A Senate committee last week heard testimony on a bill that would require private corporations to disclose their owners, in the latest move that involves proposed legislation that has circulated through Congress in some version for nearly 10 years.The bill, the Incorporation Transparency and Law Enforcement Assistance Act (S.569), would require states to collect the names and addresses of owners of private companies and limited liability companies, to help police investigate money laundering, fraud, tax evasion and terrorism financing.
The US states of Delaware, Nevada and Wyoming are often singled out for incorporating companies with less information than appears on the average driver’s license.
At the same time that the worldwide financial crisis has prompted governments and experts worldwide to call for the end of offshore banking secrecy, Michigan Senator Carl Levin and the bill’s co-sponsors are calling for an end to confidential company formation in the United States.
“At the same time that we are calling for an end to offshore secrecy, we need to put our own house in order and meet our international commitments by obtaining ownership information for corporations formed within the United States,” Levin told the Senate Homeland Security Committee.
The bill was introduced in March by Senator Levin, Senator Chuck Grassley (R-Iowa) and Senator Claire McCaskill (D-Missouri). It remains in committee, where it will either die or be voted on by the Senate. GAO Revelations
Levin chairs the Subcommittee on Investigations, which has been looking into state incorporation practices since 2000, when the Government Accountability Office (GAO) investigated an individual who had set up more than 2,000 Delaware shell companies and then, through company bank accounts, moved $1.4 billion through the accounts.
Other findings by the GAO:
The FBI found that US shell companies are being used to launder as much as $36 billion from the former Soviet Union. US Treasury Department determined that financial institutions had filed nearly 400 suspicious activity reports from 1996 through 2003, concerning around $4 billion that involved US shell companies, Eastern European countries and US bank accounts. Immigration and Customs Enforcement reported that a Nevada-based corporation received more than 3,700 suspicious wire transfers totaling $81 million over two years; the case was not prosecuted because the agency was unable to identify the company’s owners. Department of Justice found that Russian officials used shell companies in Pennsylvania and Delaware to illegally divert $15 million of international aid earmarked for upgrading the safety of USSR-era nuclear power plants.
Various government agencies have also received – and not been able to answer – hundreds of requests from foreign police for ownership information for US companies suspected of criminal misconduct.
Nevada Opposes Bill
Officials from Nevada, however, are up in arms about the proposed bill, saying Nevada will no longer be able to attract businesses that want to keep their corporate ownership secret.
“If it makes every state knuckle under to the same set of rules, what’s the attraction for Nevada versus the state of Indiana?” deputy Secretary of State Robert Walsh asked the Las Vegas Review-Journal.
Nevada expects this year to collect $74 million in fees from companies registering there as private corporations or limited liability companies, according to the paper. Secretary of State Ross Miller opposed the bill in a letter to Homeland Security committee chair Senator Joseph Lieberman (I-Connecticut).