Guest Post: The U.S. Just Created a Public Beneficial Ownership Registry for a Subset of Companies

Today’s guest post is from Neil Gordon, a Senior Researcher at the Project On Government Oversight (POGO).

Companies with anonymous ownership structures are a serious global problem. Anonymous companies, as readers of this blog are likely well aware, play a significant role in facilitating grand corruption. Anonymous companies are associated with a wide range of other criminal misconduct as well. Unfortunately, the United States bears much of the blame for the proliferation of anonymous shell companies and the harm they cause. Most states make it relatively easy to set up a business without revealing the real owners—even easier than getting a library card, according to the anticorruption think tank Global Financial Integrity. That’s why it was so important that Congress finally enacted two key corporate transparency provisions as part of the fiscal year 2021 National Defense Authorization Act (NDAA).

The first provision, the Corporate Transparency Act (CTA), requires most companies to register their beneficial owners—the people who really own, control, and financially benefit from the company—with the Treasury Department’s Financial Crimes Enforcement Network. This provision received a great deal of media coverage, and rightly so. But the second key beneficial ownership transparency provision in the NDAA has received almost no attention, even though it could be a real game-changer. That second provision can be found in Section 885 of the NDAA. Section 885 requires all companies receiving federal contracts or grants over $500,000 to report their beneficial owners in the Federal Awardee Performance and Integrity Information System (FAPIIS), a database containing the misconduct and performance histories of federal contractors and grantees. Continue reading

Guest Post: An Anticorruption Agenda for the Biden Administration

Today’s guest post is from Lucinda A. Low and Shruti Shah, respectively Acting Chair and President of the Coalition for Integrity, a U.S. based non-governmental organization focused on fighting corruption. The opinions expressed here are those of the authors, and should not be attributed to the organization..  

The United States has a long history, across administrations of both parties, of showing leadership internationally in the fight against corruption. The passage and enforcement of the Foreign Corrupt Practices Act (FCPA) has served as an example for other countries to adopt their own transnational anti-bribery laws. Additionally, the United States has championed international anti-bribery efforts in multilateral organizations and worked to build coalitions to root out all types of corruption. For the last several years, however, U.S. has faltered. In order to reestablish the U.S. as a global leader against corruption, and to get its own house in order, the Biden Administration and the new Congress should embrace an ambitious agenda that includes the following elements: Continue reading

New Podcast, Featuring Gary Kalman

A new episode of KickBack: The Global Anticorruption Podcast is now available. In this week’s episode, we’re delighted to welcome back to the podcast Gary Kalman, the Director of Transparency International’s United States office. I was fortunate to be able to interview Gary a little over one year ago, just before he stepped into his new role as TI’s U.S. Director. In our more recent conversation, we had the opportunity to discuss how his first year in this position has gone, touching on some major successes–most notably the passage of the Corporate Transparency Act, which requires companies to provide the government with information on their true beneficial owners–as well as ongoing challenges. Gary discusses some of the advocacy strategies that proved effective on the corporate transparency issues, and suggests how similar strategies might be deployed to advance other aspects of the anticorruption agenda. He also lays out what he sees as the highest priorities for TI’s advocacy work in the United States, and what vulnerabilities have been exposed by the experience with the Trump Administration and how those might be addressed. You can also find both this episode and an archive of prior episodes at the following locations: KickBack is a collaborative effort between GAB and the ICRN. If you like it, please subscribe/follow, and tell all your friends! And if you have suggestions for voices you’d like to hear on the podcast, just send me a message and let me know.

Guest Post: For Whose Benefit? Reframing Beneficial Ownership Disclosure Around User Needs

GAB is pleased to publish this post summarizing a recent paper on beneficial ownership disclosure by Anton Moiseienko (Research Fellow) and Tom Keatinge (Director) of the London-based Centre for Financial Crime and Security Studies at the Royal United Services Institute.  In the paper, the authors examine current standards governing disclosure of beneficial ownership data, the challenges of ensuring the data’s accuracy, and the needs and interests of the data’s different users. It will be of particular interest to American policymakers given enactment of the Corporate Transparency Act.

Beneficial ownership disclosure – the collection and sharing of information on genuine (rather than formal or nominee) owners of assets – has become a central issue in the fight against corruption and other financial crimes. To whom to disclose it can be controversial, as the very public spat between the United Kingdom, and several of its Overseas Territories shows. Moreover, even countries committed to full public disclosure face challenges in ensuring implementation meets promise as continuing discussions among EU member states shows.  

Arguments over the extent of disclosure and verification can obscure an equally important issue, ensuring the ownership data meets the needs of domestic and foreign law enforcement agencies, tax authorities, regulated businesses, and the public at large. In our paper, we examine not only to whom the information should be provided and how to guarantee it is accurate but how to be sure what is collected and disclosed serves the interests of different types of users. It is based on a review of publicly available sources and over 40 interviews, including more than 25 with experts based in British Overseas Territories and Crown Dependencies, jurisdictions where the lack of information on beneficial ownership has been a major concern internationally.

Continue reading

It’s Not Just the Corporate Transparency Act: Other Reasons To Welcome the Passage of the U.S. NDAA

Last week I posted about the Corporate Transparency Act (CTA), the new law requiring companies to provide the government with information about their ultimate beneficial owners. The CTA, which was passed (over President Trump’s veto) as part of the National Defense Authorization Act (NDAA), has been getting a lot of attention in the anticorruption and anti-money laundering (AML) community, and rightly so. The product of decades of tireless and shrewd advocacy, the CTA—despite its limitations and imperfections—will make it substantially harder for kleptocrats, terrorists, organized crime groups, and others to abuse corporate structures to facilitate their crimes and hide their loot. But the CTA is not the only part of the NDAA that may have a substantial positive impact on the fight against corruption and money laundering. And while it’s entirely understandable that most of the attention (and celebration) in the anticorruption community has focused on the CTA, I wanted to use today’s post to highlight several other provisions in the NDAA that may also prove important in combating corruption and money laundering. Continue reading

A Few Thoughts on the Passage of the U.S. Corporate Transparency Act

[Note: I drafted the post below earlier this week, before yesterday’s shocking events in the U.S. Capitol. I mention this only because it might otherwise seem odd, and perhaps a bit tone-deaf, to publish a commentary on new corporate transparency rules when we just saw an attempted insurrection incited by the siting U.S. President. I don’t really have anything to say about the latter events (at least nothing that others haven’t already said), so I decided to go ahead and publish the post I planned to publish today anyway.]

Last week, as I suspect many readers of this blog are well aware, the United States Congress enacted one of the most significant anticorruption/anti-money laundering (AML) reforms in a generation. The Corporate Transparency Act (CTA), which was incorporated as part of the annual National Defense Authorization Act (NDAA), will require—for the first time in the United States—that corporations, limited liability companies, and similar entities will have to provide the U.S. government (specifically, the Treasury Department’s Financial Crimes Enforcement Network (FinCEN)) with the identities of the ultimate beneficial owners of those entities. That beneficial ownership information, though not made publicly available, will be provided to law enforcement agencies, as well as to financial institutions conducting due diligence (with customer consent). This reform will make it substantially harder for kleptocrats and their cronies—as well as other criminals, including human traffickers and terrorists—to conceal and launder their assets in the United States through anonymous shell companies, and will make it substantially easier for law enforcement to “follow the money” when investigating possible criminal activity.

This important reform has already gotten a ton of coverage in the anticorruption/AML community (see here, here, here, and here), as well as the mainstream media (see here, here, here, and here), though mainstream coverage has understandably been overshadowed by both the coronavirus pandemic and President Trump’s attempts to subvert the recent election. And we’ve had quite a bit of discussion of the issue on GAB prior to the passage of the NDAA (see, for example, here, here, here, here, and here). So, I’m not sure I really have that much to add to what others have already said. Nevertheless, it felt strange to allow this landmark event to go entirely undiscussed on GAB, so at the risk of self-indulgence, I’d like to throw out a few additional thoughts and observations related to the CTA. Continue reading

Are Legislative Changes to US AML Rules Finally on the Way? Some Thoughts on Tomorrow’s Subcommittee Hearing

Although the United States has been a leader in the fight against global corruption in some respects—particularly in its vigorous enforcement of the Foreign Corrupt Practices Act and, at least until recently, its diplomatic efforts—there is widespread agreement in the anticorruption community that the United States has not done nearly enough to address the flow of dirty money, much of it stolen by kleptocrats and their cronies, to and through the United States. Effectively addressing this problem requires updating the US legislative framework, a task made difficult by the checks and balances built into the federal legislative process, coupled with high levels of political polarization. Yet there are reasons for cautious optimism: Thanks in part to skillful lobbying efforts by several advocacy groups, and aided in part by the Democrats taking control of the House of Representatives in the most recent mid-term elections, it looks as if there’s a real chance that the current Congress may enact at least some significant reforms.

Three of the reform bills under consideration are the subject of a hearing to be held tomorrow (Wednesday, March 13, 2019) before the House Financial Services Committee’s Subcommittee on National Security, International Development, and Monetary Policy. That hearing will consider three draft bills: (1) a draft version of the “Corporate Transparency Act” (CTA); (2) the “Kleptocracy Asset Recovery Rewards Act” (KARRA); and (3) a draft bill that currently bears the unwieldy title “To make reforms of the Federal Bank Secrecy Act and anti-money laundering laws, and for other purposes” (which I’ll refer to as the Bank Secrecy Act (BSA) Amendments). The subcommittee’s memo explaining the three proposals is here, and for those who are interested, you can watch a live stream of the subcommittee hearing tomorrow at 2 pm (US East Coast time) here.

For what it’s worth, a few scattered thoughts on each of these proposals: Continue reading