The group filed a lawsuit in Alabama federal court against the Treasury Department, Treasury Secretary Janet Yellen and acting director of the Financial Crimes Enforcement Network Himamauli Das.
The rule finalized in September requires most American businesses with fewer than 20 employees — roughly 32.6 million companies — to register with the government as of Jan. 1, 2024. They must provide the government with details on their owners and others who benefit from them under a regulation that’s intended to peel back the layers of ownership that can hide unlawfully obtained assets.
Treasury officials said the regulatory burden will be small, costing about $85 per business, but will offer massive benefits to law enforcement, which will be one of few parties with access to the database. Small businesses are targeted because shell companies, often used to hide illegally obtained assets, tend to have few employees.
Ian Gary, executive director of the FACT Coalition, a nonprofit that promotes corporate transparency, said in an email that the new rule “will protect our financial system and small businesses from the criminal abuse of anonymous shell companies.” A representative from Treasury declined to comment on the lawsuit.
Kenyen Brown, an attorney representing the small business association, said the law, while well-intentioned, is a “gross government overreach.”
“The right avenues for the government to gather money laundering and possible anti-terrorism financing activity is through transaction monitoring and financial institutions performing their due diligence,” he said, adding that the new registration rule “is not the way.”