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US Appeals Court Reinstates Anti-Money Laundering Law

US Appeals Court Reinstates Anti-Money Laundering Law
Credit: REUTERS/Andrew

U.S.(Washington Insider Magazine) – A U.S. appeals court has lifted a nationwide block on the Corporate Transparency Act (CTA), allowing its enforcement as legal battles continue.

The 5th U.S. Circuit Court of Appeals ruled in favor of the U.S. Department of Justice, overturning a Texas judge’s decision that declared the law unconstitutional.

What Does the CTA Require?

The law mandates corporations and LLCs to disclose their real beneficial owners to the Financial Crimes Enforcement Network (FinCEN) to combat money laundering.

Legal Challenges & Court Rulings

  • Earlier this month, Judge Amos Mazzant ruled the CTA unconstitutional, citing states’ rights violations under the Tenth Amendment.
  • The appeals court reversed the ruling, asserting that the law falls within Congress’ power under the Commerce Clause to regulate interstate economic activity.

Impact on Businesses

  • Businesses created before 2024 now have until January 13, 2025, to comply.
  • 300,000+ small businesses, represented by the National Federation of Independent Business (NFIB), plan to appeal the decision.

Why Was the CTA Enacted?

The law was passed in 2021 as part of a bipartisan defense spending bill to curb the growing use of LLCs and shell companies for illicit financial activities.

What’s Next?

With legal challenges ongoing, FinCEN has resumed enforcement while business groups continue their fight in court.

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