WASHINGTON, DC – On October 27, the attorneys general of 20 states and the District of Columbia sued the Treasury Department and other federal defendants over their gutting of the Corporate Transparency Act (CTA), a landmark law that requires anonymous shell and front companies to disclose their true owners. Treasury’s final rule, released in August, exempts nearly all entities from the CTA’s reporting requirements, effectively repealing through regulation a law Congress passed.

“Congress spent fifteen years crafting and passing a bipartisan law to help federal, state, and local law enforcement follow the money and stop drug dealers, human traffickers, and fraudsters from harming our communities,” said Erica Hanichak, FACT Co-Director. “Now, many of those same law enforcement leaders are joining together to demand that the Treasury simply carry out the law as Congress intended and require U.S. companies to disclose their true owners. We expect the court to find this subversion of congressional intent unlawful and vacate Treasury’s final rule.”

The complaint alleges that FinCEN’s final rule and planned data purge violate the Administrative Procedure Act (APA), as well as the separation of powers and the Take Care Clause of the U.S. Constitution. As a remedy, the states are asking the court to set aside the FinCEN rule and bar FinCEN from purging more than 16 million records already submitted to the database.

Many of the arguments made by the plaintiffs mirror those presented in FACT’s official comments on Treasury’s interim final rule last year, including that the rule contradicts the CTA and exceeds Treasury’s authority under the APA. The final rule and its predecessor also drew opposition from Senators Chuck Grassley (R-IA) and Sheldon Whitehouse (D-RI), as well as several law enforcement groups, including the National Narcotics Officers’ Associations’ Coalition (NNAOC), United Coalition of Public Safety (UCOPS), and former federal law enforcement and intelligence agents.

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Notes to the Editor: 

• For a brief history of the Corporate Transparency Act and more information on the importance of beneficial ownership transparency, see FACT’s recent fact sheet.
• The case, State of Oregon v. Bessent, was filed in the U.S. District Court of Oregon. The full complaint can be read here.
• In 2020, 42 attorneys general sent a bipartisan letter urging the U.S. Senate to pass the Improving Laundering Laws and Increasing Comprehensive Information Tracking of Criminal Activity in Shell Holdings (ILLICIT CASH) Act, the legislative predecessor to the CTA.
• The complaint comes as the U.S. is undergoing an evaluation by the Financial Action Task Force, the international anti-money laundering standard setter. Beneficial ownership is a stated priority of this round of evaluations and may feature prominently in the U.S. review. For more information, see here.