Supreme Court reinstates federal anti-money laundering law

The Supreme Court on Thursday agreed to reinstate a federal anti-money laundering law at the federal government’s request as a legal challenge proceeds in a lower court.

The court’s emergency stay halts, for now, a federal judge’s injunction that blocked the Corporate Transparency Act (CTA), which would require millions of business entities to disclose personal information about their owners.

Justice Ketanji Brown Jackson dissented.

The Biden-era Justice Department asked the high court late last month to intervene, and the court issued its ruling just three days after President Trump’s inauguration. Trump’s Justice Department did not withdraw the application, but during his first White House term, Trump had opposed the new law.

Passed as part of the annual defense bill in early 2021, the CTA would require millions of small business owners to turn over personal information, like dates of birth and addresses, to the Financial Crimes Enforcement Network, which seeks to combat money laundering and other crimes.

The dispute has attracted significant attention from business and anti-regulatory interests, which have looked to stave off the impending deadline.

The case will now return to the 5th U.S. Circuit Court of Appeals, which will weigh the Justice Department’s defense of the law as a valid exercise of Congress’s constitutional authority over interstate commerce. In the meantime, the justices’ order paves the way for officials to implement the disclosure requirement, which had been set to go into effect this month.

Jackson, former President Biden’s sole appointee to the court, was the only justice to publicly dissent, saying the government hadn’t shown “sufficient exigency” and noting the 5th Circuit was hearing the government’s appeal on an expedited schedule.

“The Government deferred implementation on its own accord—setting an enforcement date of nearly four years after Congress enacted the law—despite the fact that the harms it now says warrant our involvement were likely to occur during that period,” Jackson wrote.

“The Government has provided no indication that injury of a more serious or significant nature would result if the Act’s implementation is further delayed while the litigation proceeds in the lower courts. I would therefore deny the application and permit the appellate process to run its course,” she continued.

The Justice Department insisted that putting the deadline on ice would cause irreparable harm.

“It prevents the government from executing a duly enacted Act of Congress, impedes efforts to prevent financial crime and protect national security, undermines the United States’ ability to press other countries to improve their own anti-money laundering regimes, and severely disrupts the ongoing implementation of the Act,” former Solicitor General Elizabeth Prelogar wrote in the government’s Supreme Court application.

The Supreme Court declined an alternative suggestion from Prelogar to convert the case to the justices’ normal docket to weigh in more broadly on federal district judges’ authority to block laws nationwide.

“Universal injunctions” have emerged as an increasingly common trend to erode laws and regulations implemented by both Democratic and Republican presidents, and taking up the issue would’ve posed major implications for legal challenges to future administrations.

Justice Neil Gorsuch, Trump’s first appointee who has previously cast concern about such injunctions, said he would’ve entertained the issue.

“I agree with the Court that the government is entitled to a stay of the district court’s universal injunction. I would, however, go a step further and, as the government suggests, take this case now to resolve definitively the question whether a district court may issue universal injunctive relief,” Gorsuch wrote in a brief, written concurrence.

The case at hand arose when a firearms dealer, a dairy farm, an information technology company, one of its owners, the National Federation of Independent Business (NFIB) and the Libertarian Party of Mississippi, challenged the Corporate Transparency Act as exceeding Congress’s authority.

The government’s emergency request came after a series of whiplash rulings at the conservative-leaning 5th Circuit, which eventually kept in place a federal district judge’s ruling blocking the new law until the government’s full appeal is resolved.

In their filings with the Supreme Court, the plaintiffs emphasized the political backdrop of Trump taking office. During his final days in the White House, Trump vetoed the defense bill containing the new corporate disclosure requirement, spurring the only time Congress overrode one of his vetoes.

“A more likely explanation for its newfound urgency is that the incoming administration might delay the deadline, which would be feasible only if it hasn’t yet passed. Thus, the charge to bring the mandate into force,” the plaintiffs’ attorneys wrote.

“Once existing companies have been forced to disclose their beneficial owners, the bell cannot be unrung.”

The Biden administration’s emergency application also received significant outside opposition from business groups like the National Small Business Association, the National Association of Wholesaler-Distributors and the National Retail Federation.

More than a dozen Republican members of Congress similarly mounted opposition, as did Advancing American Freedom, a conservative political advocacy group founded by former Vice President Mike Pence.

“Make no mistake: this stay application constitutes an aggressive play for vast power over American small businesses (and others),” 25 Republican state attorneys general wrote in a friend-of-the-court brief.

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