Maloney, King, FACT Coalition, BPI Highlight Need to Crack Down on Anonymous Shell Companies

Representatives Carolyn B. Maloney and Peter King lead sponsors of the Corporate Transparency Act, today joined with the FACT Coalition and the Bank Policy Institute to highlight the need to crack down on anonymous shell companies.

Reps. Maloney has been introducing a form of the bill for the last 5 congresses. The bill will be considered by the House Financial Services Committee at the next full committee markup.

“The Corporate Transparency Act is one of the most important bills, if not the most important bill, that the Financial Services Committee will take up this Congress,”said Congresswoman Maloney.

 “It will help solve one of the most pressing national security problems we face in this country — the use of anonymous shell companies to hide dirty money, and finance terrorism and drug cartels. It is good for our financial institutions, good for law enforcement, and good for our national security.

“We’re the only advanced country in the world that doesn’t already require disclosure of this information — and frankly, it’s an embarrassment. This is an issue we must address, a problem we must fix, and a bill we need to pass.”

“Criminals are taking advantage of state laws by establishing firms – often without a physical presence or business activity – to access our banking system,” said Congressman King.

“The Corporate Transparency Act targets this problem by requiring a company that has the characteristics of a shell corporation to disclose who benefits from the company’s operations and makes that information available only to law enforcement.

“This simple requirement would enable law enforcement to stop money from flowing across our borders to terrorist organizations.

“A 2019 study found that every state requires more information to obtain a library card than to set up a company that can be used to facilitate tax evasion, money laundering, fraud and corruption,” said Gary Kalman, executive director of the FACT Coalition.

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“Anonymous companies open a gateway for dangerous crimes, and the US is particularly vulnerable. Ending the anonymity will have an enormous impact.

“Congress should move to adopt the Corporate Transparency Act swiftly. I thank Rep. Maloney and Rep. King for their leadership on this important issue and for their diligence in building true bipartisan support.”

“The Corporate Transparency Act will finally put an end to the anonymous shell companies exploited by terrorists, drug lords and human traffickers to fund their illicit activities,” said Greg Baer, President and CEO of the Bank Policy Institute.

“Representatives Maloney and King have worked tirelessly and have found bipartisan consensus to prohibit the use of these companies while also addressing essential privacy concerns and burdens on small businesses.

‘The time is right for Congress to come together in support of legislation that will have a profound impact on preventing human trafficking, drug smuggling, terrorism financing and other illicit activities.”

BACKGROUND

Anonymous incorporation isn’t difficult for criminals to do — no U.S. states currently require companies to provide the identities of the company’s true, beneficial owners. This makes it very easy for criminals and other bad actors to manipulate the system and launder or hide money via anonymous shell companies.

What This Bill Does:

  • Requires corporations and limited liability companies disclose their true, beneficial owners to FinCEN (Financial Crimes Enforcement Network) at the time the company is formed.
  • Establishes minimum beneficial ownership disclosure requirements: must provide beneficial owners’ name, date of birth, current address, and driver’s license or non-expired passport number.
  • Requires companies to file annually with FinCEN a list of its current beneficial owners, as well as a list of any changes in beneficial ownership that occurred during the previous year.
  • Provides civil and criminal penalties for persons who willfully submit false or fraudulent beneficial ownership information, or who knowingly fail to provide complete or updated beneficial ownership information.

Provides Much-Needed Transparency While Avoiding Excessive Burdens:

  • Beneficial ownership information collected by Treasury or the states will only be available to: (1) law enforcement; and (2) financial institutions, with customer consent, for purposes of complying with their “Know Your Customer” requirements under Anti-Money Laundering law.
  • It is narrowly tailored so as not to be overly burdensome to either businesses or the states themselves — the bill targets companies that are more likely to be shell companies.
  • Many companies are already required to disclose their beneficial owners, such as Federally regulated banks, credit unions, investment advisers, broker-dealers, state-regulated insurance companies, churches, and charitable organizations. As such, these companies are exempt from the bill’s requirements.
  • Companies with over 20 employees and over $5mm in gross receipts or sales, and which have a physical presence in the U.S., are also exempt from the bill’s requirements, because companies that employ this many people and that have legitimate, business-related income are very unlikely to be anonymous shell companies that were created to hide or launder illicit funds.

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