42 Attorneys General Urge Senate to Pass Law to Fight Shell Companies

Washington, D.C. — The National Association of Attorneys General (NAAG) sent a bipartisan letter today signed by 42 attorneys generals urging the U.S. Senate to pass S. 2563, the Improving Laundering Laws and Increasing Comprehensive Information Tracking of Criminal Activity in Shell Holdings (ILLICIT CASH) Act.

The ILLICIT CASH Act updates the federal framework for fighting money laundering and terrorism financing, which has not been comprehensively reassessed since its inception in the 1970s. The legislation creates new tools for information sharing between financial institutions and law enforcement. Along with that, the Act requires a covered entity to report its “beneficial owners,” the actual people who benefit from or control the entity.

“As our States’ chief legal officers, we are concerned about the use of American financial institutions for money laundering by terrorist groups and other criminal enterprises. We believe the ILLICIT CASH Act, in particular its provisions mandating disclosure of entities’ beneficial ownership information, will greatly reduce criminals’ and terrorists’ abuse of our institutions,” reads the letter.

The NAAG letter highlights that many states do not have the ability to track information on the actual people who control or benefit from corporations and other entities doing business there. Without that information, states cannot know if an entity is a shell for concealing the illicit proceeds of criminals like drug traffickers, terrorist financiers, tax evaders, and corrupt government officials.

Under the ILLICIT CASH Act, certain business entities will have to disclose a “beneficial owner” to the federal government. A beneficial owner is a “natural person” who controls an entity, owns at least 25% of it, or receives economic benefits from it. The Financial Crimes Enforcement Network of the U.S. Department of Treasury (FinCEN) will then keep all the disclosed beneficial ownership information in a federal registry. The Act requires FinCEN to release beneficial ownership information to law enforcement agencies, including at the local and state levels.

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