House and Senate introduce legislation promoting transparency in beneficial ownership of companies
TI-USA welcomes the introduction of bills by Representative Carolyn Maloney (D-NY) and Senator Sheldon Whitehouse (D-RI) –both titled the Incorporation Transparency and Law Enforcement Assistance Act – that require Treasury/states to collect, maintain and update beneficial ownership information on legal entities for law enforcement purposes.
At present, the legal framework in the United States is flawed and vulnerable to exploitation by corrupt public officials by allowing U.S. companies to be created without requiring the disclosure of meaningful information about the individuals who own or control them. This anonymity facilitates domestic and foreign corruption and other criminal activity by allowing individuals to hide their identities and their illicit assets behind the façade of a U.S. corporation.
The bills, if enacted, would help prevent individuals from hiding and laundering illicit money in the U.S. through anonymous companies.
Bipartisan legislation requiring the disclosure of beneficial owners at the time of incorporation has been introduced in every Congressional session since 2008. Most recently, in the 2013-2014 congressional session, Rep. Maloney reintroduced the House version of beneficial transparency legislation, H.R. 3331.
A similar bill (S. 1465) applicable to states receiving federal funding was introduced at that time in the Senate by Senator Carl Levin (D-MI). Unfortunately, no significant action was taken to further either of the proposed bills. TI-USA applauds the reintroduction of legislation that addresses the abuse of anonymous corporate entities for illicit purposes in this 2015-2016 session.
“Transparency International-USA urges members of both houses of Congress to promptly support and vote in favor of this crucial legislation, which would finally shed light on the true owners and beneficiaries of vehicles used to enable corrupt transactions,” said Claudia J. Dumas, President and CEO, TI-USA.
In addition to calling for support of legislation in Congress, TI-USA is advocating the closing of other U.S. legal loopholes with respect to beneficial ownership transparency.
In 2015, for example, TI-USA called on the Financial Crimes Enforcement Network (FinCEN) of the U.S. Department of Treasury to (1) strengthen and adopt a proposed rule to require financial institutions to identify and verify the beneficial owners of legal entity customers; and (2) repeal the temporary exemption for real estate industry from the Patriot Act requirement of implementing anti-money laundering programs.
Such requirements, as well as beneficial ownership transparency legislation such as the bills introduced today would help the United States prevent illicit funds from entering the U.S. and fulfill its international commitments:
“Over the years, the United States has committed to implementing beneficial ownership transparency in a number of different fora, including the G8, G20 and the Open Government Partnership. Enactment of this type of legislation would be a strong signal to the rest of world that the U.S. is taking the necessary steps to uphold its commitments to beneficial ownership transparency,” said Shruti Shah, Vice President of Programs and Operations, TI-USA.
Notes to Editors:
TI-USA’s 2015 letter to FinCEN urging the repeal of the temporary exemption granted to the real estate industry from the requirement of implementing anti-money laundering programs can be found here.
TI-USA’s 2014 letter to FinCEN on enhanced customer due diligence requirements for financial institutions can be found here
A 2011 study by the Stolen Asset Recovery Initiative of the World Bank – “The Puppet Masters” – found that in nearly all of the 150 cases of grand corruption analyzed, corporate vehicles were misused to conceal the identities of corrupt public officials.