Under current U.S. law, when criminal organizations want to hide their money laundering and financing activities from law enforcement officials, they have the means to do so. The result is the United States has become an international haven for rogue regimes, terrorist groups, human traffickers, drug cartels, and other dangerous enterprises who hide behind anonymous shell companies formed within our borders.
This bewildering dynamic is due to the fact that our corporate privacy laws suffer from a massive loophole – shell companies do not have to disclose beneficial ownership information when forming. Consequently, when law enforcement agencies are investigating and piecing together cases against these criminals, they often hit a dead end when the trail leads to anonymous shell companies.
Fortunately, some common-sense legislation has been introduced by a bi-partisan team of U.S. Senators who understand we can and should strike the right balance between privacy protection and national security. The ILLICIT CASH Act will immediately provide law enforcement and banking institutions the tools needed to identify criminal activity in our nation’s financial system, while protecting the privacy of those who are doing nothing wrong.
The disclosure requirements are straightforward. It requires no more information than you would have to provide when renting a car – name, address, date of birth, and driver’s license or passport number. Furthermore, the directory that houses that information is only available to authorized users and must be accessed in the course of an active law enforcement investigation.
This simple, yet highly effective solution is why seventy-five percent of American small business owners with an opinion on the topic, support requirements to provide personal information when forming their company and are willing to take action themselves to end anonymous shell companies. And that action could not come soon enough.
The fact is the United States is woefully behind the rest of the world in preventing and stopping financial crimes. The U.S. has been criticized by the Financial Action Task Force, the inter-governmental body for combating illicit finance, for being a shelter for criminals and seeking to launder money. A report from the United Kingdom named the United States second in the world in financial secrecy, embarrassingly placing the U.S. between Switzerland and the Cayman Islands.
With growing national security threats emanating from foreign adversaries like China, Russia, and Iran, as well as the increased sophistication of criminals closer to home like opioid smugglers, it is clear the status quo leaves all Americans vulnerable.
The ILLICIT CASH Act is an immediate way to close the loophole that protects criminal activity and prevents law enforcement agencies from carrying out their missions to keep the public safe. A simple change in the law would require criminals operating anonymous shell companies to come out of the shadows and reveal their ownership in entities that presently allow them to fund serious crimes with minimal scrutiny.
There’s no reason to wait on passing this important reform.
Joseph Michael Arpaio is a former American law enforcement officer. Described as “America’s Toughest Sheriff”, he was the elected Sheriff of Maricopa County, serving from 1993 through 2016.