The US Senate has voted to enact legislation that will tighten rules on beneficial ownership disclosure where corporations are concerned. Ironically, for some time the US has trailed other jurisdictions in this regard, even though Washington had led a drive to crack Swiss bank secrecy a decade ago.
US lawmakers have passed a bill that overhauls anti-money laundering rules and bans anonymous shell companies, a blow for financial transparency.
The bill, passed by the US Senate on Friday, requires most companies to report their true beneficial owners to the government, allows greater information sharing between law enforcement and regulators, and authorises the use of new suspicious activity monitoring tools.
The Bank Policy Institute, a group lobbying for such transparency, applauded Congress's actions.
“This legislation warns the world that the US will stop human traffickers, terrorists and other global criminals in their tracks when they attempt to infiltrate the financial system,” said BPI president and CEO Greg Baer. “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. We applaud Congress for taking action on this essential issue,” he said in a statement.
Disclosure of beneficial ownership of companies and other structures has been a consistent theme among those claiming that the current system allows criminals to hide behind shell companies. In the past, offshore jurisdictions such as Switzerland and the Cayman Islands have come under attack. States within the US such as Delaware are often favoured by entities in the US as places to register companies.
In 2011, the World Bank said that each year the US produced nearly 10 times as many legal entities with anonymous owners as 41 tax havens combined (source: Reuters). Scores of countries have signed up to tax and financial data exchange agreements under what is known as the Common Reporting Standard. Ironically, the US, which has sought to crack down on jurisdictions such as Switzerland, isn’t a signatory to the CRS.
The bill, introduced on Friday, was tacked on to a defence funding package. It was approved by the US Senate after the House of Representatives passed it earlier last week. The bill now heads to President Donald Trump. The Senate voted in favour by 84 to 13 votes, enabling it to brush aside a presidential veto were President Trump to try and squash the bill.
In recent months, jurisdictions with ties to the UK such as The Cayman Islands, the British Virgin Islands, Guernsey, Jersey and the Isle of Man, have pushed through public registers of beneficial ownership of companies, although not for trusts.
A concern has been that publication of beneficial ownership details imperils legitimate financial privacy. Cybersecurity breaches have also raised worries that private financial details that come under data-transfer deals could be at risk.
"The current AML/CFT framework is outdated and ill-suited to apprehending criminals and countering illicit financial activity. The 50-year-old framework has been expanded, but not substantially revised, since its inception," the BPI said in its statement last Friday.