“Today, with the introduction of the Corporate Transparency Act, the US Senate reaffirmed their commitment to putting an end to anonymous shell companies, often used by organized crime networks, rogue regimes and the corrupt to finance illicit activities ranging from arms and drug trafficking to terrorist financing, money laundering and healthcare fraud. The push for transparency can no longer be ignored.
Though many people still think of white-sand beaches and sun-drenched islands when they think of shell companies, the US is actually one of the easiest and most popular places to form a shell company without disclosing its ownership. And, as the UK, the EU and other major hubs for financial activity begin to require people to disclose their company ownership, the US risks becoming an even more attractive haven for suspect funds.
The new bill, the Corporate Transparency Act (S.1717), is a companion bill to H.R. 3089 in the House of Representatives, which was introduced earlier this year by Reps. Carolyn Maloney (D-New York) and Peter King (R-New York) S.1717 also joins the True Incorporation Transparency for Law Enforcement (TITLE) Act (S. 1454), which was introduced earlier this year by Senators Sheldon Whitehouse (D-Rhode Island), Chuck Grassley (R-Iowa), and Dianne Feinstein (D-California).
The two Senate bills are similar in many respects – both require companies to disclose their real owners – the so-called “beneficial owners” – when they are first formed, and to keep that information up to date in a timely fashion. They key difference between the bills is who collects that information. The TITLE Act requires the States to collect ownership information, while the Corporate Transparency Act authorizes the Financial Crimes Enforcement Network (FinCEN) – a branch of the Treasury Department – to collect this information directly from companies as they are formed. Both approaches offer effective paths to make company ownership transparency a new standard for doing business in the US.
More information on recent bills and proposals introduced by Congress to tackle the problems posed by anonymous companies can be found here.