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