Reps. Maloney and King Join with Law Enforcement and Advocates to Call for End to Shell Company Secrecy

Jun 28, 2017
Press Release
Representatives introduce bipartisan legislation to combat anonymous shell companies used to finance criminal activity

WASHINGTON, DC – Congresswoman Carolyn B. Maloney (D-NY) gathered today with anti-corruption advocacy groups, law enforcement, and financial institutions to discuss the need for transparency in company ownership and announced the introduction of her bipartisan Corporate Transparency Act. Congressman Peter King (R-NY) is lead Republican cosponsor of the bill.

Congresswoman Maloney was joined today by Stefanie Ostfeld, Deputy Head of Global Witness’ US office; Greg Baer, President of The Clearing House Association; and Rick Fulginiti, retired Prince George’s County detective and Chairman of the Fraternal Order of Police’s National Legislative Committee, among others. Global Witness released an undercover report in January 2016 highlighting the use of U.S. shell companies for illicit activity.

Criminal organizations are infamous for using anonymous shell companies, both foreign and domestic, to open bank accounts, launder money, perpetrate fraud, and finance terrorism. The Corporate Transparency Act will require companies to disclose their true, beneficial owners, so that they can no longer escape oversight and thwart law enforcement.

“There’s a reason you didn’t see many Americans involved in the Panama Papers – criminals in America can hide their money right here! We’re the only advanced country in the world that doesn’t already require disclosure of beneficial ownership information and my Corporate Transparency Act will change that,” said Congresswoman Maloney. “Anonymous shell companies have become the preferred vehicle for money launderers, criminal organizations, and terrorist groups because they can’t be traced back to their true owners and the U.S. is one of the easiest places in the world to set up an anonymous shell companies. We are allowing criminals and terrorists to move money around in the U.S. financial system, and finance their operations, freely. Frankly, it’s an embarrassment. We need to fix this gaping hole in our national security and listen to law enforcement who is requesting these changes. This bill would also shore up the safety of our financial system, and would streamline the compliance costs for financial institutions that are trying to make sure that terrorists and criminals aren’t secretly using U.S. banks to move money around. I’m proud to introduce this bill with my friend Rep. King and hopeful we can pass it.”

“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.”

“From multi-million dollar healthcare fraud to terrorist financing, anonymously-owned companies act as getaway cars for all sorts of criminals,” said Stefanie Ostfeld, Deputy Head of Global Witness’ US Office. “Swift passage of this legislation will make it harder to move, enjoy and hide dirty money and demonstrate that Congress is serious about making sure the US is not exploited by criminals and the corrupt who are a risk to national security.”

“It is time for the U.S. to catch up to the rest of the world and end the use of shell companies with anonymous ownership,” said Greg Baer, President of The Clearing House Association. “The Clearing House commends Representatives Maloney and King for introducing this legislation, which will help prevent criminals from laundering money by adopting the corporate form and cloaking their ownership. The Clearing House strongly urges Congress to adopt this legislation promptly, and is pleased to see bicameral, bipartisan support for it.”

“Corporations can used as front organizations by criminals conducting illegal activity like money laundering, fraud, and tax evasion,” said Chuck Canterbury, National President of the Fraternal Order of Police representing more than 330,000 members in every region of the country. “This legislation would act as a critical information gathering tool for law enforcement in combating these crimes by giving law enforcement access to the true identity of the owners using a business to conceal their illicit activity.”

Additional original cosponsors of the bill are: Rep. Maxine Waters, Ranking Member of the Financial Services Committee; Rep. Ed Royce (R-CA); and Rep. Gwen Moore (D-WI).

The bill is supported by 27 investors managing assets worth more than $855 billion, listed below. You can see their letter of endorsement here

  1. Avaron Asset Management
  2. Bâtirente
  3. Boston Common Asset Management
  4. Candriam Investors Group
  5. Capricorn Investment Group
  6. Clean Yield Asset Management
  7. CtW Investment Group
  8. Domini Social Investment LLC
  9. Dominican Sisters of Hope
  10. Hermes Equity Ownership Services
  11. Hexavest
  12. Inflection Point Capital Management
  13. Local Authority Pension Fund Forum
  14. Magni Global Asset Management LLC
  15. Maryknoll Sisters
  16. Mercy Investment Services, Inc.
  17. NorthStar Asset Management, Inc.
  18. Oblate International Pastoral Investment Trust
  19. Sisters of Charity, BVM
  20. Sisters of Saint Joseph of Chestnut Hill, Philadelphia, PA
  21. Sisters of St. Dominic of Blauvelt, New York
  22. Sisters of St. Francis of Philadelphia
  23. Trillium Asset Management
  24. Triodos Investment Advisory & Services BV
  25. Ursuline Sisters of Tildonk, U.S. Province
  26. Verka VK Kirchliche Vorsorge VVaG
  27. Zevin Asset Management

Forty-four anti-corruption advocacy groups have also endorsed the bill. You can see their coalition letter here.

  1. AFCSME
  2. AFL-CIO
  3. ActionAid USA
  4. Americans for Tax Fairness
  5. Business & Human Rights Resource Centre
  6. Citizens for Responsibility and Ethics in Washington (CREW)
  7. Coalition for Integrity
  8. Consumer Action
  9. Demand Progress
  10. EarthRights International
  11. Economic Policy Institute
  12. Enough Project
  13. Fair Share
  14. Financial Accountability and Corporate Transparency (FACT) Coalition
  15. Financial Transparency Coalition
  16. Friends of the Earth
  17. Global Financial Integrity
  18. Global Integrity
  19. Global Witness
  20. Government Accountability Project (GAP)
  21. Institute on Taxation and Economic Policy
  22. International Corporate Accountability Roundtable (ICAR)
  23. iSolon.org
  24. Jubilee USA
  25. Main Street Alliance
  26. National Latino Famers & Ranchers Trade Association
  27. Natural Resource Governance Institute
  28. New Rules for Global Finance
  29. Norm Eisen
  30. Open Contracting Partnership
  31. Open Ownership
  32. Open the Government
  33. Oxfam America
  34. Pax Advisory
  35. Public Citizen
  36. Publish What You Pay – U.S.
  37. Responsible Sourcing Network
  38. Rights and Accountability in Development (RAID)
  39. RootsAction.org
  40. Sunlight Foundation
  41. Tax Justice Network USA
  42. The Center for Constitutional Rights
  43. Transparency International
  44. U.S. Public Interest Research Group (U.S. PIRG)

The FACT Coalition also sent a letter of support to Reps. Maloney and King, which you can see here.

BACKGROUND:

Congresswoman Maloney has introduced a version of this bill in the last four congresses after meeting the law enforcement officials who expressed the need for such legislation. Criminal organizations are infamous for using anonymous shell corporations, both foreign and domestic, to open bank accounts, launder money, perpetrate fraud, and finance terrorism. The Corporate Transparency Act will gather beneficial ownership information from companies that thus far have been able to escape oversight and thwart law enforcement.

Corporate Transparency Act

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 owners.
  • If a state chooses not to collect beneficial ownership information, then Treasury will collect beneficial ownership information as a backup.
  • Establishes minimum beneficial ownership disclosure requirements: must provide beneficial owners’ name, current address, and non-expired passport or state-issued driver’s license.
  • Provides civil penalties for persons who submit false or fraudulent beneficial ownership information, or who 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, and broker-dealers, state-regulated insurance companies, 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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