FATF Evaluation Notes the U.S. Anti-Money Laundering “System Has Serious Gaps that Impede Timely Access to Beneficial Ownership Information”

Last week, the Financial Action Task Force (FATF)—the international body that sets anti-money laundering and counter-terror financing (AML/CFT) standards—released its first review of the United States’ efforts to combat dirty money since 2006.  While the FATF report finds that the U.S. generally has a decent AML/CFT framework, it notes that there remains a gaping hole in the regime: the problem of anonymous shell companies.

The FATF release states:

“The United States has a well-developed and robust anti-money laundering and counter-terrorist financing (AML/CFT) regime through which it is effectively investigating and prosecuting money laundering and terrorist financing. However, the system has serious gaps that impede timely access to beneficial ownership information.”

Indeed, the U.S. remains one of the easiest places in the world for criminals, terrorists, and kleptocrats to open anonymous shell companies to launder illicit money with impunity, according to leading academics.  That is because no U.S. state requires that information on the true, human owner (known as the “beneficial owner”) of an entity be disclosed to authorities at the time of incorporation.

There remains bipartisan legislation in both chambers of Congress that would fix this problem (H.R.4450, S.2489), but Congress has heretofore failed in its responsibilities to protect the American people from criminal money laundering and terrorist financing by closing this gaping loophole.

In fact, the U.S. failure was a major topic of discussion over the weekend at the world’s largest anti-corruption conference, which took place in Panama—itself reeling from its own anti-money laundering issues since the April publication of the Panama Papers.

It was also the focus of an op-ed last week by Asst. U.S. Attorney General Leslie Caldwell, who noted that:

“If legislation [to address anonymous shell companies] is not enacted before Congress adjourns, this must be a high priority for the next Congress.”

It is high time that Congress gets its act together.  It’s time to put an end to these anonymous U.S. shell companies.

Clark Gascoigne is the deputy executive director of the FACT Coalition.