Reps. Maloney, King and Senator Whitehouse introduce bills to stop anonymous money laundering operations by requiring disclosure of shell corporation beneficial owners

Feb 3, 2016
Press Release
Groundbreaking investigation by Global Witness aired on 60 Minutes this week exposed breathtaking corruption enabled by lax disclosure rules

NEW YORK – Representatives Carolyn B. Maloney (D-NY-12) and Peter King (R-NY-2) today re-introduced their legislation in the House of Representatives to require the disclosure of a corporation’s beneficial owner. Senator Sheldon Whitehouse (D-RI) introduced companion legislation in the Senate. The introduction of the Incorporation Transparency and Law Enforcement Assistance Act follows a groundbreaking investigation by Global Witness, which exposed the common practice of using U.S.-based shell corporations to launder money linked to criminal enterprises.

The investigation, which aired this week on 60 Minutes, showed that lax disclosure laws in the United States are easily manipulated and exploited. An investigation last year by The New York Times documented how streams of foreign wealth shielded by shell corporations are used to purchase more than half of all properties in New York City that cost more than $5 million.

“This is unacceptable, and it has to stop,” Maloney said. “Our national security and our law enforcement priorities depend on it. And it is the right thing to do: our legal system should not protect the rights of bad people to do bad things in secret. The bill I am introducing this week would require the states to obtain information about the true ownership of the corporation when incorporation papers are filed with the state. And if the states don’t collect this information, then the Treasury Department would. Our message is simple: tell us who the real owner is, or take your business elsewhere.” 

“Criminals are taking advantage of state laws by establishing firms – often without a physical presence or business activity – to access our banking system,” King said The Incorporation Transparency and Law Enforcement Assistance 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.”

“Right now, the United States is a preferred destination for terrorists, drug traffickers, tax cheats, and other criminals who want to hide the gains from their illegal activity in anonymous business entities,” said Whitehouse, the Ranking Member of the Senate Judiciary Subcommittee on Crime & Terrorism.  “This simple change will help law enforcement have the tools to root out this dirty money.”

The top Democrat assigned to the House Financial Services Committee Task Force to Investigate Terrorism Financing backed the legislation:

 “Shell companies are particularly susceptible to exploitation by terrorists, as they are often used to mask the identities of their beneficial owners. It is critical that the United States collect information on beneficial ownership in order to prevent criminals and terrorists from exploiting anonymity to conceal their illicit activity,” said Congressman Stephen F. Lynch (D-Boston). “Congresswoman Maloney's bill will do that. The Incorporation Transparency and Law Enforcement Assistance Act of 2016 will assist law enforcement with transparent disclosure information, which can be used to follow the money to the people who actually control or profit from these companies.” 

“Anonymously-owned companies are used in almost all crimes that generate big money, and America is at the heart of this problem,” said Stefanie Ostfeld, Acting Head of Global Witness’ U.S. office.  “By collecting information about the real owners of companies we can stop criminals from using companies to cover their tracks and usher in a new era of transparency. Congresswoman Maloney’s bill is a big step forward.”

Background:

Incorporation Transparency and Law Enforcement Assistance Act of 2016

Criminal organizations are infamous for using shell corporations, both foreign and domestic, to open bank accounts, launder money, perpetrate fraud, and finance terrorism. The Incorporation Transparency and Law Enforcement Assistance Act will gather beneficial ownership information from companies that thus far have been able to escape oversight and thwart law enforcement.

  • Anonymous incorporation isn’t difficult for criminals to do — virtually no states require corporate applications to provide the identity of the corporation’s ultimate owner.
  • As it stands, anyone can easily manipulate the system and fund criminal activity.

What this bill does:

  • Directs the Treasury Department to issue regulations requiring corporations and limited liability companies formed in a state that does not already require basic disclosure, to file information about their beneficial ownership with Treasury as a backup.

Provides minimum disclosure requirements for states:

  • Identification of beneficial owners by name, current address, and non-expired passport or state-issued driver’s license;
  • Identification of any affiliated legal entity that will exercise control over the incorporated entity; and
  • Consistent updating of lists of beneficial owners no later than 60 days after any change in ownership.

Provides civil penalties for those who:

  • Submit false or fraudulent beneficial ownership information;
  • Do not provide complete or updated information; or
  • Knowingly disclose subpoena, summons, or other requests for beneficial ownership information without authorization.

This bill will offer the transparency law enforcement needs to investigate these kinds of financial crimes.

  • It is narrowly tailored so as not to be overly burdensome on either incorporating entities or the states themselves.
  • The bill’s language is so narrow that most corporations are already exempt from the bill’s requirements, including companies that are already regulated by federal banking regulators and companies with over 20 employees, because these types of companies are very unlikely to open bank accounts to hide or move criminal funds or to hold illegal assets.