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Harry Cassin
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Jessica Tillipman
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Bill Steinman
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Richard L. Cassin
Editor at Large

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Cody Worthington
Contributing Editor

Julie DiMauro
Contributing Editor

Thomas Fox
Contributing Editor

Marc Alain Bohn
Contributing Editor

Bill Waite
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Shruti J. Shah
Contributing Editor

Russell A. Stamets
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Richard Bistrong
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Eric Carlson
Contributing Editor

White House acts to end secret U.S. companies and hidden foreign ownership

Official White House Photo by Pete SouzaThe Obama Administration Thursday announced a series of actions to end the use of anonymous corporations in the United States and require disclosure of beneficial owners when foreigners deposit money or buy assets in this country.

The White House said the Panama Papers — more than ten million leaked documents from the Mossack Fonseca law firm — “revealed the use of anonymous offshore shell companies” and put the “issues of illicit financial activity and tax evasion in the spotlight.”

Transparency International-USA has led calls to end the use of anonymous corporations in the United States.

“Secret companies allow corruption to flourish,” Shruti Shah said last month. She’s a contributing editor of the FCPA Blog and the Vice President of Programs and Operations at TI-USA.

The White House said the actions will include:

  • Final Treasury regulations on “Customer Due Diligence” that enhance transparency and protect the integrity of the financial system by requiring financial institutions to know and keep records on who actually owns the companies that use their services.
  • New Treasury/IRS tax rules closing a loophole allowing foreigners to hide assets or financial activity behind anonymous entities established in the United States.
  • New legislative proposals to strengthen tools to fight corruption and money laundering.
  • Increasing transparency into the beneficial ownership of companies formed in the United States by requiring that companies know and report their true owners.
  • Adding law enforcement tools to combat corruption and money laundering.

“These efforts are critical to preventing criminals from using the global financial system to launder proceeds from corruption or other illegal activities, finance criminal activity or even terrorism, evade international sanctions regimes, or evade taxes,” the White House said.

Last month, a TI-USA campaign mobilized people to contact their Senators and Representatives and urge support for bills to end anonymous companies in this country.

“Anonymous companies are used for dirty-money transactions and schemes that support drug traffickers and terrorists, defraud government agencies and cheat U.S. citizens, and undermine U.S. institutions,” TI-USA said.

Next week, UK Prime Minister David Cameron will host the UK Anti-Corruption Summit. Cameron has put the fight against corruption at the top of the international agenda.

He said in a Huffington Post article last year that for too long, corruption has “lined the pockets of those on the inside” but has been met with “little more than a reluctant sigh” from politicians.

“World leaders simply cannot dodge this issue any longer,” Cameron said. “We have to show some of the same courage that exposed FIFA and break the taboo on talking about corruption.”

In its statement Thursday, the White House said the “United States was the first country to criminalize money laundering and the U.S.’s Foreign Corrupt Practices Act (FCPA) provided the model for the OECD’s Anti-Bribery Convention and other efforts globally.” 

*      *      *

The Administration said Thursday it will:

  • Issue the Treasury Department’s final rule to require financial institutions to obtain and verify the identity of beneficial owners of a company, including individuals who control or own more than 25 percent.
  • Support a bill to require U.S.-formed companies to disclose the beneficial owners at the time of formation or ownership transfer.
  • Require single-member limited liability companies and other foreign-owned U.S. entities to obtain a tax identification number and share ownership and transaction data with the Internal Revenue Service.
  • Expand jurisdiction of prosecutors to pursue money launderers for acts committed in other countries.
  • Allow use of high-speed administrative subpoenas in money-laundering cases rather than grand jury subpoenas.
  • Increase access to U.S. bank records located abroad and expand admissibility rules for the records.
  • Give foreign governments up to 90 days to show probable cause why assets located in the United States should be frozen and ultimately forfeited under the Kleptocracy Asset Recovery Initiative.
  • Allow U.S. prosecutors in kleptocracy cases to use foreign business records in civil asset recovery cases after the records meet a certification test.

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Richard L. Cassin is the publisher and editor of the FCPA Blog. He’ll be the keynote speaker at the FCPA Blog NYC Conference 2016.

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2 Comments

  1. What are the chances that these legislative proposals are adopted before the November elections and subsequent lame-duck session?

  2. Aside from the normal push-back from those one percenters who will be affected by this, the Administration proposal will have to overcome the principle of federalism. Corporations are the creatures of state law. If a state secretary of state or corporation commission doesn't want to give up the identity of shareholders of private corporations or limited liability companies, they don't have to do so. There are banks which are state chartered. Private banks are basically trusts, which once again are creatures of state law.

    Stockholder anonymity is not all about money laundering and tax evasion. There are reasons that have been traditionally accepted as reasonable, such as privacy and asset protection. The whole purpose of limited liability of shareholders has been to induce people to invest in new enterprises without having to put the rest of their estate at risk.If we are going to do away with limited liability and its related doctrines and effects, then we need an open and very public discussion by the whole body politic, not just a few activists and academics.


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