Long Sought US Anti-Money Laundering Bill to Ban Anonymous Companies

After more than a decade-long push by trans­paren­cy and anti-cor­rup­tion advo­cates to ban the incor­po­ra­tion of anony­mous com­pa­nies, U.S. Congress on Friday passed the mea­sure into law. The move is expect­ed to make it more dif­fi­cult for crim­i­nals and klep­to­crats to con­ceal the ori­gin of their ill-got­ten gains.

Eli Moskowitz, OCCRP, 05 January 2021,

The new pro­vi­sions serve as the most sig­nif­i­cant update to U.S. anti-mon­ey laun­der­ing laws in a gen­er­a­tion,” read a state­ment by Transparency International’s U.S. Office, which helped leg­is­la­tors draft the law.

As part of a larg­er defense bill, which Congress passed by over­rid­ing a veto by President Donald Trump, the Corporate Transparency Act will force secre­tive shell com­pa­nies to reveal the iden­ti­ties of their ben­e­fi­cial own­ers to the Treasury’s Financial Crimes Enforcement Network (FinCEN).

Gary Kalman, who serves as the TI Office’s direc­tor, described the bill as “one of the most impor­tant anti-cor­rup­tion mea­sures ever passed by the U.S. Congress,” and added that it will help the U.S. catch up with trans­paren­cy stan­dards that have already been estab­lished by numer­ous coun­tries, includ­ing the European Union.

Over the last sev­er­al decades, the U.S. has reck­oned with noto­ri­ous­ly lax reg­u­la­tions that has made it one of the most finan­cial­ly secre­tive hotbeds in the world.

One study by the think tank Global Financial Integrity found that on a state by state lev­el, indi­vid­u­als had to pro­vide far more infor­ma­tion to obtain a library card than to cre­ate a company.

Rick McDonnell, the for­mer Executive Secretary of the Financial Action Task Force (FATF) and cur­rent Executive Director at ACAMS, a finan­cial crime detec­tion and pre­ven­tion orga­ni­za­tion, told OCCRP in a video call that opaque com­pa­ny own­er­ship was the main vul­ner­a­bil­i­ty in its oth­er­wise strong rep­u­ta­tion for crack­ing down on illic­it finan­cial flows.

The US has always been one of the lead­ers, if not the main leader, in rela­tion to anti-mon­ey laun­der­ing and ter­ror­ist financ­ing,” he said, explain­ing that the FATF – tasked with assess­ing vul­ner­a­bil­i­ties in coun­tries’ finan­cial law enforce­ment – found its fail­ure to iden­ti­fy ben­e­fi­cial own­ers to be one of its few sig­nif­i­cant flaws.

Once this mea­sure is in effect, “it will vast­ly increase the like­li­hood of law enforce­ment and super­vi­sors being able to deter­mine whether bad actors are using shell cor­po­ra­tions or not,” he said, adding that it will then be far eas­i­er to uncov­er finan­cial crimes.

Given the size of the U.S. econ­o­my, this deci­sion will also force oth­er coun­tries to do the same if they wish to con­duct busi­ness with­in the U.S. finan­cial sys­tem, McDonnell explained.

While some ben­e­fi­cial own­er­ship reg­istries are acces­si­ble to the pub­lic, such as the U.K.’s Companies House, the U.S. bill only allows com­pa­ny own­er­ship to be accessed by law enforce­ment, and will not be made avail­able to cit­i­zens or jour­nal­ists, even if request­ed through the Freedom of Information Act – which gen­er­al­ly pro­vides full or par­tial dis­clo­sure of gov­ern­ment infor­ma­tion and doc­u­ments upon request.

Several civ­il soci­ety orga­ni­za­tions, such as Transparency International, have pushed finan­cial author­i­ties such as the FATF to man­date glob­al pub­lic reg­is­ters so that inves­tiga­tive jour­nal­ists do not have to wait for leaks – such as the Panama Papers – to fol­low illic­it mon­ey trails.

We think that the data­base should be pub­lic,” Kalman, of Transparency International, said.

There might be, from their per­spec­tive, good argu­ments for that,” McDonnell said, argu­ing that it would not, how­ev­er, be nec­es­sary from a law enforce­ment or anti-mon­ey laun­der­ing perspective.

Despite being pub­licly avail­able, coun­tries such as the U.K. have strug­gled with mak­ing sure their ben­e­fi­cial own­er­ship reg­is­ter is up to date and accu­rate. A recent study shows that rough­ly 400,000 U.K. com­pa­nies did not dis­close this infor­ma­tion, and anoth­er analy­sis by Global Witness found that 4,000 list­ed own­ers were under the age of two.

The U.S. bill dic­tates that any­one mak­ing any delib­er­ate­ly mis­lead­ing com­pa­ny own­er­ship dis­clo­sure would face a prison sen­tence of three years and/or a fine.

That is the big prac­ti­cal issue: if the infor­ma­tion is going to be accu­rate, and even if it might be accu­rate at the time of for­ma­tion of the cor­po­ra­tion, that infor­ma­tion can change rapid­ly, which makes the main­te­nance of the accu­ra­cy essen­tial,” McDonnell said.

A not­ed short­com­ing of the bill is that it does not apply to trusts or pooled invest­ment vehi­cles – such as hedge funds and pri­vate equi­ty funds, which has also – accord­ing to FBI leaks – been relied on for large-scale cas­es of mon­ey laundering.

If I could have waved a mag­ic wand, this is not the bill I would have writ­ten,” said Clark Gascoigne, Senior Policy Advisor at the FACT Coalition – an orga­ni­za­tion that has been push­ing the move­ment in the U.S. for ben­e­fi­cial own­er­ship disclosure.

He described the bill as a “com­pro­mise with integri­ty,” and despite the fact that it will not solve all of the country’s mon­ey laun­der­ing prob­lems, it “remains a big deal.”

McDonnell, who pre­vi­ous­ly served as a pros­e­cu­tor inves­ti­gat­ing cross-bor­der white col­lar crime, said that any request for infor­ma­tion on cor­po­ra­tions was “time after time, met with a blank wall,” which he described as “extreme­ly frustrating.”

If for noth­ing else, and there is more than noth­ing else, this piece of leg­is­la­tion lifts that veil,” he said.


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