Summary of the Incorporation Transparency and Law Enforcement Assistance Act
Tuesday, August 2, 2011
To protect the United States from U.S. corporations being misused to support terrorism, money laundering, tax evasion, or other misconduct, the Levin-Grassley Incorporation Transparency and Law Enforcement Assistance Act would:
Beneficial Ownership Information. Require the States directly or through licensed formation agents to obtain the names of beneficial owners of corporations or limited liability companies (LLCs) formed under a State’s laws, ensure this information is updated, and provide the information to law enforcement upon receipt of a subpoena or summons.
Identifying Information. Require corporations to provide beneficial owners’ names, addresses, and a U.S. drivers license or passport number; or if the owners do not have either a U.S. drivers license nor passport, information from their non-U.S. passports.
Federal Contractors. Require corporations bidding on federal contracts to provide the same beneficial ownership information to the federal government.
Shelf Corporations. Require formation agents selling “shelf corporations” – companies formed for later sale to a third party – to identify the beneficial owners of those corporations.
Penalties for False Information. Establish penalties for persons who knowingly provide false information, or willfully fail to provide required information, on beneficial ownership.
Exemptions. Exempt from the disclosure obligation regulated corporations, including publicly traded companies, banks, broker-dealers, insurers, registered investment funds, and charities; corporations with a substantial U.S. presence; and corporations whose beneficial ownership information would not benefit the public interest or assist law enforcement.
Funding. Provide $30 million over three years to States from existing Treasury and Justice Department forfeiture funds to pay for the costs of complying with the Act.
State Compliance Report. Specify that nothing in the Act authorizes funds to be withheld from any State for failure to comply with the Act, but also require a GAO report by 2015 identifying which States are not in compliance so a future Congress can determine what steps to take.
Transition Period. Give the States three years, until October 2014, to require beneficial ownership information for corporations and LLCs formed under their laws.
Anti-Money Laundering Safeguards. Require paid formation agents to establish anti-money laundering programs to guard against supplying U.S. corporations or LLCs that facilitate misconduct. Attorneys using paid formation agents would be exempt from this requirement.
GAO Study. Require GAO to complete a study of State beneficial ownership information requirements for partnerships, charities, and trusts.