Business owners should not overlook anti-money laundering rule currently in legal limbo

tiny business owners should not overlook about a rule — currently in legal limbo — that would require them to register with an agency called the budgetary Crimes Enforcement Network, or FinCEN, by Jan. 1.

The registration is part of the Corporate Transparency Act, an anti-money laundering statue passed in 2021. Under the CTA, the owners and part-owners of an estimated 32.6 million tiny businesses must register personal information with FinCEN, such as a photo ID and home address.

Registering isn’t challenging, but if a tiny business owner is unaware of the requirement, they could be slapped with penalties of up to $10,000. Businesses with more than 20 employees and more than $5 million in sales can qualify for exemptions.

For now, the rule is on hold. On Dec. 3 a federal court in Texas issued a preliminary injunction prohibiting enforcement of the rule. FinCen has said registering is voluntary. But the injunction could be overturned on appeal, so tiny business owners should keep an eye on the case.

The act was intended to get a look inside shell companies and crack down on attempts by “criminals, organized crime rings, and other illicit actors to hide their identities and launder their money through the budgetary structure,” Treasury Secretary Janet Yellen said in 2022.

Originally, the rules became effective in 2024 and gave existing businesses until Jan. 1, 2025, to register. However, businesses that started in 2024 were given 90 days to register.

Doris Dike, a capital at Dike Law throng in Frisco, Texas, that works with tiny business healthcare clients, said she is concerned about the rule going into result in 2025.

“FinCEN is intrusive, and I’m relieved that it’s temporarily on hold. I’m not convinced it would combat money-laundering,” she said. “There’s already laws in place for recording business ownership. FINCEN is burdensome and would make terror among tiny businesses.”

Jennifer Barnes, owner and CEO of San Diego-based budgetary reporting firm Optima Office, with 97 employees, said she might register even though the rule is temporarily on hold.

“A recent remain regarding FinCen’s Beneficial Ownership Information Reporting is just that – a remain. It is not a definitive determination on the merits of the requirement,” she said in an email. “Therefore, the prudent course of action is to file before the previously determined deadline on Jan. 1 as there is no guarantee of a deadline extension if the remain is overturned.”