The recently enacted Corporate Transparency Act is America’s most important step towards cracking down on corporate secrecy and corruption in decades. Our current corporate transparency regime is antiquated and woefully deficient, which has caused the country to be ranked as the worst jurisdiction in the world for financial secrets.

A group of companies have unleashed a major campaign against the law, and on Tuesday, April 30th, the House Small Business Committee held a hearing to bash it in an attempt to kneecap its enforcement. CREW’s Federal Policy Manager and Senior Counsel Gabe Lezra submitted testimony for the record defending the CTA against the lawmakers’ false and misleading attacks. 

The CTA combats the use of shell companies to move illicit funds into the United States and our into markets by building the country’s first ever beneficial ownership registry. This will have numerous and varied benefits if FinCEN is allowed to implement the law properly. 

  • It will help stop illicit funds from being funneled through shell companies into the United States, a practice which distorts American markets through harmful commercial practices. 
  • It will stop bad actors from using webs of anonymous shell companies to, for instance, obtain government contracts over legitimate American businesses, or defraud business partners.
  • It will help the country combat drug trafficking, including by undermining the shell company structures used by the infamous Zheng drug trafficking organization, and the brutal Sinaloa Cartel, both of which used webs of shell companies to further their illegal activities.
  • It will make it easier for the poor to join the middle class and for Black and Brown communities in particular, to build generational wealth.

When the proceeds of corruption flow back into the economy, they “distort[] markets and victimize[] ordinary Americans.” This relationship is particularly evident in the real estate market where corrupt overseas financial flows are pricing ordinary Americans out of the housing market, with particularly devastating consequences for first-time homebuyers and Americans of color.

Lezra emphasized the need to protect and support the country’s legitimate small businesses by ensuring that FinCEN has the tools to continue developing a truly state of the art anti-corruption regime. 

So far FinCEN is doing its job. It has designed a strong regulatory regime focusing on simplicity and clarity for filers. Compliance with the CTA consists of a single form that, for the 70% of businesses that have only one owner, and the many that have simple ownership structures, will take only minutes to fill out, at an estimated one-time cost of $85.

That a small number of loud lobbyists and corporations are campaigning to delay or even destroy the CTA must not distract from the reality: that the CTA is transitioning the United States from a global haven for corrupt money, into a global leader in the fight against corruption. The more the United States pushes back on the abuses of shell companies, the more it protects our markets and our small businesses from bad actors who seek to undermine our economy. 

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