2 January 2021
The United States has passed new law that effectively bans anonymous shell companies from operating in the country. Transparency International(TA) which worked with the authorities in crafting the bill, called the law as “historic”. This legislation was included in the annual National Defense Authorization Act, which allocates funds to the US military, which was vetoed by President Trump last month and subsequently passed by veto-proof majority in Congress on Friday. Under the law the companies are required to provide information on the beneficial ownership of shares to the treasury department’s Financial Crimes Enforcement Unit.
The provision was relatively obscure as Trump and the Congress clashed on a variety of other provisions in the bill. The bill allows greater information sharing between law enforcement and regulators. The law authorizes the use of new suspicious activity monitoring tools. The law is a big leap forward in fighting foreign corruption in the US.
TA group’s US director said that it will be harder for corrupt leaders and other criminals to hide and move stolen money through secretly-owned corporations. US ranks second after the Cayman Islands in a global ranking of financial secrecy. This was reported by the Tax Justice Network’s Financial Secrecy Index 2020. Previously Switzerland was the hotspot for anonymous companies but now it has cleaned up its system.
A 2011 World Bank report found that the US led the world in anonymous shell companies, with 10 times more anonymous entities than the top 41 tax havens combined, according to Reuters.