Corporate Transparency Act Takes a Knock-Out punch
The city might have appeared completely grey if not for the scattered, omnipresent flecks of color plastered over walls, over windows, on screens and billboards, and in the minds of the populace—Party-issued posters of a familiar man with a thick, bushy mustache, captioned, “BIG BROTHER IS WATCHING YOU.” George Orwell’s 1984 is, in essence, about control. The allegorical Party featured in the novel forces its followers into complete submission through surveillance and propaganda. Meanwhile, in the real world in 2024, the federal Corporate Transparency Act (CTA) has been described as Orwellian. It requires extensive disclosure of personal information about business owners, which some feel is an invasion of privacy and government overreach
The CTA was enacted in January of 2021. It required over 32 million businesses with less than $5M in annual revenue to report beneficial ownership information to the Financial Crimes Enforcement Network (FinCEN). The deadline to report is January 1, 2025—or was, rather. But on December 3, 2024, a Texas district court issued a preliminary injunction, halting enforcement of the CTA nationwide. The plaintiffs argued that the CTA compels speech and association, infringing on First Amendment protections. They also raised concerns about privacy violations under the Fourth Amendment (unreasonable search and seizure).
The presiding Judge Amos Mazzant wrote, “ . . . the government is unable to provide the court with any tenable theory that the CTA falls within Congress’s power. And even in the face of the deference that the court must give Congress, the CTA appears likely unconstitutional.” He added that corporate regulation has typically fallen under the states’ jurisdiction.
At the time of the injunction, just over 8 million of the 32 million businesses had reported to FinCEN. Had the CTA not been put on hold, the remaining businesses would soon be subject to fines amounting up to $500 per day. The injunction is therefore critical to the livelihood of small businesses. The federal government has already appealed the case to the Fifth District Court.
With the new administration beginning in January, it’s unclear what further steps may be taken to limit or halt enforcement of the CTA. Working jointly with Congress, the administration could revisit the actual contents of the law, amending transparency expectations or enforcement policies. They could deprioritize the funding of resources for enforcement. They might even manage to repeal the law altogether.
If a chief goal of the CTA is, as FinCEN claims, to uncover money laundering schemes, the fact that one criterion for exemption is a prior year federal income tax reporting of over $5M seems odd. Any money-laundering company would need way more than $5M in revenue to conceal its crimes. Banks with revenue in the billions have been fined for money laundering in the past. In 2012, for instance, HSBC was fined $1.9B for laundering money for drug cartels and countries under sanctions. Later, in 2018, Dankse Bank was involved in a $230B money laundering scandal. And in 2020, Deutsche Bank was fined $150M for involvement in laundering activities related to Jeffrey Epstein.
And it isn’t just banks. In my research, I still haven’t found one conviction for a business with less than $5M in revenue. The Unitech Group, a real estate firm, allegedly started and managed over 52 shell companies to launder money with a revenue of $36M. The Los Zetas Drug Cartel used an Oklahoma horse ranch and numerous shell companies to conceal and transfer millions of dollars of drug money to Mexico with revenues of over $13B. Other common businesses involved in money laundering include nightclubs and art dealers, again, with revenues well over $5M.
You would think, then, that such businesses would be the focus of any transparency acts designed to prevent money laundering. Why does there need to be another huge government database containing private information, which the government has proven they cannot guard safely? (Think back to April 2024, to the Social Security Administration hack. 2.9 billion records were breached.)
Was Judge Mazzant correct to describe the law as quasi-Orwellian? Is Big Brother trying to track the small business owner, infringing on his First and Fourth Amendment rights?
Original article published in the Sierra Vista Herald here.
