The anti-money laundering law, known as the Corporate Transparency Act (CTA), was given new life after an appeals court on Monday ruled that the rules can be enforced as litigation progresses. It seems so. The law requires small business owners to register with the Financial Crimes Enforcement Network (FinCEN) by January 1, or face fines of up to $10,000.
The registration rule had been on hold since Dec. 3, when a federal court in Texas issued a preliminary injunction blocking its enforcement. But on Monday, the 5th Circuit Court of Appeals reversed the order, ruling that the decision was in the “objective public interest of combating financial crime and protecting our nation’s national security.”
The CTA requires owners and co-owners of an estimated 32.6 million small businesses to register personal information, such as photo identification and home addresses, with FinCEN. The court’s ruling allowing enforcement to proceed gave businesses starting in 2024 90 days to register, but many small business owners missed the January 1, 2025 deadline. There is a possibility that registration will be rushed ahead of time.
Some civil liberties groups condemned the ruling, saying the restrictions amounted to government overreach.
“The government cannot allow this unconstitutional statute to remain in place,” the civil rights group New Civil Liberties Union said in a statement emailed to CBS MoneyWatch. exceeds.”
The Treasury Department did not immediately respond to a request for comment from CBS MoneyWatch.
Here’s what you need to know about the ruling and CTA.
What is the Corporate Transparency Act (CTA)?
The CTA, an anti-money laundering law passed in 2021, monitors the inner workings of shell companies and prevents “criminals, organized crime organizations, and other illegal actors from trying to hide their identities and launder money through financial institutions. The purpose was to crack down on “attempts to do so.” system,” Treasury Secretary Janet Yellen said in 2022.
The rule, which first took effect in 2024, gives existing companies until January 1, 2025 to register, and companies starting this year have a 90-day deadline to register.
FinCEN is a bureau within the U.S. Treasury that investigates money laundering and other illicit financial activities.
What are the CTA reporting rules?
According to the U.S. Chamber of Commerce, this reporting rule is part of the CTA’s beneficiary information reporting requirement, which requires small businesses to register with FinCEN:
Your company’s legal legal name. The company’s address (P.O. boxes or attorney’s offices are not accepted, the Chamber says). The state in which the company was incorporated or first registered. Identification documents, such as a taxpayer identification number and filed articles of incorporation. Beneficiary’s legal name and date of birth. Beneficiary’s home address. A copy of the beneficiary’s address. US driver’s license or passport.
How does a business register with CTA?
Small businesses can submit beneficial ownership information reports to FinCEN through this link.
What happens if I don’t register for CTA?
Fines for failure to file can be up to $591 per day, according to FinCEN.
The Chamber of Commerce notes that companies could face criminal penalties of up to two years in prison and fines of up to $10,000.
Which businesses are exempt from CTA filing?
According to the Chamber of Commerce and Industry, there are 23 types of companies that are exempt from reporting beneficial ownership information. These include some large industrial companies as well as many publicly traded companies and nonprofit organizations.
According to FinCEN, many types of banks and other financial services companies do not need to declare. Other types of businesses are also exempt, including many sole proprietorships, the report noted. (A list and Q&A regarding exemptions can be found here.)
What happens next in the CTA case?
Details are unclear, but groups opposing the regulations could seek relief from the U.S. Supreme Court or request additional review from the Fifth Circuit, according to the National Law Review.
contributed to this report.
