Senate bill would require shell companies to disclose their owners

A bill introduced in the Senate would require shell companies to disclose their true owners to the U.S. Department of Treasury.

The Improving Laundering Laws and Increasing Comprehensive Information Tracking of Criminal Activity in Shell Holdings (ILLICIT CASH) Act would help law enforcement combat illicit financial activity being carried out by terrorists, drug and human traffickers, and other criminals.

In addition to requiring shell companies to disclose their owners, it would also update anti-money laundering (AML) and combating the financing of terrorism (CFT) policies to improve communication between law enforcement, financial institutions, and regulators.

“We must be vigilant and ensure that our financial system is not being misused to fund individuals and groups who intend harm to the United States and our allies,” Sen. Mark Warner (D-VA), one of the bill’s sponsors, said. “This legislation will empower the Treasury Department and other appropriate agencies to better protect our financial system from such abuse, and will ensure that we are using all the tools at our disposal to protect our national security.”

Sens. Tom Cotton (R-AR), Doug Jones (D-AL), and Mike Rounds (R-SD) also sponsored the bill.

“The United States ought to make it as difficult as possible for criminals and terrorists to finance their evil deeds. Our draft bill makes it easier for law enforcement to track ill-gotten gains without burdening legitimate businesses,” Cotton said.

The United States is one of the easiest places in the world to set up an anonymous shell company, according to research from the University of Texas and Brigham Young University. More information is required to obtain a library card than to register a company. Human traffickers, terrorist groups, arms dealers, transnational criminal organizations, kleptocrats, drug cartels, and rogue regimes have all used U.S.-registered shell companies to hide their identities and facilitate illicit activities.

U.S. intelligence and law enforcement find it harder to investigate these illicit financial networks without access to information about the ownership of the entities.

The bill would establish federal reporting requirements mandating that all beneficial ownership information be maintained in a federal database to crack down on criminal shell companies. It would also help recruit and retain top talent at the Financial Crimes Enforcement Network (FinCEN) by increasing their pay.

The senators are seeking input from stakeholders. Comments can be submitted to Warner’s office at AML-BSAReform@warner.senate.gov by July 19, 2019.

“As a former U.S. Attorney, I am all too familiar with criminals hiding behind shell corporations to enable their illegal behavior. At the same time, our anti-money laundering laws have not kept pace with the increasingly sophisticated means by which criminals and terrorist organizations use our financial system to move their money around the world. This bipartisan legislation addresses both challenges and gives law enforcement the tools they need to protect Americans and prosecute criminals,” Jones said.