Janet Yellen, U.S. Treasury secretary, speaks during an interview at the National Association of Business Economics (NABE) annual meeting in Arlington, Virginia, U.S., on Tuesday, Sept. 28, 2021.
Amanda Andrade-Rhoades | Bloomberg | Getty Images
The U.S. Treasury Department’s anti-corruption watchdog on Tuesday said it wants to enact a new rule that would crack down on criminals that use businesses and shell companies to hide illegal funds behind webs of opaque corporate structures.
The Financial Crimes Enforcement Network, a bureau of the Treasury Department and known as FinCEN, announced that the prospective rule would require a wider range of companies to provide details on their investors.
“Millions of corporations, limited liability companies, and other entities are formed within the United States each year. While such entities play an essential and legitimate role in the U.S. and global economies, they can also be used to facilitate illicit activity,” the Treasury Department said in a fact sheet.
The Treasury Department hopes that the bulked-up transparency rules will dissuade bad actors from forming shell companies to launder illicit money and ultimately make it easier for law enforcement to track the movement of criminal funds.
Treasury officials believe the new rule will force companies and limited liability partnerships to provide information on individuals who own or control at least 25% of the entity or anyone who carries “substantial control” at the business.
Companies would be forced to provide FinCEN with its owners’ names, birthdates, addresses and other identifying documents. Those companies created prior to the rule’s enactment would have one year to file their initial reports, while those formed after would have 14 days to file.
“FinCEN is taking aggressive aim at those who would exploit anonymous shell corporations, front companies, and other loopholes to launder the proceeds of crimes, such as corruption, drug and arms trafficking, or terrorist financing,” Acting FinCEN Director Himamauli Das said in a statement.
The proposed rule comes as part of the Biden administration’s broader effort to champion democracy leading up to the inaugural Summit for Democracy later this week. The two-day virtual event will gather officials from around the globe to renew commitments to democracy and tout the benefits of representative government.
The administration already announced new sanctions against foreign-government officials and people it accuses of corruption and human-rights violations. Lawmakers and activists say the White House should use such tools to punish Russian oligarchs, Chinese officials and other alleged corrupt actors.
Treasury officials who spoke to reporters on Tuesday said their department is uniquely equipped to aid in those efforts since it oversees sanctions policies. The department said Monday that it’s also looking to tackle corruption by magnifying reporting requirements on all-cash real estate deals.
