Supreme Court Allows Enforcement of Major Anti-Corruption Law to Resume

Order From Nation’s Highest Court Represents Huge Victory for Efforts to Protect U.S. Financial System from Criminals

WASHINGTON, DC — Today, the U.S. Supreme Court stayed a nationwide injunction against the landmark Corporate Transparency Act (CTA), clearing a major hurdle to enforcement of the most consequential anti-money laundering law in a generation. The bipartisan Corporate Transparency Act, originally passed during the first Trump Administration, cracks down on anonymous shell companies by requiring certain legal entities to provide basic identifying information on their true, or “beneficial”, owners.

The Court’s order, with Justice Gorsuch concurring and Justice Jackson dissenting, stayed a sweeping nationwide injunction handed down last month by a lower court judge in Texas Top Cop Shop, Inc., et al. V. Merrick Garland, which prevented the Treasury Department from enforcing the CTA against any party.

“Today’s order is a blow to fentanyl dealers, human traffickers, terrorists, corrupt foreign leaders and other criminals that use anonymous companies to launder the proceeds of their illegal activities,” said Scott Greytak, Director of Advocacy for TI US. “Nearly 85 percent of all countries in the world have committed to collecting beneficial ownership information to protect against abuse of their financial systems. It is astonishing that the plaintiffs in this case believe the United States isn’t capable of doing the same. The order from the Supreme Court to stay this injunction should serve as a clear sign to the other courts currently weighing misguided challenges to the CTA that the law is constitutional.”

“For years, police and prosecutors have tried to combat a flood of dirty money associated with often violent crimes, but that can’t happen if they run into a wall of shell companies and secrecy,” said Ian Gary, Executive Director of the FACT Coalition. “Today’s order is a reminder of the urgency of opening the money trail so our law enforcement officials can crack down on criminals who abuse the system.”

“The CTA is a vital tool for U.S. law enforcement to take on the brutal Mexican cartels, Communist Party-backed Chinese gangsters, and other thugs fueling America’s fentanyl crisis,” said Nate Sibley, fellow and director of Hudson Institute’s Kleptocracy Initiative. “With access to data collected under the CTA, law enforcement will be better equipped to stop criminals who use anonymous U.S. shell companies to launder fentanyl profits. With 100,000 Americans dying from fentanyl every year, now is the time to be providing law enforcement agents with powerful investigative tools that help them follow drug money. The CTA passed under the Trump Administration. To secure its investment in protecting the U.S. financial system from dirty money, I hope the incoming Administration will again stand with law enforcement and see to the successful implementation of this crucial law.”

“The Supreme Court’s decision to allow enforcement of the Corporate Transparency Act reaffirms what we already know: that the CTA is urgently needed to empower U.S. officials to protect national security at a time when we must show strength and global leadership,” said Elaine Dezenski, senior director and head of the Center on Economic and Financial Power at the Foundation for Defense of Democracies. “Foreign adversaries and criminals move billions through our economy using opaque shell corporations, propping up kleptocratic regimes, enabling drug cartels, and undermining democracy. While we spend trillions on our military capability, we leave the front door open to the illicit finance that emboldens and enriches our adversaries. The CTA closes this major security vulnerability.”

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Notes to the Editor:

Read the order from the Supreme Court to stay the 5th Circuit injunction against enforcement of the Corporate Transparency Act here.
A separate nationwide preliminary injunction issued by a different district court in Texas remains in place for now. Accordingly, Treasury’s FinCEN is treating reporting under the CTA as voluntary for the time being. However, because that lower court injunction is at odds with the Supreme Court’s stay order, it should also be stayed.
Recent polling from conservative polling firm McLaughlin and Associates details widespread support for the Corporate Transparency Act, with 81 percent of respondents agreeing with the statement that “Asking some small businesses to do 20 minutes of paperwork identifying their true owner is a small price to pay for keeping our communities safe from drug trafficking, terrorist financing, and other financial crimes.”
Federal courts in Oregon, Michigan and Virginia have denied motions for preliminary injunctions against enforcement of the CTA. A narrower injunction by a federal lower court judge in Alabama is currently on appeal before the 11th Circuit Court of Appeals.
FACT policy director Zorka Milin’s March op-ed in Bloomberg Law outlines why the CTA is a routine and necessary exercise of Congress’ power under the Commerce Clause.
The CTA has been supported during legal proceedings by diverse stakeholders, including through amici curiae briefs filed by national security and anti-corruption experts, small-businesses, Members of Congress, and tax policy experts.