By Sabina Mollot
For the past decade, Congresswoman Carolyn Maloney has been pushing legislation aimed at preventing money laundering, often via real estate purchases, by cracking down on shell companies.
On Tuesday, May 14, Maloney held a press conference in Washington, DC about the bill, which she said is finally starting to gain traction in Congress along with having the support of law enforcement agencies, banks, credit unions and four real estate industry associations. Real estate groups in support of the bill are American Escrow Association, American Land Title Association, National Association of REALTORS, Real Estate Services Providers Council, Inc. (RESPRO).
“I’ve never had such huge support for one of my bills before,” said Maloney. “If this bill passes, it’ll be harder to finance terrorism.”
After reintroducing the Corporate Transparency Act, which is co-sponsored by Reps. Peter King and Tom Malinowski last week, she expects it to have a markup soon. A markup, unlike a hearing, is aimed at getting legislation passed in committee and moved onto the house floor. There have already been hearings for this bill, and there is also one set for next week. The bill hasn’t yet been discussed in the Senate.
If passed, the Corporate Transparency Act would require limited liability companies to reveal their true, beneficial owners to FinCEN (The Financial Crimes Enforcement Network of the Department of the Treasury) when the company is formed. The companies would also have to file annually and report if there have been any changes in ownership. There would also be civil and criminal penalties for filing fraudulent or incomplete information.
Maloney said she believes the purchase of properties by illicit companies is even a problem in her own district, much of which is Manhattan’s East Side.
“You can drive around and see buildings with no lights on,” she said. “These buildings are their bank accounts. (With the bill), we can track the use of shell companies who hide dirty money to fund terrorism and drug cartels.”
Maloney added that many other developed countries have some sort of system in place to prevent shell companies from hiding illicit funds. “It’s not just embarrassing; it’s a gaping hole in our national security.”
She pointed out how a Treasury pilot program tracking higher-end purchases in Manhattan and Miami over a six-month period found that 30 percent of the transactions made had been subject to a suspicious activity report by a financial institution. Maloney suspects that number would have been even higher had the program not been publicly announced ahead of time.
The bill’s sponsors have stressed the bill is about targeting suspicious companies likely to be shells and not just LLCs created for purchases that otherwise wouldn’t raise red flags.
“A lot of people (create LLCs) for business reasons,” Maloney said. “Criminals do it to hide their money.”
In a written statement about the bill, its sponsors said information about the true owners being collected by the government would only be made available to financial institutions with customer consent and law enforcement.
Additionally, companies with over 20 employees and over $5 million in gross receipts or sales which have a physical presence in the U.S. are exempt from the bill’s requirements, because they’d be less likely to be anonymous shell companies created to hide or launder money.
The congress members have also pointed out that many companies are already required to disclose their owners such as federally regulated banks, credit unions, investment advisers, broker-dealers, state-regulated insurance companies, churches and charitable organizations. Therefore, they’d also be exempt from the bill’s requirements.