FinCEN Suspends CTA Enforcement Following Preliminary Injunction By Texas District Court
On December 3, 2024, in Texas Top Cop Shop v. Garland et al. the U.S. District Court for the Eastern District of Texas issued a nationwide preliminary injunction against enforcement of the Corporate Transparency Act (the “CTA”), a federal anti-money laundering law that requires private companies to report their beneficial ownership information to the Financial Crimes Enforcement Network (FinCEN) by December 31, 2024.[1] The court ruled that the CTA and its implementing rules are “likely unconstitutional as outside of Congress’s power.”[2]
On December 5, 2024, the Department of Justice appealed the preliminary injunction to the Fifth Circuit Court of Appeals.[3] FinCEN also posted a public notice on its website that “[w]hile this litigation is ongoing, FinCEN will comply with the order… for as long as it remains in effect. Therefore, reporting companies are not currently required to file their beneficial ownership information with FinCEN and will not be subject to liability if they fail to do so while the preliminary injunction remains in effect. Nevertheless, reporting companies may continue to voluntarily submit beneficial ownership information reports.”[4]
FinCEN’s public notice expressly excuses reporting companies from filing reports “while the preliminary injunction remains in effect.” It now appears unlikely that FinCEN will seek a stay of the preliminary injunction while its appeal is pending. However, should the preliminary injunction be lifted or should FinCEN otherwise prevail on appeal, the implication is that FinCEN would resume enforcement of the CTA, even if we have passed the filing deadline of December 31, 2024. Reporting companies should therefore continue to monitor the Texas Top Cop Shop case and the status of the preliminary injunction.
PierFerd will continue observing developments regarding the CTA. For additional information, please contact Ahpaly Coradin at ahpaly.coradin@pierferd.com or your regular PierFerd contact for assistance.
This publication and/or any linked publications herein do not constitute legal, accounting, or other professional advice or opinions on specific facts or matters and, accordingly, the author(s) and PierFerd assume no liability whatsoever in connection with its use. Pursuant to applicable rules of professional conduct, this publication may constitute Attorney Advertising. © 2024 Pierson Ferdinand LLP.
[1] For more information on the CTA, see our previous client alerts The Corporate Transparency Act: Implications and Challenges for Foreign Companies and Foreign Owners — Pierson Ferdinand LLP; The Corporate Transparency Act: Implications and Challenges for US Companies and Owners — Pierson Ferdinand LLP and Texas District Court Enjoins Federal Government From Enforcing Corporate Transparency Act — Pierson Ferdinand LLP
[2] cta-v-garland-district-court-opinion-preliminary-injunction.pdf at p. 79.
