A new U.S. law has shut down a key conduit for global money laundering and tax evasion, as it requires U.S. shell companies to reveal the identity of their owners to authorities. Such companies are used to hide billions of dollars in wealth.
AFP reports that the U.S. Congress passed the National Defense Authorization Act for Fiscal Year 2021 (NDAA FY21), including the Corporate Transparency Act, overriding President Donald Trump‘s veto on the evening of January 1.
This law forces the “beneficial owners” behind shell companies to notify the U.S. Treasury Department’s financial enforcement agency, the Criminal Enforcement Network (FinCEN), of their identities.
While the law still protects these individuals from public view, and only the Treasury and law enforcement agencies have access to FinCEN’s database, advocates of financial system transparency say it has led to significant progress against corrupt officials, organized crime and tax evasion by the wealthy.
In the past, these individuals have been able to anonymously borrow from the world’s largest economy, the United States, to launder their dubious wealth.
Experts have often cited anonymous shell companies … as the biggest weakness in our nation’s money laundering fight for years,” said Ian Gary, chief executive of the FACT Coalition, a group actively lobbying for the law’s passage.
This is the most important step we can take to strengthen the protection of our financial system from abuse,” he said.
The United Nations (UN) estimates that between $800 billion and $2 trillion is laundered through the global financial system each year.
While much of the focus is on tax havens such as Panama and the Cayman Islands, experts say the sheer size of the U.S. economy and its ability to siphon billions of dollars unnoticed makes the U.S. an important key to turning illicit funds into legitimate assets.
The nonprofit Tax Justice Network named the Cayman Islands and the United States in early 2020 as the most important places in the world to help people hide their assets from law enforcement and tax authorities.
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