PROVIDENCE – The U.S. House of Representatives last week approved a bill to help authorities track illicit financial flows by requiring companies to identify their true beneficial owners instead of allowing them to use anonymous shell corporations.
The House passed the Corporate Transparency Act late Oct. 22 by a vote of 249-173.
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“We’re the only advanced country in the world that doesn’t already require disclosure of this information – and frankly, it’s an embarrassment,” said Carolyn Maloney, D-N.Y., who co-introduced the bill in May. “The Senate needs to act to pass this bill without delay.”
However, the bill’s chances in the Republican-led Senate are uncertain, as Senate Majority Leader Mitch McConnell, R-Ky., has not been supportive of the Democratically-controlled House’s legislative agenda.
Sen. Sheldon Whitehouse, D-R.I., who has pressed for such legislation, said he isn’t giving up on the issue.
“Lax incorporation laws have allowed criminals and foreign strongmen to obscure their ill-gotten gains in the American financial system,” Whitehouse said in a statement after the House vote.
“There is strong bipartisan awareness of the national security dangers of this sorry state of affairs,” the senator added. “I’m pleased that the House has taken a significant step toward making sure that the United States is no longer a financial haven for the world’s worst people. I’m going to continue to work on this issue with my colleagues in the Senate to get a bill to the president’s desk.”
Opponents of the bill have said it would create five new federal crimes for paperwork violations; is not specific enough in defining what constitutes a “beneficial owner”; and it may have long-term privacy implications.
“What is perhaps most perplexing about the Corporate Transparency Act is that it targets small businesses by explicitly excluding businesses that have over 20 employees and more than $5 million in gross receipts or sales,” said Adam Brandon, president of FreedomWorks, a conservative libertarian advocacy group based in Washington, D.C. “The bill would create paperwork burdens for these small businesses that will be required to comply with the mandates of the bill.
“Although larger corporations and LLCs do not need to file the beneficial ownership information, they would be required to make a separate filing to FinCen [the Financial Crimes Enforcement Network of the U.S. Department of the Treasury] explaining why the entity ought to be excluded from the requirement,” Brandon added. “In other words, every corporation or LLC will have to file some type of paperwork with FinCen on an annual basis and be subject to civil and criminal penalties.”
Maloney’s office acknowledged the bill exempts companies with more than 20 employees, more than $5 million in gross sales or receipts, and which have a physical presence in the U.S. because “companies that employ this many people and that have legitimate, business-related income are very unlikely to be anonymous shell companies that were created to hide or launder illicit funds.”
Last week, organizations supporting the Corporate Transparency Act issued statements, applauding the House’s action.
“Requiring secretive businesses to come out from the shadows will benefit small businesses throughout the country,” said Amanda Ballantyne, executive director of the Main Street Alliance, a national coalition representing small-business interests.
“It will reduce conflicts of interest and cronyism in contracting, as well as curb false billing of contractors and fraudulent certification of small, disadvantaged, veteran- or disability-owned businesses,” Ballantyne said. “This policy will make it harder for bad corporate actors to gain advantage through tax evasion, ensuring that our country has the revenue we need to support critical programs small-business owners and communities rely on.
“We urge the Senate to move forward with their bill so that corporate transparency can become law,” she added.
Scott Blake is a PBN staff writer. Email him at Blake@PBN.com.
