US Congress approves Act requiring companies to reveal ownership
The measures were incorporated into the NDAA from two earlier acts, the Corporate Transparency Act of 2019 and the Improving Laundering Laws and Increasing Comprehensive Information Tracking of Criminal Activity in Shell Holdings (ILLICIT CASH) Act. They will mandate the Department of the Treasury to create a registry of beneficial owners of companies, whether pre-existing or created in the future.
The NDAA applies to non-US companies registered to do business in the US, as well as to US-registered corporations. Reports will have to be filed at the time of company formation and within a year of any changes. The information will be administered by the Treasury's Financial Crimes Enforcement Network (FinCEN), and will be made available to law enforcement authorities, non-US enforcement agencies and financial institutions (FIs) attempting to meet their customer due-diligence requirements, although not to the general public.
It is one of the most significant pieces of anti-money laundering regulation ever enacted in the US, said law firm Macfarlanes, which said it 'signalled a potentially momentous shift in the relationship between law enforcement, companies and financial regulators'. Almost two million corporations and LLCs are registered every year in the US, but few states require companies to disclose their true owners.
Some uncertainties remain, including the definition of what constitutes the 'substantial control' over an entity necessitated for an individual to qualify as a beneficial owner. FinCEN will issue guidance to clarify this.
Other provisions in the legislation require streamlined, real-time reporting of suspicious activity reports through the establishment of channels of communication between FIs, law enforcement and regulators.
President Trump has threatened to veto the Act on grounds unconnected with the transparency clauses, but will find it difficult to do so because of the senate's overwhelming vote of 84 to 13 in its favour. If he does attempt to veto it, Congress could then take a further vote to force it through.
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