Just when you think that things might be about to turn around with regard to the explosion of unbelievably stupid laws and regulations to harass and annoy the people, along comes another one that’s stupid enough to top them all. This one has sprung up seemingly out of nowhere in the past few weeks, in notices that have gone out among the New York co-op and condo communities. But the law’s application is far broader than just these communities. I suspect that many readers have received such notices in many diverse contexts.

The law in question is a federal statute called the Corporate Transparency Act. Have you heard of it? The Act arises out of a brilliant idea coming from an arm of the federal Treasury Department called the Financial Crimes Enforcement Network, or FinCEN. FinCEN’s mission is to stamp out crimes involving money. Unfortunately for FinCEN, the bad guys keep figuring out ways to use and/or transfer money in ways that FinCEN can’t keep track of, something they refer to as “money laundering.” But FinCEN thinks they have the answer: just track everything that all of the people do all of the time. Surely, that will work!

Somewhere along the line, FinCEN noticed that the various state Secretaries of State, who create and register corporations and LLCs, often do not keep any record of who owns these entities at any moment in time. (Why should they? It’s a lot of work to no purpose.). Entities with undisclosed ownership are sometimes referred to as “shell companies.” Sometimes, bad guys will use such “shell companies” without disclosing their involvement to anybody. Shocking!

Well, FinCEN knows just how to put an end to such chicanery: simply require every corporate entity in the country to disclose its owners and directors to the Treasury Department, and continuously update same. That way, FinCEN can create a massive data base to surveil everybody. Problem solved.

FinCEN has been proposing legislation along these lines for a decade and more, through both Democratic and Republican administrations, but the legislation never had enough support to pass. Then, at the tail end of the first Trump administration, the bill that became the Corporate Transparency Act somehow got attached to the Defense Appropriations Act, a must-pass statute that cleared Congress in December 2020. And then Trump vetoed it! But the 116th Congress, in its last act before fading into the sunset, overrode Trump’s veto on January 1, 2021. The Act took effect on January 1, 2024, and the first filing deadline is December 31, 2024.

The Corporate Transparency Act has now been codified at 31 U.S.C. Section 5336. The idea is to require essentially every single corporation, LLC, or “similar entity” in the country to register with the federal FinCEN. Previously, almost all of these entities have had no federal regulatory oversight at all. Information to be provided includes all “beneficial owners,” and for each of them, name, date of birth, residential or street address, and a copy of passport or driver’s license with an “identifying number.”

Your first instinct might be, well there must be exemptions for entities below a certain size. Actually, it’s the opposite. Large entities are mostly exempt, because they are already subject to federal regulation of one sort or another. This thing is specifically intended for the small ones. After all, you never know where one of those nefarious bad guys may be hiding. How many such small entities are there? This piece at the website of the American Bar Association estimates that there will be 33.2 million existing businesses now required to register, plus about 5 million new ones each year.

This thing comes to my attention through involvement with New York condos and home owners’ associations. First question: Do these FinCEN geniuses really think that forcing every one of millions of condo and homeowners’ association in the country to register its directors and members is going to catch a single financial criminal? It’s completely absurd. You also might reasonably ask, what does the term “beneficial owner” even mean in the context of a condo or homeowners’ association. The association does not distribute dividends, and can’t be sold for the profit of the members.

And condos and homeowners’ associations are just a small piece of this mess. Millions upon millions of community, fraternal, and family entities are targeted to no meaningful purpose.

In the early days of this blog, I wrote a series of pieces about the totally futile efforts to stamp out crime through the regulation of “money laundering.” Here is a representative piece from June 2015 with the title “The Joke Of Criminalizing Money Laundering”; and another from April 2016 called “The Joke Of Criminalizing Money Laundering — Part II.” The second piece discusses the collection by bank regulators of approximately 2 million annual “Suspicious Activity Reports,” none of which collection ever makes any serious dent in financial crime. Excerpt from Part II:

Did you notice that along the way the law enforcement authorities have achieved victory in the drug war?  Yeah, neither did I.  And drug dealing at least involves substantial amounts of real money.  Nobody can even give a coherent explanation of how a money laundering regime that can't make a dent in the multi-billion dollar drug business is supposed to stamp out terrorism, which generally does not involve any substantial amounts of real money.

Of course the end result here is that millions upon millions of regular, honest people will get swept up into the surveillance system, and will endure a few hours of wasted time filling out yet more forms. Meanwhile the real crooks will figure out a way to avoid the Act, or will just fail to comply. When you are committing crimes that risk life in prison, why would you pay any attention to a filing penalty like they have here, capped at $10,000? This is no different from expecting criminals to register their guns.

Elon and Vivek, here is a good place to start.