The White House has publicised a legislative proposal as part of the President’s budget to help law enforcement investigate the use of shell companies for unlawful purposes including money laundering. The purpose of the legislation is to allow the Inland Revenue Service to share beneficial ownership information with law enforcement officials to identify and investigate criminals who form and misuse U.S. corporate structures to launder criminal proceeds and finance terrorism through the international banking system.
This new proposal would require all companies formed in any state to obtain a federal tax employee identification number. It would also require the Internal Revenue Service to collect information on the beneficial owner of any legal entity organized in any state, and would allow law enforcement to access that information.
The White House’s press statement said that: “[s]uch sharing would advance criminal investigations and successful prosecution of money laundering and terrorist financing cases and assist in identifying criminal proceeds and assets.“ It added: “The proposal released in the budget is the next step in advancing greater transparency and anticorruption efforts in the United States. We look forward to working with Congress to draft the legislation and get this important proposal signed into law.”
This proposal follows on from the U.S.’ June 2013 Action Plan for Transparency of Company Ownership and Control, committed to advocating for comprehensive legislation to require identification and verification of beneficial ownership information following the G8 summit in that same month.
Sen. Carl Levin, D-Mich., and Sen. Chuck Grassley, R-Iowa have separately introduced the Incorporation Transparency and Law Enforcement Assistance Act, S. 1465, which would combat transnational crime by requiring U.S. states to include in their incorporation applications a question asking for the prospective corporation’s true owners. Cosponsors of the bill are Sen. Dianne Feinstein, D-Calif., Sen. Tom Harkin, D-Iowa, and Sen. Sheldon Whitehouse, D-R.I..
The move in the United States does not go as far as the UK and now wider EU’s desire to have a public register of beneficial ownership. But many believe it is a big shift in the right direction.