Fraud, Deception and False Claims January 22, 2025

Second Circuit Joins Other Circuits with AKS One Purpose Test

By Michael J. Podberesky, Timothy Fry and Micaela Enger

Second Circuit Court of Appeals building

On December 27, 2024, the United States Court of Appeals for the Second Circuit decided United States ex rel. Camburn v. Novartis Pharmaceuticals Corporation and joined a growing list of federal circuit courts that have adopted what the Second Circuit called the “at least one purpose rule”. This rule provides that defendants have violated the Anti-Kickback Statute (“AKS”), 42 U.S.C. §1320a-7b so long as at least one purpose of the alleged remuneration at issue (as opposed to the sole or main purpose) was to induce patient referrals, even if there were other, legitimate reasons for the payment.

Anti-Bribery and Corruption January 17, 2025

DOJ Seeks Supreme Court Review of CTA Injunction

By Lauren Mann and Jeffrey M. Hanna

Another flurry of court activity has further muddied the Corporate Transparency Act (CTA) waters, leaving additional uncertainty about its enforceability.

You may recall that on December 26, 2024, the Fifth Circuit vacated its own order granting the Government’s motion to stay the district court’s preliminary injunction, leaving FinCEN unable to enforce the CTA and lifting any filing obligations. FinCEN has acknowledged the stay and is accepting voluntary beneficial ownership reports. Though the Fifth Circuit’s expedited briefing schedule provided Reporting Companies some sense of timing to analyze their reporting obligations (oral arguments are scheduled for late March), there is a possibility that Reporting Companies may have even less time than expected.

Anti-Bribery and Corruption January 9, 2025

Corporate Transparency Act Reporting Obligations: On Hold Until At Least Late March 2025

By Jeffrey M. Hanna and Lauren Mann

A flurry of activity in the Fifth Circuit this holiday season left clients asking the same questions about the Corporate Transparency Act (CTA): “Do we report Beneficial Ownership Information?” “If so, when is the deadline?” “Will this Act survive judicial review?”

You may recall that on December 26, 2024, the Fifth Circuit vacated the “part of the motions-panel order granting the Government’s motion to stay the district court’s preliminary injunction enjoining enforcement of the CTA,” as well as the Reporting Rule. In other words, FinCEN cannot enforce the CTA and there is no reporting obligation until this gets resolved.

The Fifth Circuit has issued an expedited briefing. Briefing will occur in February, and the court has scheduled oral argument on March 25, 2025, after which it will need time to issue an opinion. As with the temporary lifting of the injunction precluding enforcement, FinCEN would likely provide additional time to file should the law go back into effect. In light of this schedule, Reporting Companies now have some clarity on the time – likely Q2 2025 – they have to analyze their compliance obligations.

McGuireWoods will continue to monitor developments and publish updates as the case proceeds. Our team stands ready to assist. For questions about the CTA or anti-money laundering (AML) compliance generally, including customer due diligence and beneficial ownership rules, contact the authors of this article or another member of McGuireWoods’ Financial Services & Securities Enforcement, Government Investigations & White Collar Litigation, Healthcare, Tax & Employment Benefits, or Corporate & Private Equity teams.

Anti-Money Laundering December 27, 2024

Here We Go Again – Fifth Circuit Lifts the CTA Order Lifting the Injunction

By Jeffrey M. Hanna and Lauren Mann

Just what you wanted – another holiday edition of Subject to Inquiry tracking the legal wrangling around the Corporate Transparency Act (CTA). If you’ve just joined our program:

On December 3, the District Court in the Eastern District of Texas issued a preliminary injunction that enjoined the Financial Crimes Enforcement Network (FinCEN) from enforcing the Act or holding the statutory December 31 deadline to report for non-exempt companies. Emphasis on preliminary.

Then, on December 23, the United States Court of Appeals for the Fifth Circuit granted the government’s emergency motion for a stay, which lifted the injunction. Our alert on that news, which required companies who reasonably thought they had some breathing room, was an unwelcome stocking stuff.

And in another stunner, last night the same Fifth Circuit has pulled a Vice Versa. No, not a screening of the hit 1988 body swap film starring Judge Reinhold and Fred Savage. Instead, the court decided to “preserve the constitutional status quo while the merits panel considers the parties’ weighty substantive arguments.” The Fifth Circuit vacated the “part of the motions-panel order granting the Government’s motion to stay the district court’s preliminary injunction enjoining enforcement of the CTA,” as well as the Reporting Rule. The case is now with the merits panel on an expedited basis, and “a briefing schedule will issue forthwith.”

McGuireWoods will be closely monitoring developments and publishing alerts as the case proceeds. As with the message following the December 3 injunction, it is reasonable to slow down on the analysis and preparation. That holds more true here given that briefing will now occur. However, FinCEN granted only 13 extra days to file when the December 23 order was granted. Accordingly, clients – especially those who are unlikely to have an available exemption from reporting – should consider substantially completing the analysis so they are prepared when or if beneficial ownership reporting is required under the CTA.

Our team is ready to assist. For questions about the CTA or anti-money laundering (AML) compliance generally, including customer due diligence and beneficial ownership rules, contact the authors of this article or another member of McGuireWoods’ Financial Services & Securities Enforcement, Government Investigations & White Collar Litigation, Healthcare, Tax & Employment Benefits, or Corporate & Private Equity teams.

Anti-Money Laundering December 24, 2024

Reporting Companies Have Less Than Three Weeks to File Beneficial Ownership Info With FinCEN

By Jeffrey M. Hanna and Lauren Mann

On Dec. 23, 2024, the U.S. Court of Appeals for the Fifth Circuit granted the government’s emergency motion for a stay of a District Court’s nationwide preliminary injunction against enforcement of the Corporate Transparency Act (CTA). The appellate court’s unpublished order in Texas Top Cop Shop v. Garland reinstates the act, which has a year-end deadline for non-exempt companies to comply.

However, in an alert published on its beneficial ownership information (BOI) page, FinCEN extended the reporting deadline for companies formed before September 2024 to Jan. 13, 2025.

McGuireWoods will monitor developments closely. However, companies now have less than three weeks to conduct the analysis and, if non-exempt, gather the required information and file a BOI report. McGuireWoods has counseled dozens of clients on this analysis and stands ready to assist.

For questions about this decision, the CTA or anti-money laundering rules compliance, including customer due diligence and beneficial ownership rules, contact the authors of this article or another member of McGuireWoods’ Financial Services & Securities Enforcement, Government Investigations & White Collar Litigation, Healthcare, Tax & Employment Benefits, or Corporate & Private Equity teams.

Anti-Money Laundering December 4, 2024

Federal District Court Issues Nationwide Preliminary Injunction Against Enforcement of the Corporate Transparency Act

By Jeffrey M. Hanna and Lauren Mann

On December 3, 2024, the United States District Court for the Eastern District of Texas issued a nationwide preliminary injunction against enforcement of the Corporate Transparency Act (“CTA”). Enacted as part of the Anti-Money Laundering Act of 2020, the CTA requires certain legal entities to report beneficial ownership information (“BOI”) to the U.S. Department of Treasury’s Financial Crimes Enforcement Network (“FinCEN”). The reporting provisions took effect on January 1, 2024. In Texas Top Cop Shop v. Garland (4:24-cv-00478-ALM), the District Court, in a memorandum opinion, rejected the Government’s position when it held that “the CTA appears likely unconstitutional,” and accordingly, issued a nationwide preliminary injunction against enforcement of the CTA and its implementing regulations, including staying the January 1, 2025 compliance deadline. The memorandum opinion and order can be found here.

This decision comes just a few months after National Small Business United v. Yellen (5:22-cv-01448-LCB), in which the District Court for the Northern District of Alabama held that the CTA exceeded Congress’ power to regulate commerce and permanently enjoined its enforcement against plaintiffs in that case, and just a few weeks before the year-end BOI reporting deadline for entities created prior to January 1, 2024, which the Eastern District of Texas stayed.

At this time, entities will not be required to comply with the reporting deadline and there will be no penalty for non-compliance. However, this is preliminary, and McGuireWoods will be closely monitoring developments in each of these cases.

For questions about this decision, the CTA, or AML compliance generally, including customer due diligence and beneficial ownership rules, contact the authors of this article or another member of the McGuireWoods Financial Services & Securities Enforcement team, Government Investigations & White Collar Litigation team, Healthcare team, Tax & Employment Benefits team, or Corporate & Private Equity team.

Anti-Money Laundering December 2, 2024

Deadline to Determine Corporate Transparency Act Reporting Obligations Fast Approaching

By Jeffrey M. Hanna and Lauren Mann

As 2024 comes to a close, companies created prior to January 1, 2024 should be mindful of the year-end deadline to analyze whether they must report Beneficial Ownership Information (“BOI”) to the U.S. Department of Treasury’s Financial Crimes Enforcement Network (“FinCEN”) pursuant to the reporting provisions of the Corporate Transparency Act (“CTA”). Companies should take immediate action to determine whether filing is necessary to avoid potential civil and/or criminal penalties. McGuireWoods described the CTA’s requirements in a previous post and the requirements are also summarized below.

Government Contracts October 24, 2024

DoD Issues Final CMMC Framework for Defense Contractors

By Edwin O. Childs, Abram J. Pafford, Andrew Konia, Jack White, Jason M. Vespoli, Maura Naehr and John Sullivan

After a nearly five-year rulemaking process, the U.S. Department of Defense (DoD) published the Final Cybersecurity Maturity Model Certification 2.0 (CMMC) program rule in the Federal Register on Oct. 15, 2024, codified at 32 CFR Part 170. Contract clauses implementing the CMMC program rule will be issued as part of the Defense Federal Acquisition Supplement, and DoD expects to require CMMC certifications as a condition of award beginning in 2025 as part of a phased-in approach.

The final CMMC program rule is the culmination of a lengthy rulemaking process to implement third-party certified cybersecurity program standards for the Defense Industrial Base. The DoD significantly revised CMMC program requirements since the inception of CMMC 1.0 in 2020. At its most basic level, the CMMC program is a transition from a self-certification model for cybersecurity compliance, to a third-party verification process contemplated by the CMMC program rule.

Read on to learn more about the final rule and its implications for contractors and subcontractors.

Financial Institution Regulation, Securities and Commodities October 14, 2024

Crypto.com Sues the SEC in Texas – Arguments and Implications for the Cryptocurrency Industry

By David Hirsch, Garen S. Marshall and Rhea Shahane

On October 8, 2024, Crypto.com filed a civil complaint against the Securities and Exchange Commission (“SEC”) and each of its Commissioners in the Eastern District of Texas seeking declaratory and injunctive relief. Crypto.com sued the SEC after the regulator sent it a Wells notice, indicating the Division of Enforcement intended to recommend an enforcement action against the Company for operating as an unregistered securities broker-dealer and an unregistered clearing agency in connection with secondary-market sales of certain Targeted Network Tokens.[1]

Compliance October 3, 2024

AI Risk and Whistleblower Protection Spotlighted in DOJ’s Revised Corporate Compliance Guidance

By V. Kathleen Dougherty, Brandon M. Santos, Garen S. Marshall, Elizabeth F. Tyler and Brenna M. Molinare

On September 23, 2024, the U.S. Department of Justice (DOJ) updated its Evaluation of Corporate Compliance Programs (ECCP) guidance.

The ECCP provides prosecutors with questions and factors to consider when assessing a company’s compliance program. Prosecutors use the guidance to assist in making decisions about whether to charge a company and how to resolve cases. The guidance is equally instrumental for companies as they build, strengthen, and internally assess their compliance structure and controls.