The Financial Crimes Enforcement Network says that more than 32 million businesses, including family offices, do not have to comply with the Corporate Transparency Act while a nationwide block on the law is being litigated.
“In light of a recent federal court order, reporting companies are not currently required to file beneficial ownership information with FinCEN and are not subject to liability if they fail to do so while the order remains in force. However, reporting companies may continue to voluntarily submit beneficial ownership information reports,” an alert on the bureau’s website says.
The latest guidance from FinCEN ends a brief period of more significant uncertainty about the CTA, which has been in the making for over a decade and challenged in several courts this year. Unlike in other cases, a federal court in Texas issued a preliminary injunction on December 3 and blocked the law nationwide, just weeks before a January 1 deadline. The timing of the judge’s opinion in Texas surprised attorneys and left family offices and other entities in limbo, wondering whether they still needed to disclose information about their owners.
Some businesses are certainly cheering the delay and hoping they will never be required to disclose their beneficiaries. Family offices generally don’t want to share information about themselves, partly to conceal a family's identity and often for legitimate reasons.
But the nationwide injunction does not mean the CTA is dead. The Department of Justice, on behalf of the Department of the Treasury (FinCEN is a bureau of the Treasury), has appealed the Texas injunction, and other courts have already sided with the government in other cases.
“Several district courts have denied requests to enjoin the CTA, ruling in favor of the Department of the Treasury. The government continues to believe — consistent with the conclusions of the U.S. District Courts for the Eastern District of Virginia and the District of Oregon — that the CTA is constitutional,” FinCEN’s alert says.
A bipartisan Congress passed the CTA in 2021 to combat money laundering through anonymous companies in the U.S., which could be used to support corruption, drug trafficking, and terrorism. The law also brought the U.S. up to international disclosure standards and the personal details about beneficial owners submitted to FinCEN are kept in a private database available to law enforcement agencies, not the general public.
Still, opponents say the CTA is overreaching. They argue that someone with access to information about a business's stakeholders could use it as leverage in financial transactions. Stakeholders, especially the offices of ultrawealthy families, are also worried because they can be more susceptible to theft, extortion, kidnapping, and other crimes.
