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SHELLING OUT

Lawmakers move to make it much harder to launder money in the US

Iran used shell companies to hide its ownership of 650 5th avenue in manhattan
AP Photo/Seth Wenig
The Iranian government used this Manhattan skyscraper as a slush fund for years without the US government knowing about it.
  • Max de Haldevang
By Max de Haldevang

Geopolitics reporter

Published

After a decade foundering in obscurity, a bill looking to dent America’s status as the world’s biggest tax haven today passed a vote in the House by a 249 to 173 margin.

The bill would force the owners of US firms to disclose their identities to law enforcement (though not the public)—a strong deterrent to the money launderers, kleptocrats, and human traffickers who use secretive American shell companies to hide their cash and their identities, the bill’s backers say. The legislation would need to be passed in the Senate and signed by US president Donald Trump before becoming law.

Support for the bill picked up steam when its proponents began talking less about how it would stop money laundering and more about how it could bolster national security. They cited Russia allegedly deploying shell companies to meddle in European elections and Iran managing to use a $500 million Manhattan skyscraper as a slush fund for two decades.

The bill picked up just 25 Republican votes, after the National Federation of Independent Business (NFIB), a conservative lobbying group, promised to downgrade their ratings of any member of Congress who backed it. The NFIB argued the bill would impose heavy costs on small businesses by forcing their owners to submit identifying information to the Treasury, and took issue with the potential criminal penalties for business owners who file fraudulent paperwork.

However, the bill got a late boost today when the White House commended it, saying it “represents important progress in strengthening national security, supporting law enforcement, and clarifying regulatory requirements.” A number of heavyweight Senate Republicans support some form of corporate transparency legislation, including Finance Committee chair Chuck Grassley and conservative hardliner Tom Cotton.

Even if the bill becomes law, the US will still languish behind its European counterparts. The UK has set up a fully public registry of the owners of every company, while the rest of the European Union is following suit—and even notorious tax havens like the Cayman Islands have committed to doing so.

Nonetheless, allowing US law enforcement at least access to corporate ownership information is a “critical step,” said Mark Hays, the anti-money laundering campaign leader at Global Witness, an anti-corruption nonprofit. “Given the role the US plays in both combatting money laundering and as a haven for dirty money, having that piece of the puzzle in place will be wonderful for the rest of the world,” he said.

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