In the UK, ‘offshore shell company’ is transformed into ‘offshore shell person’
FINCEN RULES
Imposing order on the jungle that is American corporate ownership is not a task for the faint-hearted, and quite a number of observers (for example) were beginning to worry that implementation of 2020’s Corporate Transparency Act was taking far too long, so credit to the brave folks of FinCEN — the financial crimes bureau at the U.S. Department of Treasury — who have spent months trying to make this happen in the face of what must be some ferocious lobbying.
- “Today’s announcement is a major step forward in giving law enforcement, national security agencies, and other partners the information they need to crack down on criminals, corrupt individuals, and other bad actors who seek to take advantage of America’s financial system for illicit purposes,” said Treasury Secretary Janet Yellen.
As you will know if you’ve been following this issue, creating a shell company in some parts of the United States is notoriously easier than getting a library card, which makes life easy for fraudsters and other financial criminals who wish to own property anonymously. Solving the problem was complicated by the fact that each state had its own registry, and some of them (especially Nevada and Delaware) were heavily reliant on incorporation revenue to prop up their budgets, and didn’t want to do anything which might annoy the golden goose, even if the goose was enabling money laundering and tax dodging on a monumental scale.
Finally, at the tail-end of the Trump presidency, the Corporate Transparency Act was passed with bipartisan support, and FinCEN was left with the task of how to make it work. It has finally published the first of three rules that will do so, giving some details, including that more anonymous companies exist in the United States than in any other jurisdiction — perhaps “tens of millions” in total — which may be why it is taking officials so long to get this off the blocks. The act won’t come into effect until the beginning of 2024 but, hopefully, that lengthy lead time means the measures will really work.
I was impressed by the thoughtfulness of how it has been put together, which suggests its authors have genuinely considered all the comments made in their call for evidence. For those of us outside the United States, it is important that this works because other jurisdictions would then not be able to use U.S. inactivity as something to hide behind. If the US is leading the pack, rather than trailing it, then other countries will have to move too. We must keep our eyes on every bit of the ball here, however, including how this is all to be paid for.