U.S. House of Representatives wants to introduce beneficial ownership disclosure when creating a new company
The U.S. National Defense Authorization Act (hereinafter “NDAA”) is a U.S. federal law that determines the budget and expenditures of the U.S. Department of Defense (hereinafter “DoD”). With this bill, the resolution of the budget takes on an annual legal character and is the prerequisite for the budget of the U.S. armed forces for each fiscal year. In recent years, each NDAA also included provisions only peripherally related to the DoD, because the NDAA is sure to be adopted by the U.S. Congress. Therefore, lawmakers also attach other bills to the annually adopted NDAA in order to pass other federal laws too.
On 21 July 2020, the U.S. House of Representatives adopted the NDAA for fiscal year 2021. By doing so, the House of Representatives pushed through beneficial ownership disclosure legislation when the Corporate Transparency Act (hereinafter “CTA”), which requires disclosure of such ownership, was also adopted as an amendment of the NDAA.
According to Representative Carolyn Maloney, Democrat of New York, who has been working on the CTA for over 10 years, the U.S.A. would be “the world’s capital of anonymous shell companies, because no state in the U.S. would currently requires companies to name their true, beneficial owners”. The aim of the CTA is to solve this issue by requiring companies to disclose their true, beneficial owners to the Financial Crimes Enforcement Network, or FinCEN, at the time the company is formed.
This beneficial ownership legislation has gained support among the business sector. A few weeks ago, the U.S. Chamber of Commerce wrote in support of it. Hence, it would value efforts to address possible negative impacts that beneficial ownership disclosure could have on small businesses. The Bank Policy Institute, a think tank and advocacy group, also has a positive view on the new legislation, which would modernise U.S. anti-money laundering laws and regulations. Furthermore, it would “address critical national security deficiencies identified in a recent Government Accountability Office report, which found that ineligible foreign-based entities were using anonymous shell companies to sell defective military parts to the Department of Defense,” BPI said.
The U.S. Senate is scheduled to vote on its version of the NDAA later this week. In case the CTA amendment to the NDAA does not pass in that chamber, it is likely the beneficial ownership legislation will be considered in conference committee between the U.S. House of Representatives and the U.S. Senate.