This may be the year the United States finally requires disclosure of who owns American corporations. By a 43-16 vote, the House Financial Services Committee recommended on June 11 that the full House of Representatives approve legislation creating a beneficial ownership registry accessible to federal and state law enforcement agencies and presumably to foreign law enforcement authorities through a valid mutual legal assistance request. At the same time, a bipartisan group of Senators, including two conservative Republicans who back President Trump, is proposing similar legislation in the Senate.
The American legislative process is an arduous one. The Financial Services Committee’s proposed bill must be passed by the House of Representatives; an identical bill approved by the Senate, and President Trump must then sign it. Long-time supporters of a registry cite two reasons for optimism a bill will pass this year. One, 10 Republican members of the Financial Services Committee voted for the bill and others may support it when the House considers it, and second, the Senate bill has the support of Republican Senators close to President Trump.
The registry will be maintained by the Treasury Department’s Financial Crimes Enforcement Network (FinCen), the agency responsible for enforcing U.S. anti-money laundering laws. To meet objections that disclosing beneficial ownership data could violate privacy rights, the bill contains strict provisions on when FinCen can disclose ownership data to law enforcement agencies and penalties for misuse of the data.
A beneficial owner is defined as “a natural person who, directly or indirectly, through any contract, arrangement, understanding, relationship, or otherwise:
“(i) exercises substantial control over a corporation or limited liability company;
“(ii) owns 25 percent or more of the equity interests of a corporation or limited liability company; or
“(iii) receives substantial economic benefits from the assets of a corporation or limited liability company” (pp 15-16).
Willful violations of the law would carry a civil penalty of up to $10,000, a prison term of up to three years, or both (p. 14). The Secretary of the Treasury is to issue regulations detailing such matters as when and how beneficial ownership data is to be updated and providing for limited exceptions to reporting ownership data when, for example, the beneficiary is a minor.
A House Financial Services staff memorandum written to aid Committee members in their deliberations on the bill nicely summarizes its rationale. It also notes that the American Bar Association and the National Federation of Independent Business “had raised concerns that corporate transparency could cause regulatory burdens on lawyers and small businesses.” The staff memo reports too that the American Civil Liberties Union worries that it would make it a crime to file paperwork with the Federal Government. Congresswoman Maloney, the bill’s sponsor, introduced an amendment in the nature of a substitute (ANS) to the initial text to address these concerns, and during its deliberations the Committee approved an amendment by Congresswoman Wagner meant to reduce reporting requirements on small businesses. Whether these changes will satisfy opposition by these influential interest groups, and whether if they do not the groups will be able to stop the bill from passing, remains a question mark. But the momentum is clearly with those who favor legislation.