Key takeaways
- The CTA rollback does not eliminate CDD obligations. FinCEN’s decision to narrow BOI reporting under the Corporate Transparency Act applies only to the direct-reporting requirement to FinCEN. It does not rescind or replace the CDD Rule under the Bank Secrecy Act.
- The CTA and the CDD Rule serve distinct regulatory purposes. Financial institutions must continue to collect, verify and maintain beneficial ownership information for legal-entity customers under their BSA/AML programs, regardless of CTA changes.
- The August 2026 Final Rule narrows, but does not eliminate BOI requirements. Under the final rule, domestic companies and U.S. beneficial owners are exempt from FinCEN reporting, but only certain foreign reporting companies remain subject to CTA obligations. Neither this rule nor the February 2026 Exceptive Relief Order removes a financial institution’s underlying CDD responsibilities.
- Examiner expectations remain unchanged. Regulators will continue to expect financial institutions to identify legal-entity customers, collect and verify beneficial ownership information, maintain appropriate records and conduct risk-based ongoing customer due diligence.
The Financial Crimes Enforcement Network’s (FinCEN) recent actions regarding the Corporate Transparency Act (CTA) and Beneficial Ownership Information (BOI) reporting have created significant confusion within the financial services industry. Many institutions have asked whether FinCEN’s decision to eliminate BOI reporting requirements for U.S. companies means that they are no longer required to collect and verify beneficial ownership information at account opening.
The short answer is no.
While FinCEN has substantially narrowed the scope of the CTA’s BOI reporting regime, the agency has not eliminated financial institutions’ Customer Due Diligence (CDD) obligations under the Bank Secrecy Act (BSA). Financial institutions must continue to identify and verify beneficial owners of legal-entity customers in accordance with the CDD Rule unless FinCEN formally amends those requirements. The CTA reporting framework and the CDD Rule are related, but they are separate regulatory requirements.
What changed under the CTA?
On March 26, 2025, FinCEN issued an interim final rule that dramatically narrowed BOI reporting requirements under the CTA. The rule revised the definition of a “reporting company” so that only certain foreign entities registered to do business in the United States remain subject to BOI reporting obligations. Domestic entities and U.S. persons were exempted from reporting BOI to FinCEN.
FinCEN’s Final Rule on BOI reporting under the Corporate Transparency Act (CTA) was issued on August 11, 2026, and became effective upon publication in the Federal Register on August 14, 2026. Under the final rule, domestic reporting companies remain exempt from BOI reporting. U.S. beneficial owners are exempt from providing BOI. FinCEN also announced that information relating to U.S. persons will be removed from the BOI database. Only certain foreign reporting companies formed under foreign law that are registered to do business in a U.S. state or tribal jurisdiction remain subject to CTA reporting obligations.
These changes represent a significant scaling back of the CTA’s original reporting framework. However, they apply only to the requirement that companies report ownership information directly to FinCEN. They do not eliminate customer due diligence obligations imposed on financial institutions.
The critical distinction for FIs: CTA reporting vs. CDD requirements
One of the most common misconceptions is that the CTA and the CDD Rule are the same thing. They are not.
The CTA created a reporting obligation requiring certain entities to submit BOI directly to FinCEN. By contrast, the CDD Rule requires covered financial institutions to identify and verify beneficial owners of legal-entity customers when accounts are opened and at certain triggering events. The information is collected and maintained by the financial institution as part of its BSA/AML program. The purpose is to help institutions understand who owns and controls their customers and to support risk-based monitoring and suspicious activity reporting.
Although Congress envisioned that the BOI database could eventually reduce compliance burdens for financial institutions, FinCEN has not rescinded or replaced the CDD Rule. Accordingly, institutions remain subject to the existing beneficial ownership requirements contained in the BSA framework.
How the February 2026 exceptive relief differs
FinCEN’s February 13, 2026, Exceptive Relief Order, FIN-2026-R001, addressed the frequency with which financial institutions must identify and verify the beneficial owners of legal-entity customers. The order permits an institution to obtain and verify beneficial ownership information when the legal-entity customer first opens an account, rather than each time the same customer opens an additional account. Updated identification and verification remain necessary when the institution knows facts that reasonably call the reliability of previously obtained information into question or when required under its risk-based ongoing CDD procedures. This relief differs from the August 2026 CTA Final Rule. The exceptive relief modifies how financial institutions apply the CDD Rule, while the CTA Final Rule limits which companies and individuals must report BOI directly to FinCEN. Neither action eliminates a financial institution’s underlying obligation to identify and verify beneficial owners under the CDD Rule.
As a result, examiners will continue to expect institutions to:
- Identify legal-entity customers
- Collect beneficial ownership information
- Verify the identity of beneficial owners
- Maintain appropriate records
- Conduct risk-based ongoing customer due diligence
These obligations remain foundational components of an institution’s BSA/AML compliance program.
How financial institutions should proceed
The recent narrowing of the Corporate Transparency Act’s BOI reporting requirements is a significant regulatory development, but it should not be interpreted as eliminating beneficial ownership requirements for financial institutions. It does not eliminate the separate obligations imposed on institutions under the CDD Rule.
Until FinCEN formally amends the CDD Rule, financial institutions should continue collecting and verifying beneficial ownership information at account opening for legal-entity customers and maintain risk-based procedures consistent with existing BSA/AML expectations. Institutions that incorrectly interpret CTA reporting relief as eliminating beneficial ownership requirements under the CDD Rule risk creating significant compliance gaps that could lead to examination findings and/or regulatory criticism.
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