A federal judge in Texas has lifted a previous order blocking the enforcement of an anti-money laundering law that compels millions of businesses to disclose their true owners to the U.S. Treasury Department.
The decision, issued Tuesday by U.S. District Judge Jeremy Kernodle in Tyler, Texas, allows the Corporate Transparency Act to be enforced while the Justice Department appeals his earlier ruling that deemed the law unconstitutional.
The 2021 law mandates corporations and limited liability companies (LLCs) to report their beneficial owners to the Treasury’s Financial Crimes Enforcement Network (FinCEN), an agency responsible for tracking financial transactions to combat money laundering and other financial crimes.
Kernodle initially ruled on January 7 that the law overstepped constitutional boundaries, regulating private companies formed under state law regardless of whether they engaged in interstate commerce. However, his latest order follows a Supreme Court decision on January 23 that temporarily blocked a separate ruling by another Texas judge who had also deemed the law unconstitutional.
The government argued that pausing the ruling would provide time to reassess compliance requirements for smaller entities. In response, FinCEN has extended the deadline for businesses to report ownership details by 30 days.
Opposing the decision, two business owners represented by a conservative legal group contended that enforcement should remain on hold until higher courts, including the U.S. Supreme Court, weigh in on what they view as a significant federal overreach.
The legal battle over the law’s constitutionality is expected to continue in the 5th U.S. Circuit Court of Appeals and possibly the Supreme Court.
