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house Bill H.R. 2513

Should Companies Have to Disclose Their ‘Beneficial Owners’ at Formation to Deter the Use of Shell Companies?

Argument in favor

The opaque nature of American LLCs allows illicit money to enter the U.S. financial system and real estate market. These dirty funds can then fund international crime, terrorism, and more. Requiring companies to disclose their beneficial ownership will help fight money laundering and help law enforcement investigate and prosecute financial crimes, and won’t be an onerous burden that deters law-abiding people from founding new LLCs.

jimK's Opinion
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10/22/2019
Yes, let’s close the loop holes that allow individuals or corporations to hide their controlling interests of shell companies- often just placeholders use to protect illegal or unethical people and practices. I cannot believe that the costs could be excessive; the legislation requires names, addresses and passport numbers- none of which would seem to be very costly to comply with. If a business entity is licensed or registered, why shouldn’t this information be required? Transparency limits the ability of those who could abuse our society’s easily establishment and licensing of companies from hiding in the shadows when their companies engage in abusive, unethical or illegal practices.
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Brian's Opinion
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10/22/2019
Shell companies should be illegal. All companies should disclose the source of their funding.
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larubia's Opinion
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10/22/2019
Yes, companies should disclose their beneficial owners. This will crack down on money laundering, criminal activity, terrorism, and all of the shady dealings that go on with shell companies.
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Argument opposed

Existing regulations and rules already provide enough information on companies’ beneficial ownership. This bill would impose duplicative burdensome reporting requirements that’ll hurt those who can least afford to comply with them — small businesses. It also raises serious privacy and cybersecurity concerns, as it collects a lot of personal information and stores it with the federal government, creating a massive target for hackers.

Just.Dave's Opinion
···
10/22/2019
If you are starting a public company, or private and are choosing to go public, sure, why not disclose... but it should be up to the business owner(s) to decide how transparent they want to be. I'm all for transparency myself, but if someone chooses not to be, that's their choice. I don't think the government should decide for business owners, but the consumers should. If you don't like how a business operates, got to a competitor. Unless it's Comcast and that's the only choice you have for high speed internet... then you begrudgingly pay for their monopoly. But when you do have an option, exercise it! Keep the government out of business, take your own action! When these companies want your business, they'll come around... or they don't deserve your business.
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DumbocratsSUCK's Opinion
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10/22/2019
Always vote NO on the greasy slime dumbocrat bills!!!
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Gregory's Opinion
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10/22/2019
More bills from the do nothing socialist democrats that just bloat the federal government. Drain the swamp and lets not make it any larger. Winning 2020
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What is House Bill H.R. 2513?

This bill — the Corporate Transparency Act of 2019 — seeks to crack down on money laundering in the U.S. through anonymous shell companies. It would require companies to disclose their true, beneficial owners at the time the company is formed to prevent bad actors from using anonymous shell companies to thwart law enforcement and hide their illicit activities.

“Beneficial owners” would be defined as natural persons who directly or indirectly express substantial control over a corporation or LLC, own 25% or more of a corporation’s or LLC’s equity interests, or receive substantial economic benefits from a corporation’s or LLC’s assets. Minor children, nominees, intermediaries, custodians, agents, persons acting solely as employees of the company or LLC and whose control derives solely from their employment status, persons whose only interest in a company or LLC is through a right of inheritance, and creditors would be exempt from this definition.

Under this bill, minimal disclosure requirements would include: 

  • Beneficial owners’ names; 
  • Beneficial owners’ dates of birth; 
  • Beneficial owners’ current addresses; and
  • Beneficial owners’ driver’s license or non-expired passport numbers.

Additionally, this bill would require companies to annually file lists of all their current beneficial owners and any ownership changes over the previous year. 

FinCEN would be responsible for collecting beneficial ownership information and compiling it into a database. Information from the database could be made available through requests.

Those who submit fraudulent or false ownership information could be subject to civil and criminal penalties. These would include imprisonment for up to three years and/or civil penalties up to $10,000.

U.S. companies that employ more than 20 workers and have more than $5 million in gross receipts or sales would be exempt from this bill’s mandates. Certain financial institutions which are federally regulated elsewhere (such as banks, credit unions, and investment companies) are also exempt. Non-profits would also be exempt.

Impact

LLCs; anonymous shell companies; disclosure of companies’ beneficial owners; illicit money in the U.S. financial system; and FinCEN.

Cost of House Bill H.R. 2513

$132.00 Million
The CBO estimates that implementing this bill would cost $132 million over the 2019-2024 period.

More Information

In-DepthRep. Carolyn Maloney (D-NY) reintroduced this bill from the 115th Congress to crack down on anonymous shell companies and the use of NYC properties as bank accounts instead of homes, which drive up home prices for all New Yorkers. After this bill passed the House Committee on Financial Services, Rep. Maloney said

“I am tired of money launderers using NYC apartments as bank accounts and driving up home prices for New Yorkers. My bill, the Corporate Transparency Act, will crack down on anonymous shell companies and help to stop this practice by requiring companies to disclose their true, beneficial owners – the people who actually own the LLC – when the company is formed. This bill is also critical for our national security, because it finally allows law enforcement to track the money that terrorist groups use to finance their operations. Disrupting terrorist financing networks should be one of our top priorities, but right now, terrorist groups can easily hide their money using anonymous shell companies. That is completely unacceptable. And its not just terrorists – far too many criminal networks can legally hide and launder their money legally here in the US. We should all be outraged that human traffickers, gun rings, and drug cartels are skirting the law because we allow these shady practices.”

In another statement, Rep. Maloney notes that this legislation is of particular interest to her home district of New York City, both as a prime target of terrorist attacks and a favored place to stash dirty money: 

“You can just ride through my district at night, the East Side of Manhattan, and you’ll pass complete buildings where there are no lights on. They’re bank accounts, and they [law enforcement] simply want to know who owns that bank account for national security.”

The National Association of Assistant U.S. Attorneys (NAAUSA) supports this bill. Its president, 

“Legislation authorizing the federal collection of beneficial ownership information would be valuable to federal law enforcement investigations into organized transnational criminal operations and other unlawful activity. The sharing of this information with law enforcement would enhance the ability of Assistant United States Attorneys and law enforcement agents to investigate and prosecute criminal activity and guard against the misuse and abuse of shell corporations to facilitate money laundering, terrorist financing, tax evasion and other misconduct. Such legislation would assure transparency and provide law enforcement with access to critical ownership information, without unduly intruding upon individual privacy or being overly burdensome.” 

Treasury Secretary Steven Mnuchin expressed support for this bill during an April 2019 hearing. He said, “I do believe generally you are headed in the right direction, and I appreciate your work on this. I hope this is something that, on a bipartisan basis, we can get accomplished, both here and [in] the Senate.”

The American Bar Association (ABA) wrote a letter opposing this bill on June 10, 2019. Its letter — which was co-signed by more than 24 organizations — called this bill’s reporting burdens overly burdensome to small businesses and raised concerns about privacy and cybersecurity: 

“This legislation would impose burdensome, duplicative reporting burdens on approximately 4.9 million small businesses in the United States and threatens that privacy of law-abiding, legitimate small business owners… This legislation would shift the reporting requirements from large banks, those best equipped to handle the reporting requirements, to millions of small businesses, those least equipped to handle the reporting requirements… [This bill] raises significant privacy concerns as the proposed FinCEN beneficial ownership database would contain the names, dates of birth, addresses and unexpired drivers’ license numbers or passport numbers of millions of small business owners. This information would be accessible on request… This type of regime presents unacceptable privacy risks. [This bill] also introduces serious data breach and cybersecurity risks. Under the legislation, FinCEN would maintain a database of private information that could be hacked for nefarious reasons.”

The ABA also maintains that current rules and regulations also provide enough information about entities’ ownership structures. In its June 2019 Washington Letter, the ABA writes: 

“Together, FinCEN’s CDD rule and other regulations, combined with the IRS’ SS-4 Form, provide the federal government with access to substantial beneficial ownership information on almost every business entity in the United States. Therefore, it is unnecessary to create a duplicative new regulatory regime that would impose unfair burdens, excessive costs, and the risk of severe civil and criminal liability on millions of small businesses and their lawyers.”

FreedomWorks opposes this bill. Its president, Adam Brandon, notes that it would “create five new federal crimes for paperwork violations and may have long-term privacy implications.” Brandon also argues that this bill’s definition of a beneficial owner is too broad, and that it gives the Treasury Dept. overly broad rulemaking authority “that could potentially expand the requirements for businesses and, in turn, widen the scope of potential criminal liability.” Finally, Brandon argues that this bill “targets small businesses by explicitly excluding businesses that have over 20 employees and more than $5 million in gross receipts or sales” from its requirements, thereby burdening small businesses — but not large corporations — with complying with this bill’s mandates. 

In May, FreedomWorks, the Due Process Institute, and the American Civil Liberties Union wrote a joint letter expressing concerns about this bill. They noted the vague definition of a beneficial owner and asked, “What does it mean to indirectly control an entity? The bill does not explain.”

This legislation passed the House Financial Services Committee by a 43-16 vote with the support of 10 bipartisan House cosponsors, including nine Democrats and one Republican. Its Senate companion, sponsored by Sen. Ron Wyden (D-OR), has two bipartisan Senate cosponsors (one from each party).

Multiple statements of support and opposition have been made with regards to this bill in the current Congress. More than 60 national security experts, 108 NGOs representing a broad cross-section of society, the banking, credit union, and real estate industries, the Delaware Secretary of State, the National District Attorneys Association, human rights organizations, and others have sent letters of support to Congress urging passage of this critical legislation.

The American Bar Association (ABA) and more than two dozen legal and business organizations, including the ACLU, International Franchise Association, National Federation of Independent Businesses, National Small Business Association, and National Association for the Self-Employed wrote a letter of opposition to this bill in June 2019. FreedomWorks, the Due Process Institute, and the ACLU also wrote a letter opposing this bill in May. 

In the 115th Congress, this legislation had 11 bipartisan Senate cosponsors, including six Democrats and five Republicans. Its Senate companion, sponsored by Sen. Wyden, had one cosponsor, Sen. Marco Rubio (R-FL). Neither bill received a committee vote.


Of NoteThe UN reports that $300 billion in illicit proceeds flowed through the U.S. financial system in 2010 (this figure is confirmed by the Treasury Dept). Chip Poncy, senior adviser at the Foundation for Defense of Democracies Center on Economic and Financial Power and a former Treasury official, observes that anonymous entities allow illicit finance to flow through the U.S. financial system. Speaking at a panel organized by BPI and the Financial Accountability & Corporate Transparency (FACT) Coalition in April, he said: 

“The number one systemic vulnerability of the United States system for combating illicit finance, for using financial intelligence, for disrupting national security threats through targeted economic actions – the number one systemic vulnerability we face – is the use of anonymous entities.”

Rep. French Hill (R-AR) has proposed designating the Internal Revenue Service (IRS), rather than FinCEN, as the point of collection for beneficial ownership information and introduced his own legislation to this effect. Hill argues that this would be a more efficient way to collect beneficial ownership information. However, Rep. Maloney argues that IRS information would be difficult for law enforcement to access, as law enforcement agencies would have to subpoena the IRS for information.

There have been other efforts to combat the use of LLCs. In November, the Treasury Department sharpened its disclosure rules, requiring that title companies provide the identity of LLC buyers who spend $300,000 or more on a real estate purchase in 12 major metro areas, including New York City, Miami, Los Angeles, Chicago, San Francisco and Boston. This was a dramatic expansion of the previous Geographic Targeting Order, which had lower thresholds for cash deals in New York City, Los Angeles, San Francisco, San Diego, Miami-Dade, Broward and Palm Beach Counties, among other cities. Additionally, the Treasury Dept. finalized a requirement that financial institutions ascertain the beneficial ownership behind newly opened accounts in 2016. That rule went into effect in 2018.


Media:

Summary by Lorelei Yang

(Photo Credit: iStockphoto.com / maybefalse)

AKA

Corporate Transparency Act of 2019

Official Title

To ensure that persons who form corporations or limited liability companies in the United States disclose the beneficial owners of those corporations or limited liability companies, in order to prevent wrongdoers from exploiting United States corporations and limited liability companies for criminal gain, to assist law enforcement in detecting, preventing, and punishing terrorism, money laundering, and other misconduct involving United States corporations and limited liability companies, and for other purposes.

bill Progress


  • Not enacted
    The President has not signed this bill
  • The senate has not voted
      senate Committees
      Committee on Banking, Housing, and Urban Affairs
  • The house Passed October 22nd, 2019
    Roll Call Vote 249 Yea / 173 Nay
      house Committees
      Committee on Financial Services
    IntroducedMay 3rd, 2019

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    Yes, let’s close the loop holes that allow individuals or corporations to hide their controlling interests of shell companies- often just placeholders use to protect illegal or unethical people and practices. I cannot believe that the costs could be excessive; the legislation requires names, addresses and passport numbers- none of which would seem to be very costly to comply with. If a business entity is licensed or registered, why shouldn’t this information be required? Transparency limits the ability of those who could abuse our society’s easily establishment and licensing of companies from hiding in the shadows when their companies engage in abusive, unethical or illegal practices.
    Like (89)
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    If you are starting a public company, or private and are choosing to go public, sure, why not disclose... but it should be up to the business owner(s) to decide how transparent they want to be. I'm all for transparency myself, but if someone chooses not to be, that's their choice. I don't think the government should decide for business owners, but the consumers should. If you don't like how a business operates, got to a competitor. Unless it's Comcast and that's the only choice you have for high speed internet... then you begrudgingly pay for their monopoly. But when you do have an option, exercise it! Keep the government out of business, take your own action! When these companies want your business, they'll come around... or they don't deserve your business.
    Like (7)
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    Shell companies should be illegal. All companies should disclose the source of their funding.
    Like (52)
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    Yes, companies should disclose their beneficial owners. This will crack down on money laundering, criminal activity, terrorism, and all of the shady dealings that go on with shell companies.
    Like (39)
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    Secrecy equals corruption.
    Like (26)
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    Why do republicans hate laws requiring transparency? Well it makes it harder to be a crook of course. And it means there’s consequences when they get caught being crooks. See republicans are all for “law and order” as long as it’s people wearing FUBU going to prison, not white guys wearing three piece pinstriped suits.
    Like (19)
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    I'm sick of and disgusted by companies scheming to get more than they deserve by hiding their true owners, their true motives, their real tax breaks.
    Like (19)
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    Yes, this will help limit corruption.
    Like (19)
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    We need more transparency in every field.
    Like (15)
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    Anything that breaks the tax avoiders greedy schemes is good. Support people not constructs. CORPORATIONS ARE NOT PEOPLE.
    Like (15)
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    Wrong for Montana Rep Gianforte to vote Nay. I believe transparency is needed for democracy!
    Like (8)
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    Representatives, Support HR 2513 and put an end to money laundering as well as the use of anonymous shell companies. The Corporate Transparency Act of 2019 should be subtitled the "Laundromat Act." I'm sure it's no coincidence that this bill has come up a few days after Netflix released the movie, "The Laundromat" directed by Steven Soderbergh starring Meryl Streep, Gary Oldman, Antonio Banderas, Sharon Stone and James Cromwell. The movie is based on the book with the explanatory title "Secrecy World: Inside the Panama Papers Investigation of Illicit Money Networks and the Global Elite" by Jake Bernstein. As the film makes perfectly clear, its long past time for our lawmakers pass significant legislation to crack down hard on money laundering in the U.S. through anonymous shell companies. Companies must be made to disclose their true, beneficial owners at the time the company is formed to prevent bad actors from using anonymous shell companies to thwart law enforcement and hide their illicit activities.
    Like (7)
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    Transparency and truth. I am done with corruption
    Like (6)
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    Yes. This will allow for me, the consumer, to better vote with my money.
    Like (6)
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    Yes, using an LLC incorporation, it is easy to hide money and facilitate the laundering of money. This money either comes into the US financial system untaxed and/or used for illegal activities. Requiring companies to disclose their beneficial ownership will help fight money laundering and help law enforcement investigate and prosecute financial crimes, and won’t be an onerous burden that deters law-abiding people from founding new LLCs.
    Like (5)
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    If you prefer democracy and freedom, you must eradicate shell companies that allow the ultra-rich to hide their money and use it against those of us who do the work. Watch “Laundromat” to see what this will mean.
    Like (4)
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    Small business don’t need shell companies to run their business unless their business is to hide and move money to avoid taxes. I can see that there could be problems with privacy concerns, but overall I think it’s better to prevent money laundering and using real estate as a shadowy way to avoid paying taxes or bringing income into the light of day.
    Like (4)
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    You can't open a bank account without several layers of identity confirmation. Heck, my brother can't even deposit cash into my account. The standards for starting a new business should be no lower.
    Like (3)
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    Always vote NO on the greasy slime dumbocrat bills!!!
    Like (3)
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    Enough legalized corruption aided by both parties! Candidates who refuse corporate bribery are well supported and loved by their constituents. Bernie has proven that putting people first brings him the highest number of donations by far. You can do this!
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