Corporate Transparency Act

Dan Gavin 7, Sep, 2024

Blog

How the World Ends

In today’s vernacular you might say you’ve been “click-baited”. Or maybe not. I’ll let you be the judge. I guess it will all come down to how you interpreted “World” and “Ends”. If you immediately pictured the metaphorical “world” or the global context of “world” and if your definition of “ends” means “completion of current state and transformation to something better,” then this most likely will not be what you expected. My intent is to reveal something more sinister and far more depressing. But I beg you to hear me out. After all, it’s only about 5 minutes of your time.

In 1942 concentration camp victims created massive amounts of counterfeit British pounds in an effort to collapse the British economy. This wasn’t the first use of currency counterfeiting in war though. The technique has been around a long time. The British attempted it during the Revolutionary War; Napoleon used it against the Italians; even during the 15th century Italy employed it.

Why would one country counterfeit the currency of its enemy? Were they intending to go on a shopping spree after invading their foe? Oh no, that’s not it. it’s more nefarious than that.

See, here’s a dirty little secret. And it’s one that the Federal Reserve Bank and other central banks around the world would rather you not find out. Counterfeiting leads to hyperinflation. The effect isn’t immediate. It takes some time to get all the money out into circulation. But once it does, the effect can be horrific on the economy.

Hyperinflation manifests itself in rising prices. At the grocery store, at the gas pump, at the movie theater. Everywhere regular people do their daily transacting. When prices rise everywhere at about the same time, this is the effect of inflating the money supply. It’s not a collusion among all the grocers. It’s more a collusion among Central Bankers. It’s not rich farmers gouging you at the store. It’s the ultra-wealthy oligarchs who control everything.

By flooding your enemy’s economy with counterfeit bills, you dilute the value of the currency until it becomes worthless. It’s pretty easy as the British found out at the end of World War II. The counterfeited bills were so good, they couldn’t tell the fake from the real bills. The only thing they could do was to stop printing the legitimate pounds and wait for the money to dissipate naturally.

In the US we’ve been experiencing inflation for some time. Actually, the Fed has a target of 2% per year. It’s intentional. This time, it just got out of hand. Not from counterfeiting, but from legitimate money creation.

Take a look at the St. Louis Fed website. Just do an internet search for “M2 money supply”. In 2020 the money supply exploded. Not counterfeit. It was Legal Tender. Because of the lag time from currency flooding the economy and inflation we are now feeling the effects. Thank you, US Congress.

If you have been wondering maybe the US Congress doesn’t always have our best interest at heart, perhaps you are onto something. Think about this. Like you, I live in Sierra Vista. I also own a small business. It’s nothing of significance but I like to think I make a difference in the lives of the people I serve. It’s my small way of pursuing happiness in my life.

In 2021 Congress passed the Corporate Transparency Act (CTA). As a result, small businesses have to disclose all the details of their business ownership. We have to upload our business details into a government database. You know, the kind of database that is a major target of cyber criminals. The kind of database our government bureaucrats should protect but don’t. From a cybersecurity perspective, the data they require for compliance can easily be used in a social engineering attack to get YOUR information and to scam YOU. Even if you aren’t the small business owner.

The funny thing about the CTA is that it affects only small businesses that almost exclusively do business locally. Corporations with over $5 million in annual revenue are exempt. The reason Congress claims they passed this legislation is to eliminate elicit money laundering. It’s supposed to be a way to financially suffocate terrorist cells. Most money laundering happens in companies handling greater than $5 million. The exemption is in the wrong direction. It will achieve the stated intent. It’s a shell game.

Small businesses have little or no budget to hire cybersecurity professionals to protect their computers, networks and sensitive business data. They are the most vulnerable to cyber attacks like ransomware. so in reality what this Act will do is provide a convenient database containing millions of small businesses who characteristically have little or no cyber security controls protecting their data. All neatly packaged for any moderately skilled threat actor.

Maybe it’s not the end of the world. Or maybe it is the end of the world as we have become accustomed to it.

Dan Gavin 5, Aug, 2024

Blog

Congress Just Made It Easier for You to Get Scammed

I hope you like jail food. Because if you own a small business or you have your assets protected by a trust, you might be eating a lot of it next year. But I wouldn’t expect you to know this. Unless you have the habit of visiting US Government websites like congress.gov, or the press release site for the US Department of the Treasury.

OK. I’m abusing my hyperbole permissions … a little. Truth is that most people still haven’t heard of the “Beneficial Ownership Information Reporting Rule and Beneficial Ownership Information Access and Safeguards Rule” (BOI). These are new rules imposed by the Financial Crimes and Enforcement Network (FINCEN). You see, as it turns out, Congress “exceed[ed] the Constitution’s limits on [their] power” (AGAIN). Those aren’t my words by the way. That’s a direct quote from the FINCEN website.

The rule we are now required to comply with (or suffer the consequences) is in connection with the Corporate Transparency Act. According to the US Government, “Corrupt actors frequently use opaque legal structures—such as shell companies—to hide and launder the proceeds of their crimes. In the U.S. anti-money laundering (AML) regime, the lack of timely access to adequate, accurate, and current beneficial ownership information has been identified as a gap.” And as you may have now guessed, you and I get to bridge that gap. They even kindly helped us by making it a felony if you fail to do your part.

You might be thinking, there you go again Tom, making your baseless accusations. But I’m just the reporter here. On the fincen.gov site, they provided a synopsis of a recent court ruling in Alabama that the US Congress exceeded their constitutional limits with this one.

“On March 1, 2024, in the case of National Small Business United v. Yellen, No. 5:22-cv-01448 (N.D. Ala.), a federal district court in the Northern District of Alabama, Northeastern Division, entered a final declaratory judgment, concluding that the Corporate Transparency Act exceeds the Constitution’s limits on Congress’s power and enjoining the Department of the Treasury and FinCEN from enforcing the Corporate Transparency Act against the plaintiffs.”

The plaintiffs in this case are members of the National Small Business Association (NCBA). As a result of the court ruling, FINCEN will not require the members of the NCBA to file the BOI. The rest of us do. So, my question is, if it is unconstitutional for them, isn’t it also unconstitutional for the rest of us? In the suit, the plaintiffs allege that “the CTA’s disclosure requirements exceed Congress’s authority under Article I of the Constitution and violate the First, Fourth, Fifth, Ninth, and Tenth Amendments” (corpgov.law.harvard.edu).

Additionally, according to law.harvard.edu, “the court determined that the CTA is not authorized under Congress’s taxing powers because, although the collection of beneficial ownership information under the CTA can help the IRS with tax collection, simply being useful to tax collection is not sufficient to invoke tax powers.” There it is. This is really nothing more than an easier way for the IRS to decide who to audit. For auditing must be efficient. Oh, and by the way, banks are already required to provide your businesses information to FINCEN making this redundant.

There are many reasons a small business owner (including trustees of trusts) should be concerned. But from an information security perspective, this will be another federal government mismanaged database containing vital Personally Identifiable Information (PII) which when it is stolen (and it will be for sure), the threat actors will have you name, address, birthdate, driver’s license number, and the s-corp, LLC, or trust for which you are the owner. The consequences are dire enough that you need to have your attorney help you report. If you do it wrong, you will face fines of $500 per day and up to 2 years in jail. Congratulations. Another tax you never agreed to.

On the surface, having this information in the hands of a terrorist might not seem like a big deal to you. But think about it like this, if a threat can derive monetary value for your company, they use it to decide whether to target you for data theft. Then they use the information they steal from you to target you and your customers with scams. In the old days, the proportion of bad people who had physical access to you was incredibly small, so your world was pretty safe. The internet has created an artificially high concentration of the worst people on the planet with immediate access to you.

The United States is a representative Republic. We are the governing body. The three branches of government answer to us. But if we don’t push back, they don’t feel that.