Introduction
Treasury Secretary Janet Yellen has revealed that a significant milestone has been achieved in the government’s effort to unveil the true owners of shell companies. Over 100,000 businesses have joined a newly established database, which collects “beneficial-ownership” information on firms. Yellen emphasizes that this initiative sends a resolute message that the United States will not tolerate the presence of illicit funds within its borders.
A Step Towards Transparency
Yellen’s announcement coincides with her visit to the Treasury’s Financial Crimes Enforcement Network (FinCEN) in Vienna, Virginia. During her visit, she will discuss the recent launch of the beneficial-ownership database and elaborate on forthcoming real estate regulations aimed at promoting transparency in property transactions involving individuals and companies.
Battling Illicit Activity
The Treasury Secretary’s visit to Virginia aims to highlight the Biden administration’s commitment to enhancing corporate transparency and curbing the misuse of shell companies for illegal purposes. Yellen stresses that opaque corporate structures around the world enable the concealment of illicit activities. By collecting data on beneficial ownership, law enforcement agencies will have valuable support in apprehending criminals, prosecuting offenders, and confiscating unlawfully obtained assets.
Corporate Transparency Act and Reporting Requirements
The significance of this recent development can be traced back to the bipartisan Corporate Transparency Act signed into law in 2021. The Act empowers the Treasury to establish new regulations concerning beneficial ownership. As of January 1, all U.S. businesses must report detailed identifying information about their direct and indirect owners or controllers. It is estimated that around 32.6 million American companies with fewer than 20 employees are obligated to register with the government under this rule.
Treasury Secretary Yellen’s unveiling of the beneficial-ownership database marks an important step forward in the battle against financial crimes and corruption. The establishment of this platform serves as a testament to the United States’ unwavering commitment to promoting transparency and integrity in the corporate sector.
National Small Business Association sues Treasury over database
A judge is expected to make a ruling on this matter soon.
Addressing Risks in Commercial Real Estate
Apart from the business database, Treasury is also considering additional measures to tackle risks associated with commercial real estate.
Real estate has long been exploited for money laundering purposes. In March 2023, Secretary Yellen revealed that illicit actors had laundered at least $2.3 billion through U.S. real estate between 2015 and 2020.
A report published by the Congressional Research Service in 2022 suggested that Congress should find a way to balance money-laundering risks in the real estate sector with differing opinions on oversight.
The Benefits of Corporate Transparency
Secretary Yellen emphasizes that increasing corporate transparency through the collection of beneficial-ownership information has numerous advantages. Firstly, it helps protect national security. Additionally, corporate transparency provides economic benefits such as safeguarding the financial system, reducing due-diligence costs, promoting fair business competition, and increasing tax revenue.
FinCEN Advocates for Safeguarding the Financial System
FinCEN’s mission, according to its website, is to safeguard the financial system from criminal abuse, money laundering, and other illicit activities.
