Last week, I wrote about Judge Amos L. Mazzant's decision to preliminarily enjoin the Corporate Transparency Act and its implementing regulations. Texas Top Cop Shop, Inc. v. Garland, 2024 WL 4953814 (Dec. 03, 2024). I chose to focus on whether Judge Mazzant's reasoning had any implications for the possible federalization of corporate law. Today's post is an imagined dialogue about the CTA itself.

Lucian: The U.S. Government's inability to mandate the collection of beneficial ownership information of corporate entities formed in the United States has been a vulnerability in the U.S. anti-money laundering/countering the financing of terrorism. Therefore, Congress should require corporations, limited liability companies and other business entities to identify their beneficial owners.

Desiderius: That's a good idea. Won't that be quite a few companies?

Lucian: Big companies will be exempted so that only about 32.6 million existing companies will have to file reports.

Desiderius: I see. It is better that millions of innocents suffer than one money launderer escape. However, this will probably be very expensive.

Lucian: We estimate that if all 32.6 million existing reporting companies have to incur it in the same single year, the aggregate cost to all existing reporting companies will only be $21.7 billion for the first year. This burden, of course, will fall primarily on middle and small businesses. 

Desiderius: Aren't you worried about non-compliance?

Lucian: Yes, individuals who willfully violate the reporting requirements will be subject to civil penalties and criminal penalties.

Desiderius: That will surely frighten criminals and terrorists into filing.

Lucian: It will be very convenient to have names, addresses and other personal information about business owners in one place.

Desiderius: I think foreign state and criminal hackers will very much appreciate the convenience of having so much useful information in one place. Is it really possible for Congress to enact such a law?

Lucian: Congress has the power to regulate activity under the Commerce Clause of the U.S. Constitution.

Desiderius: What activity exactly will be regulated?

Lucian: The "anonymous existence and operation of corporations".

Desiderius: You don't say. Mere anonymous existence is an activity? Wouldn't such a law simply be an exercise of police power, rather than a regulation of an activity which might impair commerce among the several states?

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Note to readers: Lucian of Samosata was a renowned Second Century C.E. satirist. Desiderius Erasmus was a famous 16th Century scholar who greatly admired Lucian's writings. Erasmus wrote Moriae Encomium, which is a Latinization of the Greek, μωρία ἐγκώμιος, meaning in praise of folly. In Latin, this would be stultitiae laus. Presumably, Erasmus chose the title Moriae Encomium as a pun since he wrote his book while staying at Sir Thomas More's house in London. Erasmus' book was an extremely popular satire about human life.