A FORK IN THE ROAD: Martin Sheil's Guest Op-Ed on the Corporate Transparency Act
Crossposting retired IRS criminal investigator Martin Sheil's latest Substack post on whether or not the CTA will be implemented to force the beneficial owners of shell companies to be exposed.
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Author’s note: Bette’s regular contributor Martin Sheil just launched his own Substack. You can support Marty’s work here:
Due to his fanbase at Bette, I am crossposting his latest report here.-hsc
GUEST OP-ED by Martin Sheil
A Fork In the Road
“Will the wealthy holding influence and access to the President lean on the Secretary of Treasury to delay implementation of the CTA and further feed the spirit of Biden's farewell address which focused on the growing wealth and power of the few?”—Martin Sheil
Now that Scott Bessent has passed muster to become the new Secretary of Treasury, he faces multiple tests for sure since he is the President's point man with regard to sanctions, tariffs and taxes to name a few.
But I want to focus on a difficult issue that Bessent will have to deal with that is flying a little under the radar and that is the status of the Congressionally bipartisan approved legislation known as the Corporate Transparency Act (CTA).
Congress actually had a lucid moment when they legislated the CTA and as amazing as that development was - actually getting it implemented is a big challenge.
I touch on this below. Please read and let me know if you find it worthy.
Treasury Secretary Bessent and A Fork in the Road
SCOTUS recently ruled that the Corporate Transparency Act (CTA) can be implemented this week in a ruling that lifted a stay that a Federal District Court in East Texas had placed on implementation.
The Supreme Court on Thursday afternoon granted the federal government’s request to be allowed to enforce a federal anti-money-laundering law while the government’s appeal moves forward in the conservative U.S. Court of Appeals for the 5th Circuit. In a brief unsigned order, the justices put on hold.
Given the sensitivity of CTA implementation to folks who have money laundering or tax evasion on their mind - steadfast implementation of the CTA is a critically important improvement and tool for law enforcement. It starts with FinCEN - the federal enforcement section of the U.S. Treasury Department.
Why so sensitive?
The CTA requires all Beneficial Owners of shell companies to register their identities with FinCEN in order to facilitate enforcement of the Bank Secrecy Act and Money Laundering laws that criminals circumvent when they use anonymous shell companies to move their proceeds from specified unlawful activities (SUA) through accounts maintained by the shell companies to conceal and shield the real owners of the companies and their connection to such nefarious border related SUA's as Narcotics, Human Trafficking, Terrorist activities, gun running etc.
It is believed that effective implementation of the CTA would go a long way to curbing the movement of the proceeds of such unscrupulous activities by shining a light on the beneficial owners of the shell companies that facilitate the activities.
Requiring registration of the identities of the beneficial owners of shell companies with FinCEN would provide a deterrence effect to those inclined to move criminal proceeds through the bank accounts of anonymous owned shell companies because - well - the beneficial owners would not be anonymous anymore and their financial activities could be effectively tracked.
Sounds like a real win for law enforcement doesn't it. Who could possibly be opposed to providing law enforcement with such a powerful anti-money laundering tool?
Fly in the ointment - Well it seems that besides impeding criminal money launderers the implementation of CTA might also cut into Tax Evasion activities of those that used anonymously owned shell companies to hide their unreported earnings from Uncle Sam. No one knows exactly how much unreported income goes untaxed due to the use of shell companies but estimates are in the billions.
By compelling beneficial owners of shell companies to dispense with their anonymity, facilitators of tax evading beneficial owners such as law firms, accounting firms, and the many financial consulting firms that assist beneficial owners set up their shrouded shell companies could lose business while Uncle Sam would likely boost its revenue from the increase in tax compliance from the upper strata.
Again, no one really knows just how many white-collar professional people in the financial industry make their living by gaming the Internal Revenue Code, but it is certainly enough for folks to file law suits to challenge the legality of the implementation of the CTA and one or more of these suits will eventually work their way up to SCOTUS for a final ruling which given the predilection of SCOTUS as presently comprised, anything is possible.
It will take some time for a final decision on the constitutionality of the CTA so the real question now is whether the CTA will be effectively implemented in the duration the way it was originally envisioned.
Will the new Secretary of Treasury Scott Bessent aggressively move forward to compel beneficial owners of shell companies nationwide to register their identities with FinCEN and thereby the U.S. Treasury ?
Mr. Bessent is a Wall St. guy, comfortable hobnobbing with corporate chieftains and looking to support Main Street and small business owners who are central to the Republican party. Bessent is a guy who has publicly stated his opposition to increasing the minimum wage thereby providing a boost to those on the lower end of the economic scale while vocally supporting income tax cuts for corporations and wealthy individuals on the upper end of the income scale in lock step with the guy who nominated him.
What will Mr. Bessent's directions be to the head of FinCEN when it comes to implementing the CTA?
A better question might be - what might be the directions to Mr. Bessent from his boss given that "the Boss" owns a holding company that according to Wikipedia, is the umbrella for at least 250 related companies and partnerships most of which are unlikely to register with FinCEN given the anti-regulation stance of "the Boss" who was convicted of 34 counts of fraud in connection with running his business in a fraudulent manner in the not so distant past?
Will the CTA be where the rubber meets the road when it comes to where the President's plutocrat contributor/supporters run into both the President's deficit hawks and law enforcement agency director's righteous goals?
Good question.
Congress failed to illuminate this issue while engaged in their official advise and consent role when scrutinizing the Bessent Treasury nomination.
Given the importance of the CTA to both law enforcement and tax enforcement just how aggressive will Secretary of Treasury Scott Bessent be in implementing the CTA now that SCOTUS has provided a green light regarding implementation of legislation important to Congress?
It should be noted that there are many wealthy political contributors to President Trump who are associated with multiple shell companies including those held offshore.
Will the wealthy holding influence and access to the President lean on the Secretary of Treasury to delay implementation of the CTA and further feed the spirit of Biden's farewell address which focused on the growing wealth and power of the few?
How does Treasury Secretary Bessent handle this seeming fork in the road?
To be continued.
Martin Sheil
Retired Supervisory Special Agent IRS Criminal Investigation
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Fascinating!! While we wait, I highly recommend reading Brooke Harrington’s brilliant and witty ‘Offshore: Stealth Wealth and the New Colonialism.’ In 120 pages, she gently schooled me so well I understand how revealing this ‘fork’ will be. Before reading it, I would have had no real idea…Thank you!