In a blow to the Biden administration’s effort to increase corporate transparency, an Alabama federal district judge has ruled that the Treasury Department cannot require small business owners to report details on their owners and others who benefit from the business.

U.S. District Judge Liles C. Burke decided late Friday that the Corporate Transparency Act, a landmark U.S. anti-money laundering law enacted as part of the National Defense Authorization Act for fiscal year 2021, is unconstitutional on the grounds that Congress exceeded its powers in enacting the law — and so the rulemaking stemming from it is unlawful.

The National Small Business Association filed suit in November 2022 to block the requirement that tens of millions of small businesses register with the government as part of an effort to prevent the criminal abuse of anonymous shell companies.

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The small business lobbying group argued that the reporting rule violates the Constitution, saying it is unduly burdensome on small firms, violates privacy and free-speech protections and infringes on states’ powers to govern businesses.

The legal challenge points to the friction between maintaining privacy rights and the government’s effort to uncover sources of criminal activity, especially as the U.S. has attempted to sanction Russian oligarchs and wealthy friends of Russian President Vladimir Putin following the start of his invasion of Ukraine.

Burke, appointed to the federal court by former President Donald Trump, called the Corporate Transparency Act “congressional overreach” and wrote that “the Corporate Transparency Act is unconstitutional because it cannot be justified as an exercise of Congress’ enumerated powers.”

A Treasury spokesperson said, “Congress overwhelmingly voted to enact the bipartisan Corporate Transparency Act in 2021 to crack down on illicit shell companies and combat financial crime. We are complying with the Court’s injunction” and referred The Associated Press to the Justice Department for further inquiries.

Ian Gary, executive director of the FACT Coalition, a nonprofit that promotes corporate transparency, said in an email that “this is a pro-crime, pro-drug cartel, pro-fentanyl ruling which undermines the rule of law and allows criminals to use anonymous shell companies to hide their dirty money from law enforcement.”