A New Small Business Burden

The Wall Street Journal Editorial Board

Who could oppose cracking down on money laundering by terrorists, drug dealers and human traffickers? Especially if all it cost was more paperwork?

That’s the argument for the Corporate Transparency Act, which the House Financial Services Committee passed in June. Its boosters frame the law in national security terms to override pesky questions about efficacy and costs. The reality is that the law would hit small businesses with another compliance burden, their confidential information would become less secure, and real criminals are unlikely to be deterred.

The bill requires corporations or limited liability companies of fewer than 20 employees or $5 million or less in revenue to disclose details about their beneficial owners to the Treasury Department’s Financial Crimes Enforcement Network (FinCEN). A beneficial owner either exercises substantial control over a company or enjoys substantial economic benefits from it. The idea is to make it more difficult for money launderers to hide behind anonymous shell companies.

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