The Treasury Department is having a hard time getting beneficial ownership reporting off the ground, with the U.S. District Court for the Eastern District of Texas most recently vacating a reporting rule just as it was set to go into effect. This is a setback for law enforcement, a win for privacy advocates, and another perplexing data point for businesses and their advisors who are trying to get their arms around federal reporting requirements.
To review the bidding: A “beneficial owner” is, essentially, a human being with a formal or informal property interest in an artificial entity like an LLC, partnership, or corporation. Different jurisdictions have different rules, but in the United States, historically, there haven’t necessarily been public or government-maintained records of the beneficial owners of smaller business entities. For the most part, these entities have been regulated by state corporate law, and many states have refrained from collecting such information. There are many reasons for privacy, both good and bad, but in any event, the opacity of American corporate entities has created at least some potential for abuse by bad actors. The concern is that our patchwork of state corporate laws has created opportunities for criminals to launder the proceeds of drug sales, human trafficking, and other illegal activity—and perhaps also facilitated bribery, corruption, and tax evasion.
So, law enforcement and good government-types have long sought to construct some kind of system, at the federal level, for the reporting of beneficial owners’ identification information (in the parlance of compliance personnel, “beneficial ownership information,” or “BOI”). Most notably, the Corporate Transparency Act of 2021 (the “CTA”) would have required many types of business entities to report BOI, including any changes in corporate ownership, to Treasury. I say “would have” because the CTA reporting regime never really got going. Before Treasury’s implementing regulations went into effect, several courts enjoined their enforcement, ruling that Congress’s passage of the CTA exceeded its regulatory powers. In March 2025, the new Trump administration essentially mooted the issue, revising the CTA implementation rules so that they applied much more narrowly, only to certain foreign corporations doing business in the U.S.
Meanwhile, Treasury has attempted to collect BOI—on a more targeted basis—through administrative means. In particular, beginning in 2016, the Financial Crimes Enforcement Network (“FinCEN”), Treasury’s financial intelligence component, began issuing “Geographic Targeting Orders” (“GTOs”) focused on areas where there were deemed to be high money laundering risks (initially, Manhattan and Miami-Dade County). Utilizing its statutory authority to mandate limited reporting from “nonfinancial trade[s] or business[es]” to combat illicit transactions (see 31 U.S.C. § 5326(a)), FinCEN required title insurance companies to report BOI for buyers of residential real estate in non-financed purchases above specified value thresholds in these jurisdictions. The notion was that drug dealers and other criminals were using dirty cash and shell companies to buy luxury condos in New York and Miami—as persons viewed by the government as bad actors had apparently deemed these assets to be secure stores of value (with incidental benefits to boot, especially if they enjoyed Broadway shows and/or beach access). Treasury asserted that BOI reporting would enable law enforcement to more effectively identify and disrupt such money laundering. In the years that followed, FinCEN issued additional GTOs, covering non-financed real estate transactions in various other jurisdictions throughout the country.
Perhaps this trend reached its logical conclusion in 2024, when FinCEN issued a final rule requiring BOI reporting for any non-financed purchases of interests in residential real estate (with certain exceptions), regardless of geography. Unlike the GTOs, this rule was to be in effect permanently, beginning in March 2026. The rule extended reporting requirements not only to title insurance companies, but to various persons involved in the covered real estate transactions. (The structure of reporting obligations was rather complex, sometimes referred to as a “cascade”: the settlement agent must report; but if no such person was involved in the transfer, the person preparing the settlement statement must report; and if no such person in that second category was involved, the title insurance underwriter for the transferee must report; and so on, extending to seven separate contingent reporting categories.) As with the CTA implementation rules, various impacted businesses objected to the burdens imposed by the 2024 rule, and to its very broad sweep.
In April 2025, a Tyler, Texas-based title insurance company brought suit to enjoin enforcement of the 2024 rule—claiming, under the Administrative Procedure Act (“APA”), that the rule exceeded FinCEN’s statutory authority under the main statute setting forth its powers, the Bank Secrecy Act (“BSA”); and, alternately, that Congress’s delegation of such broad powers to FinCEN would be constitutionally invalid, violating the nondelegation doctrine, the Commerce Clause, and the Fourth Amendment. See Flowers Title Insurance Companies, LLC v. Bessent et al., Case No. 6:2025-cv-127 (E.D. Tex.). On March 19, 2026, U.S. District Judge Jeremy Kernodle granted the insurance company summary judgment, agreeing with its statutory argument that the rule exceeded FinCEN’s authority under the BSA (and avoiding the constitutional claim).
In defense of FinCEN’s 2024 rule, the government had argued that 31 U.S.C. § 5318(g)(1) authorized the agency to require financial institutions to report “any suspicious transactions relevant to a possible violation of law or regulation.” But the District Court rejected the proposition that non-financed real estate purchases were inherently “suspicious” within the meaning of the statute. Citing Loper Bright Enterprises v. Raimondo, 603 U.S. 369 (2024), the Court underscored that it need not give the government deference on the statutory interpretation question. It further held that:
The fact that some bad-actors have conducted non-financed real estate transactions does not make such transactions categorically “suspicious.” If it did, then nearly every type of transaction imaginable would be “suspicious,” and § 5318(g)(1) would grant FinCEN far reaching powers that no one has contemplated.
The District Court similarly rejected the government’s contention that the rule was authorized under 31 U.S.C. § 5318(a)(2), which empowers Treasury to require businesses to “maintain appropriate procedures, including the collection and reporting of certain information as the Secretary of the Treasury may prescribe,” to ensure BSA compliance and guard against money laundering. The Court deemed the creation of an entirely new reporting regime to be categorically different than the maintenance of anti-money laundering controls and similar “appropriate procedures”. Based on this analysis, and on its assessment that FinCEN could not cure the rule’s deficiencies on remand, the Court vacated the 2024 rule, rendering its reporting obligations null nationwide.
So, at this point, all eyes (or at least, all eyes interested in BSA compliance) turn to the government, to see if it will appeal or seek a stay of Judge Kernodle’s order. If the Trump administration’s change in course on CTA reporting is an indication, perhaps Treasury will take this occasion to scale back on residential real estate reporting too. But on the other hand, as noted above, there is a persistent sense in federal law enforcement that drug sales proceeds and other dirty money is locked up in U.S.-based residential holdings; these stakeholders are likely to lobby hard for the government to hold the line on FinCEN’s reporting rule.
The government will show its hand soon, and we will continue to monitor developments in this case.
