Injunction Must be Stayed Before End of Year to Protect U.S. Markets and Communities from Criminal Abuse

WASHINGTON, DC – On Tuesday, a lower court judge in Texas issued a nationwide preliminary injunction preventing the Department of the Treasury from enforcing the Corporate Transparency Act (CTA), the most consequential U.S. anti-money laundering law of the past two decades. The injunction was issued in response to a motion from plaintiffs in Texas Top Cop Shop, Inc., et al. V. Merrick Garland, with the court finding the CTA “likely unconstitutional as outside of Congress’s power.”

“This wrong-headed injunction is a Christmas gift to criminals who use anonymous shell companies to traffic fentanyl, exploit people, and hide dirty money,” said Ian Gary, executive director of the FACT Coalition. “The law is clearly constitutional and Congress was well within its powers to pass the law to defend America and protect our financial borders. Multiple other federal courts have reached the opposite conclusion and denied injunctions in similar cases, so we expect the government to move to stay this outlier order promptly.”

The CTA – which requires certain legal entities to provide basic identifying information on their true, or “beneficial”, owners – passed with the support of the former Trump Administration and represents the most substantial improvement to the U.S. anti-money laundering framework in a generation. Anonymous shell companies have long been the premier vehicle for criminals to launder the profits of corruption, drug and human trafficking, and other illicit activities in the U.S. economy. This regulatory blindspot has for decades contributed to the U.S.’ status as, in the words of Treasury Secretary Janet Yellen, perhaps “the best place to hide and launder ill-gotten gains.” 

“This improper injunction, issued less than a month before the deadline to file under the CTA, only serves to undermine U.S. national and economic security,” said Zorka Milin, policy director at the FACT Coalition. “This bipartisan law, supported by a broad coalition of business, law enforcement, national security, and anti-corruption groups, was enacted by Congress to close the door on financial criminals benefiting from activities that harm our communities. Congress has a clear mandate to protect the U.S. financial system from dirty money, as confirmed by other federal courts, so this injunction should be stayed before the law’s year-end filing deadline.”

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Notes to the Editor: 

• The decision by Judge Amos L. Mazzant III of the US District Court for the Eastern District of Texas to grant a preliminary injunction in Texas Top Cop Shop, Inc., et al. V. Merrick Garland can be found here.
• 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. 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.