Treasury rules would crack down on anonymous shell companies

Treasury Secretary Janet Yellen arrives for a Senate Banking, Housing, and Urban Affairs Committee hearing to discuss oversight of the Department of Treasury and Federal Reserve over the CARES Act on Tuesday, November 30, 2021.
Greg Nash

The Treasury Department on Tuesday proposed rules meant to snuff out money laundering through the use of anonymously owned businesses.

The department’s Financial Crimes Enforcement Network (FinCEN) issued a proposed set of regulations that would force the controlling owners of a wide range of companies to register themselves with the federal government. The rules are meant to prevent individuals from using shell companies and other opaque corporate structures to evade taxes and international finance laws.

“The proposed rule for beneficial ownership reporting is a major step toward addressing the gaps in our corporate transparency framework that allow corruption to flourish and illicit funds to flow into the United States,” Treasury Secretary Janet Yellen said in a Tuesday statement.

“The beneficial ownership rule will help close the loopholes that undermine U.S. national security, bolster economic fairness, and protect the integrity of our financial system.”

The proposed rules are intended to ensure that the federal government can identify businesses’ “beneficial owners,” individuals who control and have access to a company’s assets. Not all U.S. states and territories require beneficial ownership information when a business is registered, which experts say can help facilitate money laundering and other financial crimes.

Under the proposed rules, certain domestic and foreign companies would be forced to disclose any individual who “exercises substantial control” over the firm, or owns or controls at least 25 percent of the firm’s ownership interests. Beneficial owners would be required to disclose their name, date of birth, a current address and a state identification number.

Publicly traded companies — which are already subject to Securities and Exchange Commission transparency rules — are not covered by the regulations. Businesses based in the U.S. with more than 20 employees, a physical office and at least $5 million gross revenue are also exempted from the regulations, along with a wide range of limited partnerships and trusts.

The proposal is open for public comment until Feb. 7. FinCEN did not specify when the rules would take effect.

The rules are the latest step the Treasury Department has taken to implement the Corporate Transparency Act, which was included in a major defense policy bill signed by former President Trump in 2020. The proposal also comes one day after President Biden rolled out the administration’s Strategy on Countering Corruption, a broader plan to crack down on money laundering and illicit finance.

Tags beneficial ownership Corporate Transparency Act Donald Trump Financial Crimes Enforcement Network illicit finance Janet Yellen Joe Biden Money laundering Securities and Exchange Commission Treasury Department

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