Bipartisan Senate Group Seeks to End Corporate Anonymity for Drug, Sex Trafficking

June 13, 2019 Updated: June 13, 2019

WASHINGTON—Drug cartels, sex traffickers, and terrorists benefit because more personal information must be provided to obtain a library card than to create a company in America, and a bipartisan group of senators is determined to do something about the situation.

To that end, Sens. Mark Warner (D-Va.), Tom Cotton (R-Ark.), Doug Jones (D-Ala.) and Mike Rounds (R-S.D.) have introduced the “Improving Laundering Laws and Increasing Comprehensive Information Tracking of Criminal Activity in Shell Holdings Act” (ILLICIT CASH).

The draft bill “would, for the first time, require shell companies — often used as fronts for criminal activity — to disclose their true owners to the U.S. Department of Treasury,” the senators said in a joint statement announcing the measure.

“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,” the senators said.

“Meanwhile, U.S. intelligence and law enforcement agencies find it increasingly difficult to investigate these illicit financial networks without access to information about the beneficial ownership of corporate entities involved,” they said.

Their bill would update the federal government’s current anti-money laundering (AML) and combating financing of terrorism (CFT) regulations “by giving Treasury and law enforcement the tools they need to fight criminal networks,” the senators stated.

The ILLICIT CASH bill stemmed in part from the “Panama Papers,” a cache of 11.5 million secret documents from a law firm in the Central American country made public in 2016 by the International Consortium of Investigative Journalists.

The documents covered more than 200,000 off-shore entities that were implicated in a dizzying variety of serious crimes, including illegal drugs, sex trafficking, terrorism financing, bribery of public officials, tax evasion, and international arms dealing.

According to a report from the Global Financial Integrity Library Card Project that was cited by the senators, “a person needs to provide far more personal information to a state to obtain a library card than to create a company.

“To obtain a library card in any state in the U.S., the applicant must be the person who will ultimately be controlling/using the card, and a significant amount of identifying information must be provided by the person to the state in order to obtain the library card.”

But to form a company anywhere in the United States, the report said, “it is not necessary to identify or provide any information about the person(s) who will ultimately be controlling the company.

“In some cases, it isn’t even necessary to provide information about who will be managing the company and, where some information about managers (i.e. officers or directors) is required, it is very limited.”

The Treasury Department’s Financial Crimes Enforcement Center (FinCEN) is the primary focus of the senators’ proposal, which includes 10 major provisions to:

  • Establish federal reporting requirements mandating that all beneficial ownership information be maintained in a comprehensive federal database, accessible by federal and local law enforcement.
  • Help recruit and retain top talent for FinCEN by putting employees on a pay scale comparable to that of federal financial regulators.
  • Create a hub of financial expert investigators at FinCEN to investigate potential AML-CFT activity in collaboration with federal government agencies.
  • Create a team of FinCEN technology experts to further the development of new and essential technologies that can assist financial institutions and the federal government in their efforts to combat money laundering.
  • Facilitate communications between Treasury and financial institutions by establishing a Treasury financial institution liaison to seek and receive comments regarding AML-CFT rules, regulations, and examinations.
  • Require the Department of Justice (DOJ) to provide Treasury with metrics on the usefulness of AML-CFT data from financial institutions for law enforcement purposes, as well as data on the past and current trends identified by DOJ in the AML-CFT landscape.
  • Require law enforcement to coordinate with FinCEN to provide periodic feedback to financial institutions on their suspicious activity reports.
  • Prioritize the protection of personally identifying information, while establishing a clear path for financial institutions to share AML-CFT information for the purposes of identifying suspicious activity.
  • Prevent foreign banks from obstructing money laundering or terrorist financing investigations by requiring these banks to produce records in a manner that establishes their authenticity and reliability for evidentiary purposes, and compelling them to comply with subpoenas. This legislation would also authorize contempt sanctions for banks that fail to comply.
  • Ensure the inclusion of current and future payment systems in the AML-CFT regime by updating the definition of “coins and currency” to include digital currency.

“The U.S. 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.