New Legislation Requires Shell Companies to Disclose Their Owners

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A new law passed in Congress in December that will, for the very first time, require shell companies to provide the names of owners, or face jail time and/or stiff financial penalties. This information will be stored in confidential databases for federal law enforcement officials, and will be shared with banks to prevent them from becoming accidental accomplices to corruption on international scales often committed by shadowy shell companies.

The Corporate Transparency Act

The new Corporate Transparency Act was part of a defense spending bill that was first vetoed by President Trump, but then overridden by Congress and put into law on New Year’s Day. It marked the first time in President Trump’s tenure that congress overrode a veto of his.

The bill was introduced by Rep. Carolyn Maloney (D-New York) in 2010, but it faced significant opposition from banks and business groups that would be worried about red tape, as well as states like Wyoming and Delaware that got significant revenue from corporation registrations each year.

But after major international scandals involving groups like FIFA and 1MDB and the leaks of the Panama Papers, the role played by these shell companies in international misdeeds was exposed on a broader scale than ever, resulting in greater domestic support for this sort of legislation.

The registry with this information will be managed by the Treasury Department, and will contain the names of true owners of any domestically established shell companies, plus any foreign ones that operate in the United States.

It is very easy to create a shell company in the United States, which is part of why they’re so frequently used as vehicles for corruption. All it takes is a small fee and a letter that lists the name, P.O. Box and registered agent for the entity. Once established, shell companies can be used to purchase assets from any funds transferred into a U.S. bank account, making them a common vehicle for money laundering.

For more information about actions you can take if you become aware of misdoings by a shell corporation, contact an experienced whistleblower lawyer at Kardell Law Group.

By Steve Kardell | Published March 15, 2021 | Posted in Graft and Corruption, New Legislation | Tagged Corporate Transparency Act, money laundering, shell companies

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