Incorporation Transparency and Law Enforcement Act

Congresswoman Maloney has introduced the Incorporation Transparency and Law Enforcement Assistance Act, H.R. 6098. The bill would require the states to obtain information about the true ownership of a corporation when they allow its creation. As some have put it, this bill is a “no-brainer”, and it is fairly straightforward. It would require that the person creating the corporation to state the “beneficial owner” of the corporation and provide some form of identification.

Although this is as straightforward as it sounds, the implications for law enforcement are broad reaching. Criminal organizations are infamous for using shell corporations, both foreign and domestic, to open bank accounts, launder money, perpetrate fraud, and finance terrorism. It isn’t difficult for them to do so. Virtually no states require people applying to create corporations to provide the identity of the corporate owner. In fact, 48 of 50 states, except for Alabama and Alaska, allow for the unfettered creation of an anonymous corporate entity. As a result, just about anyone can easily manipulate the system to fund criminal activity.

Here is an example from a recent investigation in NY by the Manhattan District Attorney. The office announced investigations involving the movement of funds through banks in NY by entities controlled by the Iranian Military. In at least two cases, domestic shell companies were opened in two different states to further secret Iranian interests. Through a NY shell company, individuals working on behalf of the government of Iran were able to move funds to secret accounts held in offshore jurisdictions. Shockingly, the offshore government was able to give the Manhattan DA more information about the ownership of the NY entity than the state of NY could.

Although the DA does not contend that requiring a declaration of beneficial ownership would have stopped this activity, it would have been a start. If the declaration of beneficial ownership had been required, any falsification would at least have served as an extra tool for law enforcement to shut down the entity and prosecute the perpetrators.    

The bill introduced will provide the kind of transparency that law enforcement needs to investigate financial crimes. However, it is narrowly drafted so that it is not overly burdensome on either states or incorporating entities. In fact, most corporations, including companies that are already regulated by federal banking regulators and companies that are over 20 employees, would be exempt from the bill’s requirements. This bill is meant to capture beneficial ownership information from companies that are able to escape regulation and oversight through other federal entities.  

Senator Levin has introduced a similar bill in the Senate, and President Obama was the lead sponsor when he was a U.S. Senator. It is supported by numerous law enforcement associations, including the Federal Law Enforcement Officers Association, the Fraternal Order of Police, the National Association of Assistant United States Attorneys, the National Narcotic Officers’ Associations Coalition, the United States Marshals Service Association, and the Association of Former ATF Agents.

More on Incorporation Transparency and Law Enforcement Act

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Oct 22, 2019 Press Release
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Jun 12, 2019 Press Release
WASHINGTON, DC – Today, the House Committee on Financial Services voted to pass Congresswoman Carolyn B. Maloney’s (D-NY) Corporate Transparency Act out of committee. Rep. Maloney has been working for over a decade to pass legislation to crack down on anonymous shell companies and the use of NYC properties as bank accounts instead of homes, which drive up home prices for all New Yorkers.
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May 14, 2019 In The News

WASHINGTON — After a vote on a House bill aimed at restricting anonymous shell companies was postponed at a markup last week, the legislation’s lead Democratic co-sponsor said the House Financial Services Committee will not delay the bill beyond the next markup.

Rep. Carolyn Maloney, D-N.Y., told reporters Tuesday that her bill to require companies to disclose their beneficial owners at the time of incorporation could be considered by the committee as early as the end of June, though the committee’s next markup has not yet been scheduled.