect. In short, if all goes according to plan, U.S. citizens and domestic reporting companies will never be subject to CTA enforcement, while foreign reporting companies will be required to comply with the CTA in accordance with the upcoming interim final rule and subsequent regulatory guidance.
If taken at face value, Treasury's non-enforcement policy has a broad sweep. Under the CTA, a reporting company is "domestic" simply if formed by filing a written organizational document in the United States, regardless of the nationality of its beneficial owners.
While Treasury's intention to expand CTA relief is a welcome development, delivering this relief by setting nominal deadlines and then waiving enforcement creates the potential for legal "foot faults." For example, transaction documents may require a reporting company to represent that the reporting company is and will remain in compliance with all applicable law (which would include the CTA). Therefore, before choosing to skip CTA compliance based on lack of enforcement, a reporting company should consider whether a "technical" CTA default has any adverse effect on any existing or contemplated transaction and whether it is necessary to include a CTA carve-out from any representation, covenant, indemnity, or legal opinion.
