Why did the Treasury Department gut Senator Rubio’s landmark law to crack down on shell companies?
Why Elon Musk’s personal interests might explain this Trump Administration gift to criminals and foreign adversaries
It was clear to then-Senator Marco Rubio that the United States had a shell company problem.
Our own country—not just “offshore” jurisdictions—had become “one of the primary facilitators of anonymous shell companies.” Experts warned that “[a]nonymous companies are the vehicle of choice for the criminal and the corrupt to launder illicit funds with impunity,” and that “[d]rug cartels, human trafficking rings, purveyors of counterfeit and pirated goods, rogue nations evading sanctions, corrupt officials concealing bribes and stealing from state coffers, and others use anonymous corporate structures to move and hide illicit wealth.”
Experts also warned that the United States had become an especially attractive place for bad actors to try to launder their funds. Register a company in the United States, and it can apply for a bank account and access our financial system. The Financial Action Task Force flagged that we lagged behind partners and allies in closing a “very significant” vulnerability: U.S. law enforcement had no effective way to identify the true or “beneficial” owners of companies registered in the United States. This made our jurisdiction a more attractive place to launder the proceeds of crimes committed both at home and abroad.
Luckily, after more than a decade of work and extensive negotiations between Congress, the first Trump Administration, law enforcement officials, and advocates, Congress passed the Corporate Transparency Act (CTA) in January 2021. The law required certain companies, including domestic shell companies, to report basic information to the Treasury Department about their true owners.
The first Trump Administration supported this bipartisan law. One of the CTA’s most enthusiastic advocates was none other than President Trump’s current national security advisor and Secretary of State, then-Senator Marco Rubio:
“Excellent investigative reporting on how dirty $ flows through real estate using shell companies… I have proposed a bipartisan law to prevent individuals from using anonymous shell corporations to engage in illicit activities.” —Sen. Rubio, July 19, 2018
“My ‘Corporate Transparency Act’, the most significant anti-corruption & money laundering law in decades & which forces anonymous shell companies to disclose their true owners is going to pass as part of the end of year defense bill.” —Sen. Rubio, December 9, 2020
“Sen. Rubio & colleagues urged @USTreasury to fully implement his Corporate Transparency Act.” —Sen. Rubio, May 10, 2022
“[T]he CTA is the product of a sensitive and painstaking legislative process, and its passage represents perhaps the most important anti-money laundering reform in two decades. ‘For years, experts routinely ranked anonymous shell companies—where the true, ‘beneficial’ owners are unknown—as the biggest weakness in our anti-money laundering safeguards.’” —Sen. Rubio and four other senators, March 15, 2023
“The Corporate Transparency Act was a pet project of Florida Senator Marco Rubio, who raised alarm at over $1 billion connected to top Venezuelan officials flooding the real estate market in Miami… ‘Shell companies involved in shady activities are a big problem, especially throughout South Florida,’ Rubio told the Miami Herald in 2018, as he began pushing for the law.” —Daniel Rivero, WLRN Public Media, December 29, 2023
Yet the Treasury Department abruptly reversed course last year under the second Trump Administration.
On March 2, 2025, Treasury announced that it would “not enforce” the CTA against “U.S. citizens or domestic reporting companies or their beneficial owners.” Treasury’s decision means that more than 99 percent of companies covered by the law’s definition are exempted from reporting to law enforcement.
This sudden reversal led The Daily Caller to say, “Trump Admin May Have Accidentally Empowered Cartels To Flood America With Fentanyl, Republican Legal Experts Warn.” It made no sense to law enforcement groups, which sounded the alarm about making it easier to “smuggle drugs into our communities” and “enable hostile regimes to move money into the U.S. financial system.” Indeed, there has been ample evidence for years that criminals and foreign adversaries—like Sinaloa Cartel operatives, Iranian sanctions evaders, and those stealing technology for China’s military—exploit shell companies in the United States. That’s why Congress passed the CTA in the first place.
Surveys of the American people show “overwhelming” support for the CTA, with 81 percent of respondents agreeing that “[a]sking some small businesses to do 20 minutes of paperwork identifying their true owner is a small price to pay for keeping our communities safe from drug trafficking, terrorist financing, and other financial crimes.”
But the richest man on the planet seemed to have a different view.
Just one day before the Treasury announced its plan to roll back the CTA, Elon Musk—then serving as the head of the Department of Government Efficiency (DOGE)—promised to “look into” the requirements. At the time, it looked like Mr. Musk was simply responding to an online commentator criticizing the CTA’s beneficial ownership requirements.
But new reporting has now revealed that Mr. Musk controls a “secretive network” of “more than 90 companies and other legal entities in Texas,” including a significant number of limited liability companies “designed to shield owners from legal and financial risks, as well as public scrutiny.” The reporting explained: “Whatever Mr. Musk’s intent, the effect of using these companies has been to disguise how he is spending his money.” Had Treasury continued to enforce the CTA as required by law, those secretive companies may have been required to report their true owners. Instead, Treasury permitted entities like that to continue operating in obscurity.
Ironically, after Treasury’s rollback, the Government Accountability Office published a report indicating that providing beneficial ownership information—the purpose of the now-gutted CTA—would have helped fight fraud in federal government programs, including procurement-, grant-, and eligibility-related fraud. Despite Treasury’s “raising the alarm” last year about how Chinese money laundering networks are helping drug cartels move huge sums of money through our financial system, the Trump Administration itself published several documents showing that those very networks use shell and front companies to launder those funds. And new reports indicate that Jeffrey Epstein, already known to have used dozens of shell companies, exploited U.S. Virgin Islands-registered shell companies to facilitate sex trafficking after bank officials raised concerns about his constant cash withdrawals. Treasury’s decision to roll back enforcement of the CTA means shell companies based in the U.S. Virgin Islands can stay anonymous.
Ranking Member Elizabeth Warren and her colleagues are demanding answers. She recently joined Senator Sheldon Whitehouse, Co-Chair of the Senate Caucus on International Narcotics Control, and Maxine Waters, Ranking Member of the House Committee on Financial Services, in sending a letter to Treasury Secretary Bessent requesting documents and information.
Read more in the New York Times here.
Read the letter here.