WASHINGTON DC - At a time of international financial crisis, where good news is hard to come by, lawmakers in the U.S. House of Representatives have introduced legislation that could go a long way in stopping money laundering in the world’s largest economy. This comes as the European Union begins to prepare its fourth anti-money laundering directive and the Financial Action Task Force (FATF) gets ready to issue a revised set of recommendations early next year.
By requiring corporations and Limited Liability Companies (LLCs) to disclose their beneficial owners (the real people that ultimately control a corporation) at the time that companies are formed, the proposed U.S. legislation, known as the Incorporation Transparency and Law Enforcement Assistance Act , would make it significantly more difficult for criminals, terrorists and tax evaders to disguise their true identities and sources of income behind shell companies.
“Criminal activity on a major scale is only possible when there is a way to hide the transfer of ill-gotten funds. The case of arms trader Victor Bout, who was recently convicted of conspiracy to kill U.S. citizens and provide aid to a terrorist organisastion, is a good example of this” said Raymond Baker, director of the Task Force on Financial Security and Economic Development. “Tax dodgers also benefit from the same money laundering mechanisms used by drug cartels and even terrorists. Implementing beneficial ownership is a relatively simple measure that could have enormous impact both on fighting organised crime and stopping tax evasion”.
The proposed legislation follows a bipartisan proposal put forward in the Senate in August and comes in the wake of a recent World Bank/UNODC report , which documents how shell companies —particularly those located in the United States—are currently being abused by kleptocrats.
The United States recently ranked fifth in Tax Justice Network’s Financial Secrecy Index of the world’s most most secretive jurisdictions, with several European countries also on the list’s top ten. The Task Force on Financial Integrity and Economic Development believes that stopping the flow of illicit financial funds is key to economic rehabilitation internationally and that greater transparency in the financial sector would serve a blow to organised crime and tax evasion.