News & Events

Legislation Will End Anonymous Shell Companies

This article originally published in the Daily Local.


As a law enforcement officer for decades, I am an advocate for not only enforcing the law but for making sure that our laws promote safety and security in our communities. That is why I am in favor of the Illicit Cash Act, which will provide transparency in business and cut down on U.S. shell companies being used for illegal activities. Providing access for criminal activities through shell companies is a threat to our communities and Congress can address the problem.

In 2011, a Treasury Department official testified that a Russian arms trafficker who is currently serving a 25 year prison sentence used multiple U.S. shell companies to facilitate his crimes.

In 2012, the leader of Mexico’s largest drug cartel was finally indicted after using U.S. shell companies for years to launder drug money in the United States by purchasing race horses.

The next year, the Department of Justice announced a court judgment finding that U.S. shell companies operating part of an office building in New York served as a front for the Iranian government in violation of sanctions and money laundering statutes.

In both cases, the parties involved broke the law, but the anonymous shell companies they used to carry out their illicit activities were perfectly legal. Under current U.S. law, there is no requirement for shell companies to disclose their beneficial owner – the person or party who actually owns the company even if the legal title belongs to another entity.

Criminals, including drug cartels, human traffickers, opioid smugglers, terrorists, and sanctions evaders, have long used anonymous shell companies formed in the United States to hide assets and launder money for illegal activities. In some cases, the formation of these companies requires less personal information than is required to rent a car or obtain a library card.

To combat financial crimes and terrorism, Congress can work with the banking, law enforcement, and small business communities to close the massive loophole that exists in the current law. A group of eight bipartisan Senators have introduced legislation doing just that. The Illicit Cash act is a straightforward solution that would create basic disclosure requirements anyone would need to open a business banking account: name, date of birth, address, and either a passport or driver’s license number.

The burden on actual business owners is minimal, but these basic pieces of information can provide law enforcement with critical information that stops criminal activity in its tracks. A recent survey found broad agreement among small business owners about the need to provide basic information in order to end the abuse of anonymous shell companies, with 75 percent of those with an opinion supporting the disclosure requirement and two thirds agreeing that it would not be burdensome to provide this information.

The Illicit Cash Act is carefully written to provide law enforcement with important tools to stop criminals while also securing the private information of business owners. It also specifically aims to minimize burdens on small business owners with limited resources. The information collected would be available in a protected directory and only available to authorized officials and can only be used to assist in an active law enforcement investigation. Every query of the directory would be recorded to prevent abuse.

It’s an unfortunate reality that criminal and illicit funds flow through the international finance system every year. According to a 2011 United Nations study, fewer than 1 percent of those funds are believed to be frozen and confiscated by law enforcement. The United States is the second most financially secretive jurisdiction in the world – a global outlier in failing to stop the abuse of anonymous shell companies.

The Illicit Cash Act will have little impact on businesses operating legitimately but will help law enforcement to root out criminals who are operating right under our noses. After all, while some companies do have reasons to refrain from making their ownership known to the public, it’s hard to imagine a legitimate reason why any company would keep its ownership secret from the state where it’s incorporated, law enforcement, and a financial institution that is legally obligated to determine and report that information.

Congress does not often have the opportunity to come to the table and pass commonsense, bipartisan legislation that will make a real difference. The Illicit Cash act is a rare opportunity for consensus that will prevent criminals from abusing our laws for their financial benefit and end some of the most serious threats to public safety in the United States. Congress should act quickly to pass this legislation.

– Carolyn “Bunny” Welsh, Chester County Sheriff