Yesterday, Congresswoman Maxine Waters (D-CA), the top Democrat on the House Financial Services Committee and Senators Sheldon Whitehouse (D-RI), Ron Wyden (D-OR), Elizabeth Warren (D-MA), and Jack Reed (D-RI), filed an amicus curiae —or “friend of the court”—brief in National Small Business United v. Yellen, a case at the U.S. Court of Appeals for the 11th Circuit. The brief urges the court to uphold the constitutionality of the bipartisan Corporate Transparency Act (CTA), the 2021 law considered the most important anti-money laundering law passed in two decades.
The CTA plays an important role in protecting national security and public safety by providing law enforcement and national security officials with the names of the true owners (“beneficial ownership information”) of U.S. corporations and other legal entities. This information facilitates the government’s efforts to combat terrorist financing, money laundering, sanctions evasion, proliferation financing, tax evasion, and other illicit finance carried out through shell companies.
On March 1, a district court judge on the Northern District of Alabama ruled that the CTA was unconstitutional because the law is outside the scope of Congress’s power to legislate. The government has appealed to the 11th Circuit, and the lawmakers’ brief in support of the government asks the court to reverse the district court’s judgment.
“Anonymous shell corporations harm the United States’ national security, foreign affairs, foreign and interstate commerce, and tax interests. Such shell companies often operate in multiple layers to hide their true owners and violations of key sanctions, money-laundering, and tax laws. Allowing illicit money to be hidden through corporate forms also undermines public safety and law enforcement efficacy on a national and international scale,” wrote the members.
“Responding to these dangers, Congress passed the Corporate Transparency Act, after it determined that requiring disclosure of beneficial ownership of legal entities, including shell companies, is crucial to combat money laundering and its attendant national security and law enforcement risks. The CTA is a garden-variety, valid exercise of Congress’s core Article I authorities, supported by extensive congressional factfinding and a robust legislative record. The district court’s contrary holding rests on a cramped reading of Congress’s Article I authority, contravenes decades of precedent, and without record support impermissibly second-guesses Congress’s copious factual findings,” added the members.
Whitehouse was the original sponsor of the TITLE Act, the precursor to the Corporate Transparency Act, alongside Senator Chuck Grassley (R-IA). Wyden was the original Senate sponsor of the CTA alongside Senators Marco Rubio (R-FL) and Whitehouse. Waters, an original cosponsor of the CTA, shepherded the bill into law while serving as Chairwoman of the House Financial Services Committee. As influential members of the Senate Banking Committee, Reed and Warren played instrumental roles in shaping the legislation.
The CTA was the culmination of more than a decade of painstaking bipartisan congressional deliberation. The CTA passed as part of the FY2021 National Defense Authorization Act and was supported by a wide range of stakeholders, including national security experts, law enforcement, anti-corruption groups, human rights organizations, faith communities, financial institutions, real estate organizations, the U.S. Chamber of Commerce, labor unions, and the Trump Administration.
The lawmakers’ amicus brief argues that Congress has robust Article I powers to legislate in the national security and foreign affairs, interstate and foreign commerce, and tax arenas and that the CTA falls comfortably within those authorities. In enacting the CTA, Congress carefully considered testimony, reports, and interests of various stakeholders, and held a large number of hearings across various committees and subcommittees over two decades. Based on this extensive record, Congress concluded that beneficial ownership information is necessary to enforce against threat actors who use shell companies to exploit the American financial system and launder their ill-gotten gains.
Robin F. Thurston and Linda Heeyoung Park of Democracy Forward Foundation are the counsel of record for the members of Congress on the brief.
Full text of the brief is available here.
###
