Dear Colleagues,

I wanted to flag that the Trump Administration just unveiled its "2020 National Strategy for Combating Terrorist and Other Illicit Financing" yesterday.

Prepared by the Department of the Treasury in coordination with the Departments of Justice, State, and Homeland Security, the Office of the Director of National Intelligence, the Office of Management and Budget, and the federal financial regulators, the document prioritizes ending anonymous companies in the U.S. by passing legislation in 2020:
* The #1 vulnerability highlighted in the document is "The lack of a requirement to collect beneficial ownership information at the time of company formation and after changes in ownership" in the U.S.
* The #1 action highlighted is to "Require the Collection of Beneficial Ownership Information by the Government at Time of Company Formation and After Ownership Changes."


The strategy notes:

"Misuse of legal entities to hide a criminal beneficial owner or illegal source of funds continues to be a common, if not the dominant, feature of illicit finance schemes, especially those involving money laundering, predicate offences, tax evasion, and proliferation financing. For example, one study found that anonymous companies play a significant role in hiding the identities of criminals behind human trafficking enterprises. A Treasury study based on a statistically significant sample of adjudicated IRS cases from 2016-2019 found legal entities were used in a substantial proportion of the reviewed cases to perpetrate tax evasion and fraud. According to federal prosecutors and law enforcement, large-scale schemes that generate substantial proceeds for perpetrators and smaller white-collar cases alike routinely involve shell companies, either in the underlying criminal activity or subsequent laundering.

"More than two million corporations and limited liability companies (LLCs) are formed in the United States every year. Domestic shell companies continue to present criminals with the opportunity to conceal assets and activities through the establishment of a seemingly legitimate U.S. businesses. The administrative ease and low-cost of company formation in the United States provide important advantages and should be preserved for legitimate investors and businesses. However, the current lack of disclosure requirements gives both U.S. and foreign criminals a method of obfuscation that they can and have repeatedly used, here and abroad, to carry out financial crimes. There are numerous challenges for federal law enforcement when the true beneficiaries of illicit proceeds are concealed through shell or front companies. Money launderers and others involved in commercial activity intentionally conduct transactions through corporate structures in order to evade detection, and may layer such structures, much like Matryoshka dolls, across various secretive jurisdictions. In many instances, each time an investigator obtains ownership records for a domestic or foreign entity, the newly identified entity is yet another corporate entity, necessitating a repeat of the same process. While some federal law enforcement agencies may have the resources required to undertake complex (and costly) investigations, the same is often not true for state, local, and tribal law enforcement."

The document later notes:

"Currently, there is no categorical obligation at the state or federal level that requires the disclosure of beneficial ownership information at the time of company formation. Also, Treasury does not have the authority to require the disclosure of beneficial ownership information at the time of company formation without legislative action. Having immediate access to accurate information about the natural person behind a company or legal entity is essential for law enforcement and other authorities to disrupt complex money laundering and proliferation financing networks. […]

"The Administration believes that congressional proposals to require the collection of beneficial ownership information of legal entities by FinCEN, including the Corporate Transparency Act represents important progress in strengthening national security, supporting law enforcement, and clarifying regulatory requirements. The Administration is working with Congress. *The aim-pass beneficial ownership legislation in 2020*." (emphasis added)

The press release from Treasury is available here: [link removed] [ [link removed] ]

The full document is available as a PDF here: [link removed] [ [link removed] ]

Don't hesitate to let me know if you have any questions.

Best,

Clark Gascoigne
Interim Executive Director
The FACT Coalition
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About the FACT Coalition

The Financial Accountability and Corporate Transparency (FACT) Coalition is a non-partisan alliance of more than 100 state, national, and international organizations working toward a fair and honest tax system that addresses the challenges of a global economy and promoting policies to combat the harmful impacts of corrupt financial practices.

For more information, visit www.thefactcoalition.org


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