* New ethics cop on the (House) block.
* Lobby Log Who’s paying whom to say what?
DCWATCH
03 2010
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legislation would require states to collect ownership info to prevent money laundering.
THE FEDS WANT YOUR COMPANY’S DATA
By MArCiA Coyle ] [
THE U.S. DEPARTMENT OF THE TREASURY
and the U.S. Department of Justice
want to require states to collect more
information about the owners of corporations and limited liability companies to help crack down on domestic
shell companies that launder money
and help finance terrorists. That effort
is putting law enforcement officials at
loggerheads with state treasurers, the
business community, and the American
Bar Association.
Besides imposing new duties on the
states, legislation introduced in the Senate could also bring lawyers and others who are compensated for helping
to form corporations and LLCs under
federal anti–money laundering requirements. They could also be subjected to
potential criminal penalties for providing false information.
About 2 million corporations and
LLCs are formed each year in this country, according to official estimates, and
generally the states do not obtain the
names of the people who will control
or benefit from those companies. Now
the feds want to change that. “States that
offer corporations to individuals without
insisting on information on beneficial
ownership undermine the efforts of law
enforcement to prevent crime, recover
stolen assets, and collect tax,” says former Senate investigator and financial
UDO WEITZ/GETTY IMAGES
crime expert Jack Blum, a Washington
solo practitioner who has testified in
support of the legislation. “We grant
corporations the privilege of limited
liability, and in return the state tells the
people exactly what the corporation is
doing. Secrecy is not and never has been
the real purpose of corporations.”
Senator Carl Levin (D-Michigan) has
spearheaded the Incorporation Trans-
parency and Law Enforcement Assis-
tance Act, along with Senate cosponsors
Charles Grassley (R-Iowa) and Claire
McCaskill (D-Missouri).
State treasurers and other opponents
of the bill contend that it would federalize state incorporation practices and
impose costly and onerous administrative burdens on the states and small
businesses. The ABA adds that the bill’s
Prosecutors claim that
arms merchant Victor
Bout used U. S. shell
companies to hide his
illegal activities.
coverage of lawyers
who handle incorporations could place them in direct conflict with their ethical obligations.
“My view is: How you go about
forming corporations and limited
liability companies is a matter of state
prerogative,” says Kevin Shepherd, a
partner in Venable and a member of the
ABA Task Force on Gatekeeper Regula-
tion and the Profession. “That’s not an
area the federal government historically
has been involved in,” notes Shepherd,
who testified on the bill in November.
“We think there are less intrusive ways
of getting this information.”
From law enforcement’s viewpoint,
the problem is clear: Some of the worst
criminals and extremists exploit the lack
of transparency associated with domes-
