House Passes Maloney Bill to Crack Down on Anonymous Shell Companies

Oct 22, 2019
Press Release
Bipartisan Corporate Transparency Act Passes 249-173

WASHINGTON, DC – Today, the House of Representatives passed Congresswoman Carolyn B. Maloney’s (D-NY) bipartisan HR 2513 - Corporate Transparency Act. The Congresswoman introduced the bill in May with Congressmen Peter King (R-NY) and Tom Malinowski (D-NJ). Congressman Emanuel Cleaver’s COUNTER Act was added to HR 2513 via a manager’s amendment.

The Corporate Transparency Act to require companies to disclose their true, beneficial owners at the time the company is formed to prevent bad actors from using anonymous shell companies to thwart law enforcement and hide their illicit activities.

“The illicit use of anonymous shell companies is one of the most pressing national security problems we currently face,” said Congresswoman Maloney. “They are being used by money launderers, criminals, and terrorists – but we can stop that. We’re the only advanced country in the world that doesn’t already require disclosure of this information — and frankly, it’s an embarrassment. We owe this to law enforcement. Beyond the impacts for law enforcement, this bill will also help to crack down on New York’s real estate being used to park illicit money, driving up housing costs and limiting availability. It seems that more than ever before, there are too many dark windows in apartments in NYC at night – but with this bill, it is my hope that this practice will be put to an end. Too many anonymous LLCs instead of families own NYC apartments. The Senate needs to act to pass this bill without delay.”

“The House passage of the Corporate Transparency Act is another important step which will ultimately enable law enforcement to stop money from flowing across our borders to terrorist organizations and prevent criminals from taking advantage of state laws,” said Congressman King.

“There is no better way for America to stand up for people suffering under repressive regimes around the world than by cutting off their corrupt leaders’ ability to launder money through shell companies and real estate on American soil,” said Congressman Malinowski. “I am proud the House passed the Corporate Transparency Act today, and I urge the Senate to take up this vital bipartisan legislation immediately.”

“After a lot of hard work to come to a bipartisan consensus, I’m extremely proud that we were able to pass the most significant anti-money laundering reform since 2001,” said Congressman Cleaver. “So much has changed in the past two decades, and the national security challenges we face today are profoundly different from those we faced at the turn of the century. It’s critical that we bring our banking regulations into the 21st century and give financial institutions the tools necessary to protect American consumers and companies from modern threats. I believe this bill is a big step forward in that regard.”

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 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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