US Congress Bans Anonymous Shell Companies

US Congress Bans Anonymous Shell Companies
Police officers wearing face masks guard the U.S. Capitol Building in Washington on May 14, 2020. (Erin Scott/Reuters)

WASHINGTON—The U.S. Senate on Dec. 11 approved a measure overhauling anti-money laundering rules and banning anonymous shell companies, a victory for law enforcement and rights groups that have long sought changes to make it easier to police illicit money flows.

The bill, included as part of a broader defense funding package, was passed by the House of Representatives earlier in the week. The bill now heads to President Donald Trump. While Trump had suggested he could veto the bill over separate policy disputes, the Senate's 84-13 vote provides more than the two-thirds majority needed to override a veto.

The measure requires most companies to report their true beneficial owners to the government, allows greater information sharing between law enforcement and regulators, and authorizes the use of new suspicious activity monitoring tools.

Cracking down on legal vehicles that allow criminals and terrorists to move money around the world has become a pressing issue for policymakers as a slew of scandals in recent years has revealed the true extent of illicit global money flows.

The United States’ weak rules on disclosing corporate owners have allowed criminals to use legal entities to shuffle their cash around the world, according to the authorities.

In 2011, the World Bank found that the United States each year produced nearly 10 times as many legal entities with anonymous owners as 41 tax havens combined.

“The global law enforcement and national security community will reap enormous benefits from anti-money laundering policy that stops bad actors from using shell companies to shepherd crime across international borders,” said Greg Baer, CEO of the Bank Policy Institute, which lobbied for the changes.

If signed into law, the bill should help banks by allowing them to share the burden of identifying and tracking potential illegal activity.

By Pete Schroeder