The United States has taken a significant step backward in its fight against financial crime. The US Treasury Department recently announced the immediate suspension of the Corporate Transparency Act (CTA), a key Anti-Money Laundering (AML) law introduced under the Biden administration. This rollback, positioned by the Trump administration as a move to reduce red tape for businesses, raises concerns about weakened corporate transparency and increased illicit financial flows.
A Step Back in AML Enforcement
The Corporate Transparency Act, which took effect in January 2024, required business owners to disclose information about Ultimate Beneficial Ownership (UBO). This was meant to curb money laundering, terrorist financing, and other financial crimes by exposing hidden corporate structures. However, its suspension removes a critical layer of transparency, making it easier for illicit networks to evade scrutiny from US regulators like FinCEN.
This decision risks:
- Facilitating financial crime by allowing bad actors to hide behind anonymous corporate structures.
- Weakening global AML cooperation, making it harder to enforce uniform financial regulations.
- Encouraging the use of shell companies for money laundering, human trafficking, and organized crime.
Global Consequences of the US AML Rollback
As the world’s largest economy, the US plays a central role in global AML enforcement. Historically, it has led efforts to combat financial crime through laws like the Bank Secrecy Act (BSA) of 1970 and the Patriot Act after 9/11. More recently, the CTA, AML Act of 2020, and Combating Russian Money Laundering Act (CRMLA) were designed to further strengthen financial crime detection.
Now, with the CTA suspension, there is growing concern that:
- Criminal activities will increase both in the US and in countries it does business with.
- International AML efforts will be weakened, creating regulatory gaps across financial systems.
- Trust in the US financial system could decline, affecting cross-border investment and compliance.
What the US Can Learn from South Africa’s FATF Greylist Battle
South Africa offers a recent example of the importance of strong AML enforcement. In 2023, the country was placed on the FATF greylist due to deficiencies in its AML measures. However, the government responded with aggressive reforms, including:
- Strengthening cooperation between regulators, financial institutions, and law enforcement.
- Tightening UBO transparency to prevent money laundering through corporate entities.
- Improving financial crime investigations and prosecutions.
As a result, South Africa is on track to restore its economic reputation and exit the greylist. The US, by contrast, is moving in the opposite direction—loosening regulations just as other nations are tightening theirs.
Striking the Right Balance: Compliance vs. Business Freedom
While reducing red tape for businesses is a valid concern, weakening AML regulations should not be the solution. Instead, the focus should be on RegTech solutions—modern compliance technologies that streamline AML processes without creating unnecessary burdens.
Advanced AML systems allow financial institutions to:
- Detect high-risk entities faster through automated customer verification.
- Monitor transactions in real-time to identify suspicious activity.
- Ensure compliance without disrupting legitimate business operations.
The US decision to roll back AML laws could have serious global consequences, potentially increasing financial crime and undermining international transparency efforts. South Africa’s experience with the FATF greylist shows that strong AML enforcement is critical for maintaining economic stability and credibility.
Rather than weakening corporate transparency, the US should consider modernizing its AML enforcement with technology-driven solutions that support both business efficiency and financial integrity.
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