Insights

On December 3, 2024, the U.S. District Court for the Eastern District of Texas issued an opinion and order (the Order) enjoining the federal government, including the U.S. Department of the Treasury’s Financial Crimes Enforcement Network (FinCEN), from enforcing the Corporate Transparency Act (CTA) and a FinCEN rule implementing the CTA, codified at 31 C.F.R. § 1010.380) (i.e., the Reporting Rule).  The Reporting Rule requires certain entities formed or registered to do business in the U.S. (reporting companies) to report information about themselves, including personal identifiers for their natural-person “beneficial owners.”  For background on the CTA and the Reporting Rule, please see our previous client alert discussing a separate district court’s decision (National Small Business United v. Yellen, No. 5:22-cv-01448 (N.D. Ala. Mar. 1, 2024) (NSBU) ruling the CTA unconstitutional.) 

The U.S. Department of Commerce’s Bureau of Industry and Security (“BIS”) issued new guidance (“BIS Guidance”) for financial institutions (“FIs”) on October 9, 2024, recommending that FIs undertake specific compliance practices to minimize their risk of violating General Prohibition (“GP”) 10 of BIS’s Export Administration Regulations (“EAR”).  GP 10 prohibits any person (U.S. or otherwise) from selling, transferring, exporting, reexporting, financing, ordering, buying, removing, concealing, storing, using, loaning, disposing of, transporting, forwarding, or otherwise servicing an item “subject to the EAR” with knowledge that that item was, or will be, exported, reexported, or transferred in violation of the EAR.  Knowledge in this context goes beyond actual knowledge, and can be inferred from circumstances surrounding a transaction; in other words, a “known or should have known” standard.  Although BIS has published several joint alerts with FinCEN encouraging financial institutions to look for potential red flags of evasion of export controls, this guidance goes further in establishing specific export compliance best practices for financial institutions and suggests that financial institutions that finance or otherwise service prohibited exports risk liability under the EAR.

On June 12, 2024, the U.S. Department of the Treasury’s Office of Foreign Asset Control (OFAC) and the U.S. Department of Commerce’s Bureau of Industry and Security (BIS) announced additional sanctions and export restrictions in response to Russia’s continued aggression in Ukraine. The next day, the UK announced additional sanctions designations.