US Government Crackdown on Financial Crimes: Transparency, the New Normal.

Corporate world, two people shaking hands.

As the laws currently stand in the United States, anonymous companies can be erected easily. In most cases, these are legitimate businesses. In others, the anonymous aspect of creating companies in the U.S. has worked against the interests of America. These companies aren’t active and productive companies. They are a part of money laundering, a way to shuttle money from foreign entities through the United States. These companies are called shell companies, and the United States is one of the world’s leaders in the number of these companies allowed to prosper within its borders. Over the last year, the laws allowing this have begun to change.

Every two years, Congress votes on the National Defense Authorization Act (NDAA), which includes a series of federal laws that specifically lay out the plan for the annual budget of the Department of Defense. More recently, the NDAA has come to include bills related to national defense, as legislators know the NDAA is sure to be considered and passed. One such attached bill for the 2020 NDAA is H.R. 2513, the Corporate Transparency Act of 2019.

The Corporate Transparency Act of 2019 is Representative Carolyn Maloney’s (D – N.Y.) culmination of a decade’s worth of work. She wrote the first edition of the bill in 2009 and has submitted it every year since for consideration. Maloney states that modifying the bill over a decade was challenging, as the many players and pieces it affects all have different wants and goals. Finally, in 2020, that work, and perseverance paid off. Maloney is quoted in an article by The Hill saying, “And now, after years of work, everyone is on board with the bill – Democrats, Republicans, and the Treasury Department.” H.R. 2513 has a simple purpose: “ “To ensure that persons who form corporations or limited liability companies in the United States disclose the beneficial owners of those corporations or limited liability companies, in order to prevent wrongdoers from exploiting United States corporations and limited liability companies for criminal gain, to assist law enforcement in detecting, preventing, and punishing terrorism, money laundering, and other misconduct involving United States corporations and limited liability companies, and for other purposes.”

Put simply, the owners of small corporations or LLCs (new and existing) are now federally required to disclose their name, address, date of birth, and social security or passport number to the Financial Crimes Enforcement Network, a subdivision of the Treasury Department. Up until this point, the disclosure laws were state-by-state, causing discrepancies. This is just a piece of the puzzle in the long legislative process in the battle against financial crimes occurring in the United States. Many supporters of the bill quote its usefulness in identifying and prosecuting terrorists, human traffickers, drug cartels, and arms dealers. The supporters state that these groups commit “anti-American” acts while funneling money through the American banking system. Within Maloney’s own district, that includes Manhattan, Maloney states that she saw entire apartment buildings without any lights on, being used by foreign entities as a money shuttle. To deter actions like this, the bill states that should any person be found “willfully providing false information, including lawyers helping with corporate-registration paperwork,” there will be a fine of up to $10,000 and a prison term of up to three years.

Backlash about the bill came from small business organizations, that stated that the bill would infringe on privacy protections and burden small businesses. Maloney, however, stated that based on data from the United Kingdom, which has a similar law in place, that the cost to a small business would be a one-time fee of $200. Additionally, the information to be disclosed is not any different to information that is currently required to set up a business, and is not public knowledge, but only available to law enforcement and financial institutions. This information allows for the Bank Secretary Act, which requires banks or other financial institutions to help the government in detecting money laundering, to better target and stop it from happening. There are exemptions to the bill, such as LLCs that already have reported their ownership to the Financial Crimes Enforcement Network (FinCEN), LLCs that have over twenty employees, or $5 million in annual revenue. 

The bill passed the House of Representatives on October 22nd, 2019 and waited until it could be reviewed by the Senate. On December 11th, 2020, the bill was passed by the Senate with an 84-13 majority.

With a year unlike any other, 2020 produced large amounts of fraud. This bill aims to reduce the amount of fraud within U.S. borders, and could not have been passed at a better time. Without the protection of anonymity, foreign entities will look elsewhere to establish “legitimate” businesses to conduct fraudulent activities. This year, American businesses saw and dealt with these businesses, newly established with only an agent listed under the company name, and lost money and time to what they thought could be a new business venture.

In the world of forensic accounting, this new bill may affect and reduce the amount of shell companies we see at home in the U.S. but does not stop these shell companies from popping up around the world and interacting with American businesses. Thus, while domestic fraud may lessen from this bill, those fraudulent companies will have to move elsewhere and continue to move money internationally, which may ultimately end up back in the United States. It is a delicate issue, though this bill may improve the fraud level in the U.S.


Gangitano, Alex. “Sweeping Financial Crimes Bill to Hitch a Ride on Defense Measure.” TheHill, The Hill, 3 Dec. 2020,

“H.R. 2513 — 116th Congress: Corporate Transparency Act of 2019.” 2019. December 28, 2020

Whalen, Jeanne. “Congress Bans Anonymous Shell Companies after Long Campaign by Anti-Corruption Groups.” The Washington Post, WP Company, 11 Dec. 2020,