Advocates celebrate major US anti-money laundering victory

The long-sought reforms, effec­tive­ly end­ing anony­mous shell com­pa­nies, were includ­ed in an annu­al defense spend­ing bill approved by both hous­es of Congress with veto-proof margins.

Asraa Mustufa, Law and Crime, Dec 11, 2020,

Landmark laws to thwart the use of U.S. shell com­pa­nies by ter­ror­ists, human traf­fick­ers, arms deal­ers and klep­to­crats are set to be enact­ed after more than a decade of lob­by­ing and pol­i­tick­ing with rare bipar­ti­san support.

The sweep­ing anti-mon­ey laun­der­ing reforms hitched a lift in the annu­al defense spend­ing bill that passed the Senate 84–13 today, and was approved by the House 355–78 ear­li­er this week.

The Corporate Transparency Act requires U.S. com­pa­nies to report their true own­ers to the Treasury Department’s Financial Crimes Enforcement Network, known as FinCEN — large­ly end­ing anony­mous shell com­pa­nies in the country.

The International Consortium of Investigative Journalists has repeat­ed­ly doc­u­ment­ed how the rich, the pow­er­ful and the crim­i­nal have used anony­mous enti­ties to hide their wealth, includ­ing in the 2016 Panama Papers and the 2020 FinCEN Files investigations.

Welcoming the clam­p­down, Transparency International’s U.S. direc­tor Gary Kalman said, “It is rare for such a sim­ple mea­sure to promise such an enor­mous impact.” Kalman added that the long sought anti-cor­rup­tion reforms would “move us into a new era of enforcement.”

The new leg­is­la­tion will allow law enforce­ment agen­cies and finan­cial insti­tu­tions to request com­pa­ny own­er­ship infor­ma­tion from FinCEN. The data will not be pub­licly available.

FinCEN Files was based on a trove of sus­pi­cious activ­i­ty reports filed by banks and oth­er finan­cial insti­tu­tions to FinCEN. BuzzFeed News obtained the secret doc­u­ments and shared them with ICIJ and more than 100 oth­er media organizations.

The glob­al inves­ti­ga­tion exposed how a bro­ken U.S.-led enforce­ment sys­tem allows banks to con­tin­ue to prof­it from mov­ing dirty mon­ey tied to drug car­telstraf­fick­ing rings fuel­ing the opi­oid cri­sisfraud, orga­nized crime, sanc­tions eva­sionruinous real estate schemes, and terrorism.

Too many times, peo­ple … think mon­ey laun­der­ing is a fed­er­al, vic­tim­less crime. It is cer­tain­ly not that,” Sen. Sherrod Brown of Ohio, the top Democrat on the Senate bank­ing com­mit­tee, told reporters on a call orga­nized by the advo­ca­cy group the FACT Coalition. “Sinaloa car­tel actors, fen­tanyl traf­fick­ers have been destroy­ing thou­sands of fam­i­lies in my state and across the country.”

Earlier this year, Brown cred­it­ed FinCEN Files for reveal­ing the lack of force­ful enforce­ment against banks that repeat­ed­ly vio­late the law. Advocates said a num­ber of pro­posed bipar­ti­san bills, includ­ing one co-spon­sored by Brown, were instru­men­tal in gen­er­at­ing the sup­port need­ed to attach the reforms to the spend­ing bill.

This is a real­ly big deal to get this passed,” Brown said Thursday. “No more hid­ing these abus­es in anony­mous shell com­pa­nies. It also cracks down on bank offi­cials who look the oth­er way or active­ly aid mon­ey laundering.”

A long time coming

ICIJ has shown how off­shore shell com­pa­nies have been used for dubi­ous finan­cial deal­ings and tax avoid­ance through a series of glob­al exposés, includ­ing the Secrecy for Sale inves­ti­ga­tion, Panama Papers and Paradise Papers. U.S. law­mak­ers have repeat­ed­ly cit­ed the inves­ti­ga­tions in propos­ing reforms over the years.

Countries like the United KingdomIndonesia and mem­bers of the European Unionalso took steps toward end­ing anony­mous shell com­pa­nies in response to ICIJ reporting.

When the Panama Papers leaked, there was a huge flur­ry of inter­est because there’s all of a sud­den this recog­ni­tion that it was klep­to­crats, mon­ey laun­der­ers, cor­rupt offi­cials the world over, as well as crim­i­nals, were all using a very com­mon struc­ture to help evade law enforce­ment, which was set­ting up an anony­mous com­pa­ny,” Lakshmi Kumar, pol­i­cy direc­tor of Global Financial Integrity, said.

The phe­nom­e­non is not lim­it­ed to the exot­ic off­shore tax havens of pop­u­lar imag­i­na­tion. U.S. juris­dic­tions like Delaware, Wyoming and Nevada are among the world’s top loca­tions to set up anony­mous com­pa­nies. Legislation to require cor­po­ra­tions to dis­close their true own­ers was first pro­posed in the U.S. over a decade ago, co-spon­sored by then-sen­a­tor Barack Obama, and sim­i­lar bills have been intro­duced over the years.

Advocates cred­it years of lob­by­ing a broad coali­tion of stake­hold­ers, includ­ing the U.S. Chamber of Commerce which had pre­vi­ous­ly been a lead­ing oppo­nent, in get­ting the reforms across the fin­ish line this year.

What’s changed now is a grow­ing under­stand­ing among var­i­ous con­stituen­cies about the harms that anony­mous com­pa­nies pose, and the threats that they pose for our finan­cial sys­tem, to our busi­ness­es,” Clark Gascoigne, senior pol­i­cy advi­sor at FACT Coalition, said.

But it’s not a done deal quite yet.

Although the anti-mon­ey laun­der­ing pro­pos­als have had the sup­port of the admin­is­tra­tion, President Donald Trump has repeat­ed­ly threat­ened to veto the National Defense Authorization Act over pro­vi­sions unre­lat­ed to finan­cial secrecy.

Both the House and the Senate votes sur­passed the two-thirds mar­gin that would be need­ed to over­ride a veto, although some Republicans have indi­cat­ed that they would not sup­port what would be the first veto over­ride of the Trump presidency.

But the NDAA has been reli­ably passed by Congress every year for six decades and advo­cates are con­fi­dent that the time has come for the land­mark finan­cial trans­paren­cy mea­sure that’s includ­ed in the omnibus bill.

It’s one of the few areas where the out­go­ing Trump admin­is­tra­tion agrees with the incom­ing Biden admin­is­tra­tion,” Gascoigne said. “It may be the first bill in the his­to­ry of Congress that has the sup­port of both Dow Chemical and Friends of the Earth. Heck, the state of Delaware even sup­ports reform.”


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