The anti-money laundering law called the Corporate Transparency Act, or CTA, has been given new life after an appeals court determined Monday that its rules can be enforced as the case progresses. The law requires small business owners to register with the Financial Crimes Enforcement Network, or FinCEN, by Jan. 1, or potentially pay a fine 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 US Circuit Court of Appeals vacated the order, ruling that the decision “is in the public's immediate interest in combating financial crime and protecting our country's national security.”
The CTA requires owners and part-owners of an estimated 32.6 million small businesses to register personal information such as photo ID and home address with FinCEN. With the court's ruling that enforcement can proceed, many small business owners may struggle to register before the January 1, 2025 deadline, although businesses starting in 2024 were given 90 days to register. .
Some civil liberties groups condemned the decision, saying the regulation represents government overreach.
“The government cannot be allowed to maintain this unconstitutional statute, which goes beyond Congress's reasonable authority to regulate Americans,” the civil rights group New Civil Liberties Alliance said in a statement emailed to CBS MoneyWatch. ”
The Treasury Department did not immediately respond to CBS MoneyWatch's request for comment.
Here's what to know about the decision and CTAs.
What is the Corporate Transparency Act, or CTA?
The CTA is an anti-money laundering statute passed in 2021 that aims to look inside shell companies and “crack down on efforts by criminals, organized crime gangs and other illicit actors to conceal their identities and launder their wealth through financial Was.” system,” Treasury Secretary Janet Yellen said in 2022.
The rules first take effect in 2024, but existing businesses have until Jan. 1, 2025, to register, while businesses starting this year have 90 days to register.
FinCEN is a bureau within the US Treasury Department that investigates money laundering and other illicit financial activities.
What is CTA's reporting rule?
Reporting Rule The CTA has a beneficial ownership information reporting requirement, which mandates small businesses to register the following with FinCEN, According For the US Chamber of Commerce.
- The full legal name of your company.
- Its business address (PO boxes or attorneys' offices are not accepted, the Chamber of Commerce says).
- The state where the company was formed or first registered.
- A Taxpayer Identification Number and an identification document, such as filed articles of incorporation.
- Full legal names and dates of birth of beneficial owners.
- Home addresses of beneficiary owners.
- A photocopy of the beneficial owners' US driver's license or passport.
How do businesses register under CTA?
Small businesses can file their Beneficial Ownership Information Report here this link With FinCEN.
What if I do not register under CTA?
According to FinCN, penalties for failure to file are up to $591 per day.
The Chamber of Commerce says businesses could also face criminal penalties of up to two years in prison and a fine of up to $10,000.
Which businesses are exempt from CTA filing?
According to the Chamber of Commerce, there are 23 types of businesses that are exempt from filing beneficial ownership information. These include many publicly traded companies and non-profit organizations, as well as some large operating companies.
According to FinCEN, many types of banks and other financial services businesses are not required to file. It says some other types of businesses, such as many sole proprietorships, are also exempt. (There may be a list and Q&A on discounts seen here,
What could happen next in the CTA case?
It's unclear, but it's possible that groups fighting against the regulation could seek relief from the U.S. Supreme Court or the 5th Circuit for additional review, According For national law review.
Contributed to this report.