Treasury suspends anti-money laundering law, citing relief for small businesses

File Source; GV Wire

The U.S. Department of the Treasury announced Sunday that it is suspending enforcement of the Corporate Transparency Act (CTA), a federal anti-money laundering law, as it moves to narrow its scope to foreign reporting companies. The decision follows a federal court ruling and aims to ease compliance burdens on American taxpayers and small business owners.

With the suspension, the Treasury will no longer enforce fines or penalties tied to the CTA’s beneficial ownership reporting rule, including any future fines after the rule change takes effect. The law was originally designed to combat financial crimes by requiring corporations to disclose their true owners to the Financial Crimes Enforcement Network (FinCEN). It sought to prevent illicit activities, including arms deals, drug trafficking, and human trafficking, often facilitated through anonymous “shell companies.”

The suspension is expected to hinder efforts to prosecute financial crimes involving such entities, potentially exposing consumers to risks when dealing with undisclosed ownership structures. Critics argue that the rollback benefits bad actors while weakening financial transparency.

The U.S. Supreme Court had issued a nationwide stay in January, affirming the government’s authority to regulate business reporting under the Commerce Clause. The ruling emphasized that combating financial crimes outweighed any administrative burdens the law imposed.

“This is a victory for common sense,” said U.S. Secretary of the Treasury Scott Bessent. “Today’s action is part of President Trump’s bold agenda to unleash American prosperity by reining in burdensome regulations, in particular for small businesses that are the backbone of the American economy.”

Richard Trent, Executive Director of the small business advocacy group Main Street Alliance (MSA), criticized the suspension, arguing that fraudulent enterprises exploit anonymous shell corporations to evade accountability. “Small businesses suffer when they are forced to compete with fraudulent and criminal enterprises,” Trent said in a press release Monday.

The Treasury’s decision follows a March 2024 ruling by the U.S. District Court for the Northern District of Alabama, which found the CTA unconstitutional. The court argued that while Congress sometimes “enacts smart laws that violate the Constitution,” regulating business entities exceeded the federal government’s powers under the Commerce Clause.

With enforcement now on hold, the future of financial transparency regulations remains uncertain, as policymakers weigh the balance between regulatory relief and national security concerns.