Establishing a business or corporation can have legal consequences because the government may suspect that they were involved in crimes. Congress recently passed a bill strengthening enforcement of white collar crimes and other laws involving money laundering, foreign bribery, drug trafficking and terrorist financing.
The large and stable U.S. financial system has long invited illegal money. However, technology and international online transactions that occur instantaneously have outpaced law enforcement.
Shell corporations were used to hide illegal transactions. Law enforcement faced dead ends even after subpoenas were issued against bank records and lawyers.
These entities are easy to establish. For example, a shell corporation may be created in Delaware with the payment of a $90 fee and filing a one-page letter containing the company’s name, post office box and a registered agent which is typically a law firm that routinely creates these corporations. The actual owners are rarely identified and hidden under a complex number of subsidiaries. But these entities could purchase real estate and other legitimate assets with illegal funds transferred into a U.S. bank account.
Support for change also followed several international financial scandals. These involved soccer’s governing body FIFA, the 1MDB development bank from Malaysia and the leaking of the Panama Paper which reveled corruption.
The Corporate Transparency Act
This law was contained in the recently passed defense authorization bill that passed over a presidential veto. It is the most comprehensive banking reform addressing these issues since the Patriot Act passed after the Sept. 11, 20001 terrorist attacks.
Shel companies, for the first time, must provide the names of their owners or face incarceration and other stiff penalties. Information will be stored in a confidential database accessible to federal law enforcement which may be shared with financial institutions who were often unintentional participants in international corruption. The U.S. Treasury Department will manage a registry containing the names of the actual owners of domestic and foreign shell corporations conducting business in this country.
The Justice Department can now demand foreign bank account records to investigate suspected activity. Pending the results of a study, oversight may be expanded to high-value antiquities which was frequently used to hide corrupt proceeds.
Individuals who provide evidence of financial misconduct are now entitled to up to 30 percent of money seized by the Treasury or Justice Departments when their information leads to successful prosecutions. Whistleblower awards were restricted to $150,000.
Legal assistance may help assure that business practices do not violate federal laws. Criminal investigations and prosecutions may also be confusing and intimidating. Kammen & Moudy can offer you the support you need.