New law introduces in US for cracking down shell companies for combating corruption

New law introduces in US for cracking down shell companies for combating corruption

A watershed reform related to money laundering cases has been introduced in the United States of America (US) for locating proceeds related to foreign bribery, drug trafficking and financing for terrorists and other such criminal activities

Many efforts have been made by a federal prosecutor named Daniel R. Alonso (Alonso) who led teams to expose anonymously owned corporate entities to criminal activity and liabilities. Now he is engaged in private practice wherein he advices to clients over money laundering related issues.

Alonso recalled, "It required all kinds of shoe-leather investigating to identify who was really behind these shell companies". It was further stated, "You'd have to subpoena bank records and lawyers, as well as human sources, and even then you frequently hit a dead end." Alonso stated that, "It's not an overstatement that this law is a game-changer in some serious ways."

The issue with the shell companies is that their true owners are rarely listed, their identities hidden under a web of subsidiaries. But once created, the entities can be used to purchase legitimate assets, such as real estate, using ill-gotten funds furtively transferred into a US bank account.

One such Delaware-based company named Essential Consultants LLC was used by one Michael Cohen who was the former personal attorney of Donald Trump. It was used by him to conceal hush-money payments to porn star Stormy Daniels.

Recently money laundering laws have been introduced in the US for locating the proceeds of criminal activities committed by anonymous corporate entities. Congress passed new legislation recently after a long battle that was going on related to sweeping bank-related reforms since the passing of the Patriot Act, after the terrorist attacks held on 11 September 2001.

As the new legislation is introduced in the US, it will be the first time that shell companies will be required to reveal the names of their owners or they may face penalties or jail sentences. The information provided by these companies shall be stored in a confidential database that will be accessible to federal law enforcement. Such information will also be shared with banks who are often unwitting accomplices to international corruption.

The US being a financial hub has been facing dirty money laundering crimes. The new legislation aims to strengthen controls over such issues and criminal activities. It shall create a registry managed by the Treasury Department wherein the names of the true owners of the shell companies (both domestic and foreign) conducting business in the US shall be stored.

The Corporate Transparency Act also dramatically expands awards for whistleblowers. It was introduced in 2010 by Carolyn Maloney who was a New York Democrat who faced opposition from banks and business groups that were concerned about red tape and States such as Delaware and Wyoming that earns major revenue from the registration every year in the US.

However, several international financial scandals that involved soccer's governing body FIFA and the 1MDB from Malaysia, and leaking of the Panama Papers, gradually resulted in soft criticism wherein it was revealed that a prominent role was played by secretive shell companies that hid the proceed and were engaged in illegal activities.

The new legislation will maintain a check over such individuals who come forward with evidence of financial malfeasance are entitled to receive up to 30% of money seized by the Treasury or Justice Departments when their information leads to successful law enforcement actions. Previously, awards were capped at $150,000.

The Justice Department has also expanded its powers wherein it can demand foreign bank account records if in case there is a suspension of any criminal activity.

According to experts, the new legislation will definitely drive away money laundering-related issues from the US that transits from abroad that has driven up real estate prices in major cities like New York, Miami, and Los Angeles.

Some experts also suggest that the new legislation may push crimes to less reputable jurisdictions where secrecy remains.