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House Bill Introduced to Crack Down on Abusive American Shell Companies

November 15, 2011

Global Financial Integrity

Legislation Would Help Prevent Criminals and Tax Evaders from Laundering Their Ill-Gotten Gains, Provide Crucial Information Access for Law Enforcement

Global Financial Integrity

WASHINGTON, DC – Yesterday, Rep. Carolyn B. Maloney (D-NY), Rep. Barney Frank (D-MA) and Rep. Stephen F. Lynch (D-MA) introduced legislation, which would require that the beneficial owners of corporations and limited liability companies (LLCs) be disclosed at the time companies are formed.  Anti-corruption watchdogs, law enforcement groups, and human rights organizations consider the legislation, known as the Incorporation Transparency and Law Enforcement Assistance Act, a crucial tool in aiding law enforcement and keeping criminal and tax evading money out of the United States.

“Criminals, kleptocrats, and tax evaders from around the world are taking advantage of this loophole in U.S. law to hide and launder illicit money here,” said Global Financial Integrity’s Legal Counsel & Director of Government Affairs, Heather Lowe. “This financial opacity puts law enforcement at a major disadvantage. Too often cases are dropped, or investigations are closed, due to a lack of evidence connecting the illicit funds held in accounts owned by anonymous corporations to the criminal owners of those companies.”

The legislation, H.R. 3416, whose bipartisan Senate counterpart was introduced by Senators Carl Levin (D-MI) and Charles Grassley (R-IA) in August, follows a call from the G20 earlier this month to do more to prevent the misuse of corporate vehicles and comes in the wake of a recent World Bank/UNODC report, which documented how corporate vehicles—particularly those located in the United States—are currently being abused by kleptocrats.  The report also called on world leaders to require the disclosure of beneficial ownership information.

“This is a very welcome bill,” said Raymond Baker, director of Global Financial Integrity. “It’s time the United States send the message that it will no longer harbor the illicit assets of tax evaders, criminals and corrupt foreign officials.”

“The U.S. financial system can be a playground for corrupt, criminal, tax evading individuals from other countries,” said Ms. Lowe. “It is far too easy to gain access to financial services in the U.S. through anonymous U.S. corporations, while it is far too difficult for law enforcement groups to figure out who is really behind those corporations. Until this law is passed, foreign corrupt politicians, terrorists and drug traffickers can continue to easily hide their identities and their dubious assets behind the legal secrecy provided by American companies.”

The bill is supported by a variety of law enforcement groups, and both the U.S. Department of Justice and the U.S. Treasury Department have agreed to provide a total of $30 million from their forfeiture fund accounts to help offset any costs that may be incurred in implementing this legislation.

The full text of the legislation can be found here.

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Contact:

Clark Gascoigne
cgascoigne@gfintegrity.org
+1 202 293 0740 ext. 222

Notes:

  • Read the full text of the legislation here.
  • Track the status of the legislation here.
  • Read a summary of the complementary Senate legislation here.
  • Download the World Bank/UNODC report, The Puppet Masters: How the Corrupt Use Legal Structures to Hide Stolen Assets and What to Do About It, here.

__________________________

Global Financial Integrity (GFI) is a Washington, DC-based research and advocacy organization which promotes transparency in the international financial system.

For additional information please visit www.gfip.org.

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