Legislation to Reform Anti-Money Laundering Framework and End Anonymous Shell Companies Nears Finish Line

Legislation to Reform Anti-Money Laundering Framework and End Anonymous Shell Companies Nears Finish Line

Washington, D.C. — The U.S. House of Representatives voted today to reform the U.S. anti-money laundering (AML) framework and end anonymous shell companies by adding an amendment to the William M. (Mac) Thornberry National Defense Authorization Act for Fiscal Year 2021 (NDAA). The amendment closely mirrors the Corporate Transparency Act (H.R. 2513) and the COUNTER Act (H.R. 2514), which previously passed the House, and positions these critical reforms to become law.

“There is overwhelming bipartisan support for these reforms, and the time is now to get it done,” stated BPI President and CEO Greg Baer. “The passage of this amendment represents the culmination of years of bipartisan work and stakeholder negotiations and signals to the world that the U.S. is serious about uprooting existing criminal organizations and aggressively turning up the fight against human traffickers, terrorists and other illicit global actors.”

The amendment, supported by BPI and other financial services trades, was included by the House Armed Services Committee as an en bloc amendment, which is a collection of amendments considered and voted on as one. Once the legislation passes, the House and Senate are expected to convene a conference committee to resolve the differences between their respective versions of the NDAA.

The amendment will modernize the U.S. anti-money laundering/countering the financing of terrorism framework to be more effective in addressing current risks. The current AML/CFT framework is outdated and ill-suited to apprehending criminals and countering illicit financial activity. The 50-year-old framework has been expanded, but not substantially revised, since its inception. The amendment also included a provision to end anonymous shell companies by requiring FinCEN to collect ownership information at the time of incorporation and ensure such information is accessible to relevant stakeholders, such as FinCEN, law enforcement and financial institutions.

Legislation to end anonymous shell companies has received broad support from a diverse coalition of stakeholders including non-profits fighting to end human trafficking and the exploitation of minors, national security experts, law enforcement, business associations such as the U.S. Chamber of Commercefinancial services associations, and non-partisan advocacy organizations such as the FACT Coalition. Approximately 75% of small business owners with an opinion support requiring small business owners to provide their personal information when forming a company, a critical requirement of the reform, according to a Morning Consult survey conducted on behalf of BPI. And the legislation addresses critical national security deficiencies identified in a recent Government Accountability Office report, which found that ineligible foreign-based entities were using anonymous shell companies to sell defective military parts to the Department of Defense.

Reforming the AML/CFT framework, including ending anonymous shell companies, has been a years-long effort. The most recent legislation to end anonymous companies was introduced by Representative Carolyn Maloney (D-NY) in May 2019, passed through committee with bipartisan support and, combined with Representative Emanuel Cleaver’s (D-MO) COUNTER Act modernizing AML/CFT expectations, passed by the full House on October 22, 2019 by a vote of 249 – 173. Shortly before House passage of the legislation, the Senate Banking Committee held a hearing exploring legislative solutions to end anonymous shell companies at which Baer testified, and a bipartisan group of senators introduced AML/CFT reform legislation of their own on September 26, 2019 known as the ILLICIT Cash Act (S. 2563). Senate Banking Committee Chairman Crapo (R-ID) and Ranking Member Brown (D-OH) recently introduced the Anti-Money Laundering Act of 2020 as an amendment to the Senate defense authorization act, the bill is an updated version of the ILLICIT Cash Act, reflecting negotiations by the committee’s leadership.