House passes bill taking aim at anonymous shell companies

House passes bill taking aim at anonymous shell companies
© Greg Nash

The House on Tuesday passed legislation aimed at cracking down on the use of anonymous shell companies for illicit activities.

The bill passed by a vote of 249-173. Twenty-five Republicans joined most Democrats in voting for the bill, while five Democrats voted against it.

The vote comes after the House Financial Services Committee advanced the measure in June.

Under the bill, certain corporations and limited liability companies would be required to disclose their true owners to the Treasury Department’s Financial Crimes Enforcement Network (FinCEN) at the time they are formed. They’d also have to submit annual filings with FinCEN listing their current true owners and any changes to ownership. There would be penalties for people who intentionally submit fraudulent or incomplete information.

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The disclosure requirements don’t apply to companies that have more than 20 employees and $5 million in gross receipts because these companies are less likely to be anonymous shell companies.

The bill would also make major updates to the Bank Secrecy Act for the first time since 2001.

Supporters of the bill argue that it would be helpful in combating money laundering, terror financing and tax evasion.

“It will make our country safer,” said Rep. Carolyn MaloneyCarolyn Bosher MaloneyLawmakers grill Census Bureau officials after report on cybersecurity issues Booker, Merkley propose federal facial recognition moratorium House Democrats question Secret Service on payments to Trump properties MORE (D-N.Y.), who introduced the bill.

House Financial Services Committee Chairwoman Maxine WatersMaxine Moore WatersDemocrats highlight lack of diversity at major banks in new report Fed chief issues stark warning to Congress on deficits 10 Democrats to boycott Trump State of the Union address MORE (D-Calif.) said that the bill is “an important commonsense measure that stops criminals from being able to hide behind anonymous shell companies.”

The bill has the backing of a number of stakeholders, including from law enforcement, anti-corruption, human rights and banking groups.

But it’s opposed by some GOP lawmakers and business groups, such as the National Federation of Independent Business (NFIB) and the National Retail Federation, which argue that the legislation would impose steep compliance costs for small businesses and raises privacy concerns.

“This bill before us is a new small-business mandate on the smallest businesses in America,” said Rep. Patrick McHenryPatrick Timothy McHenryFed chief issues stark warning to Congress on deficits Fed chairman warns of economic damage from coronavirus House passes legislation to overhaul consumer credit reporting MORE (N.C.), the top Republican on the House Financial Services Committee.

Brad Close, senior vice president of public policy for the NFIB, said that banks are already required to collect ownership info from all their clients and that the government can get access to that information.

“We don’t think this bill is the way to go,” he said.

The Trump administration spoke positively about the bill, saying in a statement of administration policy that the measure “represents important progress in strengthening national security, supporting law enforcement, and clarifying regulatory requirements.” But the administration also said that steps need to be taken to improve the bill as it moves through Congress, including improvements that protect small businesses from burdensome reporting requirements.  

A version of the bill has been offered in the Senate by Sens. Ron WydenRonald (Ron) Lee WydenSenate Dems blast Barr for 'clear violation' of duty in Stone case, urge him to resign Overnight Health Care: Nevada union won't endorse before caucuses after 'Medicare for All' scrap | McConnell tees up votes on two abortion bills | CDC confirms 15th US coronavirus case Harris, Castro introduce resolution condemning Trump aide Stephen Miller MORE (D-Ore.) and Marco RubioMarco Antonio RubioPeace Corps' sudden decision to leave China stirs blowback Lawmakers raise concerns over Russia's growing influence in Venezuela USDA takes heat as Democrats seek probe into trade aid MORE (R-Fla.).

Wyden said in a statement after the House passage that "with the White House supporting this effort there’s no excuse for further delay in acting on this legislation."