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US Bill Seeks To Expose Company Ownership

Tuesday, 06 August 2013   (0 Comments)
Posted by: Author: Mike Godfrey
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Author: Mike Godfrey

To combat acts of tax evasion, money laundering, terrorism and other misconduct involving United States corporations, a bill, the Incorporation Transparency and Law Enforcement Assistance Act, has been introduced in the Senate that would ensure that the identities of corporation's beneficial owners are known.

Carl Levin (D – Michigan), Chairman of the Permanent Subcommittee on Investigations, and Chuck Grassley (R – Iowa), Ranking Member of the Senate Judiciary Committee, have introduced the bipartisan bill that would end the practice of the US States forming corporations for unidentified persons, and instead require the States to obtain the identities of the persons behind the corporations formed under their laws.

"Today, it takes more information to obtain a driver’s license or open a US bank account than it does to form a US corporation," said Levin. "Our States don't require anyone to name the owners of the corporations being formed under their laws, practically inviting people to misuse our corporations."

"A single State can't solve the problem on its own," he added, "because if one State starts requiring names, people seeking to use corporations for nefarious purposes can switch to another State with weaker requirements. That's why federal legislation is needed to level the playing field among the 50 States and get them to obtain corporate ownership information so it is available to law enforcement investigating corporate wrongdoing."

"Prosecutors of financial crimes follow the money," Grassley continued. "It's hard for them to do that when the owners of shell corporations are able to hide their identities so easily. Setting consequences for submitting false ownership information would help law enforcement by imposing a hardship on the money launderers and tax cheats who use shell corporations to conceal their fraud."

It was pointed out that States form almost 2m corporations and limited liability companies within the US each year without asking for the identity of the owners. The proposed bill would require the States to add a single question to their existing incorporation forms requesting the names of the natural persons who are the beneficial owners behind the corporations being formed.

In a June 2009 hearing, the Manhattan District Attorney's office testified: "We see these shell companies being used by criminal organizations, and the record is replete with examples of their use for money laundering, for their use in tax evasion, and for their use in securities fraud."

States would not be required to verify the information, but penalties would apply to persons who submitted false information, while regulated corporations whose ownership is already known, including publicly traded corporations, banks, and securities firms, would be exempt from the disclosure requirement.

In addition, law enforcement would be given access to the information upon presentation of a subpoena or summons, and corporations bidding on federal contracts would have to provide the same beneficial ownership information to the federal government.

It was emphasized that the bill is supported by a number of law enforcement groups, and by small business and public interest groups. This is the third time the bill has been introduced, being previously co-sponsored by Barack Obama before he became President.

The issue has also been identified as an urgent priority by the G8 Summit earlier this year, and Levin therefore concluded that the bill would not only help law enforcement combat wrongdoing, it would bring the United States into compliance with international standards issued by the Financial Action Task Force on Money Laundering requiring the disclosure of corporate beneficial ownership information.

He noted that, "for years, the US has been fighting offshore corporate secrecy laws, pointing out corporations were designed, not to hide ownership, but to protect owners from personal liability for corporate acts. If we want to stop inappropriate corporate secrecy offshore, we need to stop it here at home as well."



Section 240A of the Tax Administration Act, 2011 (as amended) requires that all tax practitioners register with a recognized controlling body before 1 July 2013. It is a criminal offense to not register with both a recognized controlling body and SARS.

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