A surprising thing is happening this week in Washington DC: Congress is on the verge of passing meaningful progressive legislation.
Attached to the National Defense Authorization Act, and passed by veto-proof majorities in both chambers of Congress, the Corporate Transparency Act will take a meaningful step toward eliminating anonymous shell corporations.
Republican and Democratic members of Congress came together around concerns about terrorist funding networks, financial corruption, trafficking, and tax dodging. Transparency activists have spent years documenting the ways that rogue nations, terrorists, dictators, and kleptocrats have deployed anonymous companies to launder illicit funds, dodge taxes, avoid sanctions, and game the U.S. financial system.
Anonymous shell companies – that mask the true owners and beneficiaries – have enabled criminal activity and made the United States an attractive destination for kleptocratic capital from around the world. IPS has documented in several reports how luxury real estate in Boston and Seattle purchased by anonymous shell companies allows for wealth storage and disrupts local housing markets.
One component of the legislation will require companies to report the name of their true beneficial owner to a private directory housed at the Financial Crimes Enforcement Network (FinCEN) arm of the U.S. Treasury Department.
Over the years, someone attempting to get a library card or a fishing license was required to provide more information than someone setting up a corporation. They went to states like Delaware with their minimal requirements for incorporation. Now when owners first register a corporation they will be required to provide their name, address, birthday, and provide a government ID number –and notify FinCEN upon any changes.
IPS Inequality program was a founding member of the Financial Accountability and Corporate Transparency (FACT) Coalition in 2011. FACT has worked diligently over the last decade to pass this legislation, forming important alliances with law-enforcement groups, small business groups, bankers, anti-trafficking networks, and the U.S. Chamber of Commerce.
“It has been decades since our nation’s anti-money laundering laws were updated,” said Ian Gary, executive director of FACT. “Over time, rogue nations, criminals, and kleptocrats have developed ever more sophisticated strategies, but national security and law enforcement officials are currently working with outdated and insufficient tools to counter these emerging threats. As financial crimes accelerate due to the COVID-19 pandemic, it is more important than ever that we address the critical vulnerability to our financial system that anonymous companies represent.”
See these resources created by the FACT Coalition:
FACT Sheet: Brief Summary of the Corporate Transparency Act (H.R. 6395)
FACT Sheet: Use of Anonymous Companies Cause Widespread Harm
Sign-On letter of support from more than 125 NGOs
FACT Sheet: Anonymous Companies and National Security
FACT Sheet: How Rogue Nations & Sanctioned Groups Use Shell Companies
100+ National Security and Foreign Policy Experts Back Action on Anonymous Shell Companies