House Passes Bill to Expose Owners of Shell Companies
24 Oct 2019

The U.S. House of Representatives passed a bill on Tuesday requiring shell companies to disclose their true owners, an effort to crack down on money-laundering and other crimes.

Some limited liability companies, sometimes referred to as shell companies, are registered in the U.S. under the names of representatives who neither own nor operate those companies. The House legislation requires that most limited-liability companies and corporations report to the U.S. government the names of anyone with a significant financial stake or control over operations.

Proponents of the bill, known as the Corporate Transparency Act of 2019, said it would unmask people who use shell companies to engage in human trafficking, bribing government officials and other illegal activity.

The White House released a statement commending the bill before Tuesday’s floor vote, but urged the House and Senate to continue working on some of the specifics.

While the bipartisan measure passed comfortably by a 249-173 vote, it is unclear that the bill will pass the Senate, where a similar bill is being discussed. Republican Mike Crapo of Idaho, the chair of Banking committee, has indicated he generally supports more shell-company disclosure.

“This bill says something very simple: No one should be able to establish in the United States a shell company with secret ownership, even secret from law enforcement,” said Rep. Tom Malinowski (D., N.J.). “We are not Panama, we are not the Cayman Islands.”

In 2016, the U.K. created a database to record beneficial ownership of shell companies. European Union states have agreed to put similar registries in place by 2020.

Some House Republicans and other opponents have said the legislation would expose small-business owners’ personal information to law enforcement and create excessive paperwork for these businesses. The House legislation would require most types of companies to report to the U.S. Treasury Department information on individuals with a 25% or higher ownership in that company. Any other individual who would substantially profit from the company or is primarily responsible for its operations would also have to be disclosed.

“In every state, it requires more information to get a library card than it does to register a company,” said Clark Gascoigne, deputy director of the FACT Coalition, a financial transparency group.

The Treasury Department’s financial crimes division, FinCEN, would use the information to create a database accessible to law enforcement and to financial institutions doing due diligence on customers.

Lawmakers have proposed for years updating the Bank Secrecy Act to require LLCs to disclose the real people who benefit from them.

By Will Parker, The Wall Street Journal, 22 October 2019

Read more at The Wall Street Journal

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