(PatriotWise)- People will no longer be able to hide behind shell companies in an effort to circumvent U.S. money laundering laws.
Last month, Congress passed sweeping banking reform laws that will curb the efforts of people trying to remain hidden from the federal government. The new money laundering laws in the U.S. will make it easier for federal authorities to discover the owners of shell companies that are set up for any number of bad reasons — from sending money to terrorists, to drug trafficking, to bribing foreign officials.
Daniel Alonso, a former prosecutor in New York, recalled the hoops he’d have to jump through to discover the true owners of corporate entities that were set up as anonymously owned. He described the situation to the Associated Press:
“It required all kinds of shoe-leather investigating to identify who was really behind these shell companies. You’d have to subpoena bank records and lawyers, as well as human sources, and even then you frequently hit a dead end.”
Under the new money laundering law, shell companies must provide the names of all their owners. If they don’t, they face possible jail sentences and heavy fines. The ownership information will be stored in a confidential database that federal law enforcement can access. That data will be shared with banks, who are sometimes “unwitting accomplices” to corruption occurring overseas.
Alonso, who advises clients on anti-money laundering and foreign corruption in his private practice, said the new law is “a game changer in some serious ways.”
The law, known as the Corporate Transparency Act, was passed as part of the defense spending bill. President Donald Trump vetoed the bill, but Congress overrode that veto with a vote.
The law was originally introduced by New York Democratic Representative Carolyn Maloney back in 2010. When it was first introduced, many business groups and banks opposed the law, as they were concerned about the red tape it created. States such as Wyoming and Delaware also opposed it, as they reap in revenues for the registration of U.S. businesses in their states. Each year, almost 2 million LLCs and corporations register their company in those two states.
In Delaware, for instance, all you have to do to set up a shell company is pay a fee of $90 and submit a one-page document that lists the company’s name, a P.O. Box for mailings and a registered agent. That agent is oftentimes a law firm that has is known for churning out bulk companies for clients. It allows the true owners of the companies to be hidden from record, and then funnel money in and out of the company.
Recent international financial scandals softened people’s stance toward the bill, though. That included 1MDB development bank in Malaysia, the leak of the Panama Papers, and the scandal involving FIFA, international soccer’s governing body.
Under the new law, the Treasury Department will manage the new registry. It will contain the full names of all true owners of the so-called shell companies that do business in America, whether those companies were created in the U.S. or in other countries.
This is an effort by the U.S. to take strong action against money laundering happening on our own soil. A former investigator for the Treasury Department, David Weber, told the AP:
“Congress was late to acknowledge that secrecy is alive and well in the United States. Kleptocrats and corrupt foreign officials did not need secret bank accounts in Switzerland. They were right here.”