Small business owners are good citizens who are eager to do their part to help expose terrorists and fraudsters. The problem with Washington’s latest attempt to enlist entrepreneurs is that mandating paperwork on law-abiding small business owners isn’t an effective way to fight crime. The so-called Corporate Transparency Act, H.R. 2513, depends entirely on the honesty of criminals to work.
The bill, which likely is ready for a vote in the U.S. House of Representatives during the week of Oct. 21, would force small business owners to file company ownership papers with the Treasury Department’s Financial Crimes Enforcement Network (FinCEN) on an annual, and potentially more frequent, basis. The agency will use the information to create a database containing the full legal names, dates of birth, addresses, and driver’s license numbers of anyone with an ownership stake in businesses with 20 or fewer employees.
Government agents will be able to look through this database without a warrant, even though current law requires at least a subpoena to obtain similar data about businesses from a bank. For the scheme to work as intended, criminals would have to supply true and accurate information, which is not the sort of thing they do. As one Senator put it, El Chapo isn’t going to list himself on his corporate papers.
But small business owners who fail to fill out complete and updated forms could find themselves becoming cellmates with the likes of El Chapo. Penalties for failure to comply include up to 3 years in prison, a $10,000 fine, or both.
FinCEN would have to spend $132 million over five years policing small businesses and processing up to 30 million new documents annually, according to the Congressional Budget Office analysis of the bill. NFIB estimated small business owners would pay a staggering $5.7 billion over 10 years in compliance costs. That 10-year figure includes the value of 131.7 million hours spent dealing with the new paperwork hassle.
Banks already have this information for business clients, and it is only accessible through warrant or subpoena. Rather that sticking with that system, big banks would rather have small business owners turn over their info to FinCEN without the privacy protection of warrants or subpoenas.
NFIB members have told us loud and clear that this is a terrible idea, which is why we’re fighting the legislation on Capitol Hill. We need your help, as small business owners have a standing in their community and representatives will listen. Contact your member of Congress to tell them you oppose H.R. 2513, the Corporate Transparency Act.
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