Anti-corruption bill requiring shell companies to disclose owners is poised to become law
An anti-corruption bill drafted in response to Miami Herald reporting on anonymous shell companies and their negative effects on the South Florida real estate market and illicit gold trade is poised to become law.
The legislation, titled the Corporate Transparency Act, forces anonymous shell companies to disclose their true owners to the U.S. Treasury Department and financial institutions. The bill, sponsored by Florida Republican Sen. Marco Rubio, is part of a massive $741 billion year-end defense bill that is expected to pass the Senate this week after clearing the House on Tuesday.
President Donald Trump is expected to veto the wideranging defense bill that includes a pay raise for troops because it includes language that would rename military bases named after Confederate leaders and doesn’t include a repeal of a law that protects socialmedia companies from liability related to the content that appears on their sites. It’s expected that Congress will pass the bill with enough votes from Democrats and Republicans to override Trump’s veto.
“This is the most significant anti-money-laundering and anti-corruption reform in a generation,” said Clark Gascoigne, deputy director of The FACT Coalition, a group advocating for greater disclosure of true owners of shell companies and a major proponent of the bill. “This is the culmination of a more than decade-long campaign to pass financial transparency legislation.”
Gascoigne said the Corporate Transparency Act’s passage during the lameduck session of Trump’s presidency came after a two-year period in which longtime opponents of the bill, mostly business interests that worried that greater transparency would create a paperwork burden for legitimate businesses, decided to support the legislation. He said that key figures from the Trump administration and Democrats both supported the bill.
“The U.S. Chamber of Commerce led the opposition for more than a decade. They endorsed the bill over the summer,” Gascoigne said. “There’s sort of a growing outpouring of support about the harm anonymous shell companies inflict on our communities, on our national security, and a lot of that is thanks to a long-term effort by journalists like the Miami Herald and the [International Consortium of Investigative Journalists] to expose the problems of anonymous shell companies.”
The bill requires companies to provide four pieces of information about their owner to the Treasury Department and to their financial institution: a name, address, date of birth and driver’s license or passport number. The information will not be available to the general public, something that Gascoigne supports, but will give the government and law enforcement more tools to investigate shell companies suspected of nefarious activity.
A 2018 Miami Herald series called “Dirty Gold, Clean Cash” spotlighted the use of shell companies to bankroll illicit gold mining in order to launder money. The Herald’s work, which was a Pulitzer Prize finalist, focused on a successful $3.6 billion money-laundering case brought by federal prosecutors against Miami-based precious-metals traders working for a Dallas company that sold gold to nearly 70 Fortune 500 companies, among them Apple, General Motors and IBM.
In 2016, the Treasury Department imposed a temporary transparency rule in Miami-Dade County’s residential real estate market, where shell companies funded by dark money frequently purchased property. The rule was announced a month after the Miami Herald published a series of stories on a massive cache of confidential files dubbed the Panama Papers. The leaked documents showed how anonymous shell companies linked to wrongdoing spent their money on high-end real estate in South Florida, driving up prices for locals.
A 2018 study found that the temporary transparency rule led to a 95% drop in how much cash that shell companies used to buy homes, a practice that Rubio and others said enabled wealthy foreigners engaged in illicit activity to park their money while also pricing out local residents from purchasing homes.
“In my home state of Florida, including in Miami, our law enforcement professionals know all too well that criminals readily use shell companies to remain anonymous and hide nefarious activity,” Rubio said in a statement to the Miami Herald.
Gascoigne said that academic studies showed that nearly 75% of suspected money launderers used anonymous companies to conceal the source of their ownership, and the U.S. was one of the easiest places in the world to set up a company with minimal disclosure.
“It actually requires more personal information to acquire library cards in all 50 states than to set up a shell company,” Gascoigne said. “That’s about to end.”