Treasury Secretary Janet Yellen has revealed that a new government initiative to expose the owners of shell companies has garnered the participation of 100,000 businesses in a recently established database. The initiative aims to collect “beneficial ownership” information, signaling a commitment to unveiling the true ownership of such entities and demonstrating that the United States is not a safe haven for illicit funds. Yellen emphasized the importance of corporate transparency and preventing the misuse of shell companies during her visit to Treasury’s Financial Crimes Enforcement Network (FinCEN) in Vienna, Virginia.
The bipartisan Corporate Transparency Act, signed into law in 2021, granted the Treasury the authority to formulate rules on beneficial ownership. As of January 1, 2024, most U.S. companies, particularly those with fewer than 20 employees, are required to report identifying information about their direct or indirect owners or controllers. Approximately 32.6 million companies fall under this reporting requirement.
Despite the progress, a legal challenge emerged when the National Small Business Association filed a lawsuit against Treasury in November 2022, asserting that the reporting rule violates constitutional rights and places an undue burden on small businesses. A judge is anticipated to make a decision on this matter soon.
In addition to the business database, Yellen disclosed that the Treasury is contemplating further measures to address risks associated with commercial real estate, a sector often exploited for money laundering. Yellen highlighted the prevalence of money laundering through U.S. real estate, amounting to at least $2.3 billion between 2015 and 2020. The Treasury Secretary emphasized that increasing corporate transparency not only safeguards national security but also brings economic benefits by protecting the financial system, reducing due diligence costs, promoting fair business competition, and boosting tax revenue. FinCEN, with its mission to protect the financial system from criminal abuse and illicit activities, plays a key role in these initiatives.
