The Independent View: The Corporate Transparency Act Bans Anonymous Shell Companies

A Groundbreaking Measure to End the Creation of Anonymous Shell Companies in the U.S. cleared Congress, on Friday, as the Senate joined the House, in Passing a Defense-Spending Bill with a Veto-Proof Margin.

The Corporate Transparency Act (H.R.2513), which was tacked onto the Defense Bill, would Require Corporations and Limited Liability Companies (LLC) established in the U.S. to Disclose their Real Owners to the Treasury Department, making it Harder for Criminals to Anonymously Launder Money or Evade Taxes.

The Measure Passed the Senate with an 84-13 Vote as part of the National Defense Authorization Act, which Cleared the House earlier this week. Trump Pledged to Veto the Defense Bill, one of few Laws that Passes every year, because it doesn’t include Trump's demand to Repeal Liability Protections for Social Media Companies. Trump also Opposes a Clause that Orders Military Bases named for Confederate Leaders to be Renamed.

The Anonymous-Shell-Company Ban was years in the making, as Supporters slowly built a Coalition of Democrats, Republicans, Law-Enforcement Officials and even Business Groups that originally Opposed the idea, such as the U.S. Chamber of Commerce.

“We are on the verge of celebrating the most significant anti-money-laundering victory in a generation due in large part to the widespread and growing support for reform,” said Clark Gascoigne, Senior Policy Adviser at the FACT Coalition, an Alliance of Anti-Corruption Groups that Helped push for the Legislation.

Nearly 2 Million Corporations and LLC's are Registered each year in the U.S., at the State level. Few States today Require Companies to Disclose their True Owners, with Delaware and a few others turning the Registration of Anonymous Companies into Big Business.

That’s One reason the U.K.-based Tax Justice Network has named the U.S. the Globe’s Second most Financially Secretive Jurisdiction, behind the Cayman Islands and ahead of Switzerland.

Delaware Secretary of State, Jeffrey Bullock, last year Endorsed the Corporate Transparency Act, calling it a “fair, bipartisan compromise” that would make it the Federal Government’s Responsibility to Collect the Ownership Data, which he said was better than a “piecemeal” State-by-State approach.

Tolerance of Anonymous Shell Companies has long helped Drug- and Human- Traffickers, Organized Crime Groups, and Foreign Kleptocrats Launder their Ill-gotten Gains through the U.S. Financial System, Supporters of the Legislation say. It took Michael Cohen, Trump’s Former Lawyer, only a few days to Set-Up and use an Anonymous Delaware LLC to Pay Hush Money to Stormy Daniels, in Violation of Campaign Finance Laws.

Rep. Carolyn B. Maloney (D-NY, 12th District), who introduced the Legislation to the House in 2009, and continued Resubmitting it each year, said U.S. Shell Companies have helped Corrupt Foreign Leaders and Criminals Anonymously buy Luxury Real Estate in her District, which includes Manhattan. “If you drive through my district at night you will find a lot of apartment buildings with absolutely no lights on,” Maloney said during a News Conference this week to mark the House Passage. “They were purchased purely to hide money and act as a bank account.”

The New Law requires anyone Registering a New Company to Disclose the Name, Address, and Date-of-Birth of the Real Owners, and an Identification Number for each Owner, such as a Driver’s License or Passport Number. Anyone Willfully providing False Information, including Lawyers helping with Corporate-Registration Paperwork, will be Liable for Fines of up to $10,000 and Prison Terms of up to Two years.

The Treasury Department’s Financial Crimes Enforcement Network will Collect the Data and provide Ownership Details to Law-Enforcement Agencies and Banks upon Request. The Legislation has Limitations. The General Public Won’t have Access to the Ownership Data, a Disappointment to Anti-Corruption Campaigners, who say Public Scrutiny would help Combat Criminal Activity.

In another Transparency Setback, the Law also Exempts some Entities from the Disclosure Requirements, including Domestic Investment Funds that are Advised and Operated by a Registered Investment Adviser.

Bullock said these Limits on Access to the Data were One Reason the State supported the Legislation.

In some Cases, Allied Nations will be able to Request Ownership Details to Aid their Own Investigations, said Gary Kalman, Director of the U.S. Office of Transparency International, a Big Backer of the Legislation.

The Database is likely to help Prosecutors Nationwide Build Cases against Criminal Groups, said Frank Russo, Director of Government and Legislative Affairs at the National District Attorneys Association. The Lack of such a Database today is Undermining Efforts in Florida to Combat Human-Trafficking Networks at Illicit Massage Parlors, Russo said. Investigators “can’t figure out who is financing and paying for these operations” because the Ringleaders hide behind Anonymous Shell Companies, he said.

Sen. Sherrod Brown (D-OH), a Ley Backer of the Senate Bill, along with Sen. Mike Crapo (R-ID) and Others, said Shell Companies have Enabled everything from Sex Trafficking to Fentanyl Pushers. “This is a really big deal to get this passed, and as you know it took a long time,” Brown said during the News Conference Thursday, adding that he hoped Republican Senators would “stand strong” and Vote to Override any Trump Veto, if necessary.

The Banking Industry became an Important Supporter of the Legislation in recent years, after realizing it would HelpBbanks identify the Real Owners of All Accounts, as Required under Obama-era Regulation. The Legislation will give Banks Access to the Treasury Ownership Database to Verify Information on New Customers requesting Accounts.

Other Developed Nations are also cracking down on Anonymous Shell Companies, responding to Fears about Terrorist Financing, and Public outrage about Corruption and Tax Evasion. The European Union instructed All Member Countries to Create Public Databases by 2020 that Disclose Companies’ True Owners. Britain Mandated in 2016.