With the Treasury Department’s beneficial ownership reporting portal now up and running, the Corporate Transparency Act is officially in effect. That means covered entities formed this year – 5 to 6 million, by FinCEN’s own estimates – will have 90 days to complete the 51-question initial report, while existing entities have until the end of the year to do so. Filers must also notify FinCEN of any changes to their initial report within 30 days.
As we’ve written previously, the new compliance regime is more than just an administrative headache. Failure to comply carries steep fines and jail time. Plus, the data being collected is a treasure trove of sensitive personal information and is sure to be a target for hackers and other malicious actors (FinCEN’s landing page is already emblazoned with a warning about scammers). To top it off, because the CTA requires criminals to effectively self-report their criminal activity, it’s unlikely to do much in the fight against money laundering.
With this ill-conceived statute now in effect, Americans are starting to learn about their new reporting obligations – and they’re not happy. Carol Roth, one of the nation’s leading small business advocates, recently summed up this frustration in a scathing critique of the CTA. As Carol writes:
FinCEN estimates it will take three hours for initial compliance (but who knows, depending on if you have to track down the information they are asking for or if you have questions). Then you will be responsible for letting FinCEN know of any future updates and changes.
First, this is an unnecessary invasion of privacy for small businesses, creating a database filled with personal information. And it is hard to believe the law will do anything meaningful to stop money laundering or that the burden it generates will justify any possible small benefit to come from it. Not to mention the security risk of having yet another database full of information for cybercriminals and foreign adversaries to target.
Moreover, it is another administrative hassle that adds to small business owners’ paperwork requirements and takes entrepreneurs away from more productive economic activities.
Of course, there is also a fee of $85 to milk from the small businesses already burdened by this compliance — that is, if you understand what you are doing and don’t need to hire some type of adviser to assist you, which will cost you much more.
And, again, very few people even know about the law.
She also offers some important background on how we got here:
By the way, you can’t blame Joe Biden for this one. “The act falls under the scope of the Anti-Money Laundering Act of 2020 and was enacted as part of an expansive national defense authorization package on Jan. 1, 2021,” the Mississippi Business Journal reported. “The package passed through Congress with broad bipartisan support before being vetoed by then-President Donald J. Trump. Both houses of Congress voted to override the veto.”
So plenty of blame to go around, meaning the backlash from the small business community will be felt on both sides of the aisle.
But while data collection regime is in full swing, there’s still time to unwind this harmful statute. Here’s Carol again in a recent interview with Glenn Beck:
And we need to be picking up our phone. And calling up our representatives. And particularly if you own a small business. And say, this needs to stop. There is absolutely no benefit to this.
And all it does, it amasses data collection against small businesses. That will make it harder for people to start. And operate. And create more penalties. And shift the landscape, again, in favor of big businesses.
Cheers to that. As we reported last time around, the House just passed the Protect Small Business and Prevent Illicit Financial Activity Act (H.R. 5119) sponsored by Representatives Joyce Beatty (D-OH) and Zach Nunn (R-IA) by a vote of 400-1! That bill would delay all this nonsense for a year and it sits in the Senate, so there’s hope. Follow Carol’s advice: contact your Senator, and demand that the Senate take up and pass H.R. 5199 now!