March 28, 2024

"Just the FACTs" is a round-up of news stories and information regarding efforts to combat corrupt financial practices, including offshore tax haven abuses, corporate secrecy, and money laundering through the financial system.

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Here's the State of Play:
Treasury Appeals Erroneous Federal Court Ruling as Ownership Database Hits One Million Filings

The Department of Justice, on behalf of the U.S. Treasury, has appealed a recent federal court ruling finding the landmark Corporate Transparency Act (CTA) unconstitutional, as urged by FACT and other transparency advocates. The case will now move to the Eleventh Circuit Court of Appeals.

The CTA - which established the first-ever federal database of true, "beneficial" owners of small businesses and certain other entities in the U.S. - represents the crown jewel of longstanding bipartisan efforts to address the flow of dirty money through U.S. markets. Just this week, the international anti-money laundering standard-setter FATF upgraded the U.S. to "largely compliant" with global norms on beneficial ownership transparency after years of non-compliance, reflecting Treasury's successful rollout of the CTA.

The Treasury, for its part, has been working tirelessly to ensure the ultimate efficacy of the law since its enactment in early 2021, finalizing strong rulemakings necessary to implement the law and conducting ongoing outreach to inform businesses of their new reporting obligations. In the first quarter of 2024, more than one million law-abiding businesses filed beneficial ownership information with the Treasury's Financial Crimes Enforcement Network (FinCEN).

The recent injunction against enforcement of the CTA by an Alabama federal district court judge applies only to a relatively small number of entities, with the vast majority of covered entities still expected to comply. FACT applauds Treasury's decision to promptly appeal the case in order to ensure that the law's broader rollout is not affected further. As FACT policy director Zorka Milin argues in a recent op-ed for Bloomberg Law, the judge's decision in this case "is mistaken on both the Constitution and anti-money laundering law, and should be overturned on appeal."

Nation's Financial Crime Fighters Dodge Budget Cuts for 2024

The appropriations package for the remainder of FY2024 passed by Congress last weekend includes $190.2 million for the Financial Crimes Enforcement Network (FinCEN), the bureau of the Treasury responsible for implementing anti-money laundering regulations and acting as the nation's financial intelligence unit.

While budget cuts to the bureau had been widely anticipated in any eventual funding deal, this final figure is consistent with current funding levels enacted for FY2023. The budget also includes an increase in funding for Treasury's Office of Terrorism and Financial Intelligence (TFI), which oversees FinCEN, as well as the Department's sanctions office, from $216 to $226.9 million.

While FinCEN avoided a budget cut in the final spending deal, the enacted figure falls far short of the Administration's requested total for FY2024. New funding will be crucial to ensuring that certain core national and financial security initiatives - including the rollout of long-awaited new rules cracking down on dirty money in U.S. real estate and private investment markets - are implemented effectively.

The rollout of the Corporate Transparency Act could likewise be implicated in upcoming budget negotiations for FY2025, with the development of critical verification measures for collected beneficial ownership likely being dependent on additional resourcing. The President's budget request for FY2025 has called for $216 million for FinCEN to meet its mission.

Latest from FACT

President's Budget Boosts Funds for Nation's Financial Crime Fighters

The President's discretionary budget request for FY2025 provides $216 Million for Treasury's FinCEN, a 12 percent increase over the enacted level for 2024.

In a statement, FACT government affairs director Erica Hanichak noted that, "Now - when the threats facing the U.S. financial system from within and without are greater than ever - is the time to increase support for those protecting the U.S. financial system from dirty money."

The budget request also recommends a number of FACT-supported tax provisions, including changes that would bring the U.S. closer to full compliance with the OECD's global minimum tax, which would need to be approved by Congress.

FACT in the News

Op-Ed: Corporate Transparency Act Ruling Misses Mark on Congress' Power

Read FACT policy director Zorka Milin's recent op-ed in Bloomberg Law, in which she lays out the misinterpretations at the heart of the recent Alabama federal court decision on U.S. beneficial ownership reform.

From the op-ed: "Allowing this decision to stand would undermine America's fight against money laundering, at a moment when we're finally seeing progress...The stakes of the case are high: The CTA is vital to protecting America from financial crime. We expect most companies will continue to comply, and we expect the appellate court to reverse the district court's erroneous decision."

Corporate Transparency Act Challenges Could Spur Legislative Updates

FACT executive director Ian Gary was quoted in coverage of the Alabama court case by Tax Notes' Nana Ama Sarfo, in which he clarified the precise, limited impact of the judge's injunction.

"I think one thing that gets lost in the weeds and lost in the coverage is that the law still stands and FinCEN is still collecting beneficial ownership information," said Gary. "It's still required for the vast, vast majority of covered entities."

Recent and Upcoming Events

April 5: 2024 International Tax Policy Forum/Georgetown Law Conference - The U.S. Confronts Pillar Two

The Georgetown Law's Institute of International Economic Law (IIEL) and the International Tax Policy Forum (ITPF) will be hosting their annual joint conference on April 5 from 8:00am-1:00pm EST, both in-person at Georgetown Law (Washington, DC) and virtually via Zoom.

Acting Deputy Assistant Treasury Secretary Scott Levine will provide keynote remarks, before a broader set of discussions on the expected impacts of the OECD's 15% global minimum tax.

April 30: Hearing Titled - Under the Microscope: Examining FinCEN's Implementation of the Corporate Transparency Act

The House Committee on Small Business will hold a hearing on April 30 on FinCEN's ongoing implementation of the Corporate Transparency Act, including the bureau's efforts to inform businesses of their new reporting obligations.

June 18-21: International Anti-Corruption Conference 2024

The 2024 International Anti-Corruption Conference (IACC) - the premier global conference bringing together heads of state, community activists, non-profits, high-level policymakers, businesses, policy experts, and academics to address the complex challenges posed by corruption - will be held from May 15-17 in Vilnius, Lithuania.

About the FACT Coalition

The Financial Accountability and Corporate Transparency (FACT) Coalition is a non-partisan coalition of more than 100 state, national, and international organizations working toward a fair and honest tax system that addresses the challenges of a global economy and promotes policies to combat the harmful impacts of corrupt financial practices.

For more information, visit www.thefactcoalition.org

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