24
Dec 2024
U.S. Appeals Court Reinstates Beneficial Ownership Information Reporting Requirement
In a significant legal development, a U.S. Appeals Court has lifted a temporary block on the enforcement of a key anti-money laundering law, known as the Beneficial Ownership Information (BOI) reporting requirement. This decision ensures that the January 1, 2025, deadline for reporting will proceed as planned.
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On Monday, a three-judge panel from the 5th U.S. Circuit Court of Appeals in New Orleans overturned a nationwide injunction set by U.S. District Judge Amos Mazzant in Sherman, Texas. The injunction, issued on December 3, 2024, had halted the enforcement of the Corporate Transparency Act (CTA), following a legal challenge by the National Federation of Independent Business (NFIB) and several small businesses. They argued that the CTA was unconstitutional, but the appeals court disagreed.
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The panel, consisting of Judges Carl Stewart and Stephen Higginson (both appointed by Democratic presidents) and Judge Catharina Haynes (appointed by Republican former President George W. Bush), found that the U.S. Department of Justice presented a compelling case for the law’s constitutionality. Judge Haynes partially dissented, suggesting she would have maintained the injunction for the plaintiffs alone, not nationwide.
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The CTA, enacted early in 2021 under President-elect Donald Trump’s first term as part of a defense spending bill, aims to curb the anonymity often exploited by criminals to launder money through U.S. entities like LLCs. Critics of the law, represented by the Center for Individual Rights, have promised further legal action.
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Judge Mazzant had previously argued that the law overstepped Congress’s constitutional bounds under the Commerce, Taxation, and Foreign Affairs Clauses, potentially infringing on states’ rights under the Tenth Amendment. However, the appellate court countered that the BOI reporting falls within Congress’s authority under the Commerce Clause, which allows regulation of activities affecting interstate commerce.
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With this ruling, all companies required under the CTA must now prepare to meet the January 1, 2025 BOI reporting deadline to avoid facing substantial penalties. This development reinstates the urgency for businesses to comply with these new transparency measures, ensuring that beneficial owners are no longer hidden behind corporate structures.
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This ruling marks a pivotal moment for transparency in corporate ownership in the U.S., aiming to close loopholes used for financial crimes while sparking ongoing debates about federal versus state jurisdiction and individual privacy versus public interest.
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(This is Blog Post #1672)