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Anonymous shell companies fund crime and terror; it’s time to crack down

Greg Nash

For nearly 30 years, a 36-story office building in the heart of midtown Manhattan — around the corner from Radio City Music Hall and Rockefeller Center — was secretly owned by the government of Iran. How was a government that was under economic sanctions able to own a highly coveted piece of real estate in the middle of the largest city in the United States? The answer is surprisingly simple: It used anonymous shell companies. What’s worse, those shell companies were not created in some shady foreign jurisdiction — they were formed right here in the U.S.

In 2016, bombshell reports by “60 Minutes” and The New York Times showed how easy it is for terrorists, drug dealers and other criminals to launder money in the U.S. through anonymous shell companies. These reports, along with a multi-year undercover investigation by Global Witness, documented numerous examples where loopholes in U.S. state and federal laws are used to hide the identities of the true owners of these shell companies, allowing criminals to launder their money by purchasing real estate and other assets with illegal funds.

Corporations and limited liability companies (LLCs) are formed at the state level in the U.S., and no U.S. state currently requires companies to disclose their true, beneficial owners. This means that the U.S. is the world capital of anonymous shell companies — and is a hub for not just money laundering but also terrorist financing. Yes, that’s right — the same terrorist groups that attack the U.S. are also using the U.S. financial system to move their money, and to finance their operations. It’s appalling, and it has to end.

To combat these abuses and end the illicit use of anonymous shell companies, I have been working on legislation, the Corporate Transparency Act, for more than a decade. It finally passed the House last October, and was included in the House-passed National Defense Authorization Act (NDAA) for Fiscal Year 2021. That legislation is currently being negotiated by House and Senate conferees, and I am working to make sure that Congress finally passes this bipartisan bill to strengthen our national security and crack down on money-laundering and organized crime.

Beyond the impacts for law enforcement, this bill will directly affect us here at home by lowering housing costs in New York City. Kleptocrats and criminals routinely park their illicit money in luxury real estate in New York City, which limits the availability of housing and drives up housing costs for ordinary New Yorkers. You see this vividly when you drive through parts of NYC at night — entire buildings have no lights on, because no one actually lives in these apartments; they were purchased purely to hide money, and to act as a bank account. This removes valuable housing from the market that otherwise could go to hard-working New Yorkers, and drives up housing costs for everyone. But my bill will put an end to this practice, once and for all. Put simply, my bill would lower housing costs for ordinary New Yorkers.

This is one of the most pressing national security problems we face in this country, because anonymous shell companies are the vehicle of choice for money-launderers, criminals and terrorists. Because of its bipartisan, common-sense approach, the Corporate Transparency Act has the support of more than 130 non-governmental organizations (NGOs) that advocate for financial transparency, as well as the entire law enforcement community, the financial industry and the real estate industry.

We’re the only advanced country in the world that doesn’t already require disclosure of this information — and frankly, it’s an embarrassment. We must fix this in the final NDAA.

Congresswoman Carolyn B. Maloney represents New York’s 12th Congressional District. She chairs the House Oversight and Reform Committee and is a senior member of the House Financial Services Committee.

Tags Carolyn Maloney LLC Money laundering NDAA shell corporation Terrorism financing

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