Alabama Federal Judge Declares Small Business Reporting Requirement Unconstitutional

Last Updated on March 5, 2024 by Robert C. Hoopes

The U.S. Treasury Department has taken a significant step in cracking down on individuals and firms connected to Iran’s Islamic Revolutionary Guard Corps and Houthi militants, as well as companies registered in Hong Kong and the Marshall Islands. These sanctions, which target a deputy commander, a Houthi militant member, firms, and two ships involved in transporting Iranian commodities, aim to restrict access to U.S. property and banks for those entities.

Despite these efforts to combat financial crime, a federal judge in Alabama has recently ruled against the Biden administration’s Corporate Transparency Act. This Act would have required small businesses to report details on their owners and beneficiaries, but the judge deemed it unconstitutional due to concerns over privacy, burden on small firms, and infringement on states’ powers.

This decision has sparked a debate over the balance between privacy rights and government initiatives to combat criminal activities, especially in the wake of recent attempts to sanction Russian oligarchs. While the Treasury Department expressed disappointment with the ruling, they have committed to following the court’s decision.

Advocates for corporate transparency have criticized the judge’s ruling, arguing that it weakens efforts to fight financial crime and enables criminals to conceal illicit funds through anonymous shell companies. The clash between privacy concerns and anti-money laundering measures continues to be a contentious issue in the financial sector.