Corporate Transparency Act of 2019

Floor Speech

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Ms. WATERS. 2513 and to insert extraneous material thereon.

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Ms. WATERS. Madam Chair, I yield myself such time as I may consume.

Madam Chair, I rise in support of H.R. 2513, the Corporate Transparency Act of 2019, a bill introduced by Representative Carolyn B. Maloney of New York.

H.R. 2513 closes significant loopholes in the law that are commonly abused by bad actors and will make it harder for terrorists, traffickers, corrupt officials, and other criminals to hide, launder, move, and use their money.

Today, anyone can create a company without providing any information about the company's actual owners. This ability to remain anonymous gives criminals and terrorists unimpeded, hidden access to our banking and commercial systems.

It also makes it more difficult for law enforcement and even our banks, which have a duty to know their customers and evaluate risk, to detect illicit activity.

For example, unbeknownst to authorities for years, the skyscraper at 650 Fifth Avenue in New York City was owned by Iranian-controlled entities through shell companies. The Corporate Transparency Act closes these loopholes by requiring firms which do not already report ownership, for example through public SEC filings, to share this information with the Financial Crimes Enforcement Network, FinCEN.

This beneficial ownership database created by the bill will be accessible only by FinCEN-approved law enforcement agencies and by financial institutions, with customer consent, to fulfill requirements to identify their beneficial owners. Unapproved sharing of this information would be subject to criminal penalties, as would lying on or intentional omission of beneficial ownership information. For most firms, which have only one or two owners, this process would require only a few lines of data. But for law enforcement agencies, the additional information will have great benefit, as their investigations will no longer be stymied by anonymous shell companies.

The bill has also been broadened to include the entirety of H.R. 2514, the Coordinating Oversight, Upgrading and Innovating Technology, and Examiner Reform Act of 2019, the COUNTER Act, a bill introduced by Representative Emanuel Cleaver. The COUNTER Act closes loopholes in the Bank Secrecy Act, the key law aimed at countering money laundering, terrorist financing, and other criminal uses of the banking system.

For example, the bill requires the identification of owners behind high-risk commercial real estate transactions and transactions involving arts and antiquities, which are often used by criminals to launder money.

The COUNTER Act examines Chinese and Russian money laundering, an issue that is seen in opioid and methamphetamine production, as well as human and wildlife trafficking.

The bill also creates a national strategy to fight trade-based money laundering, which is considered the most pernicious but hard-to-detect form of money laundering.

Mrs. Maloney and Mr. Cleaver's bill also works to lower the compliance burden on financial institutions, most of which are community banks, by establishing several tools to allow for more targeted sharing of BSA-AML-related information.

The bill makes modest increases to the currency transaction reporting limit and studies ways to reduce the costs associated with researching and writing suspicious activity reports.

The bill also creates a new privacy and civil liberties officer, as well as an innovation officer in each of the Federal financial regulators.

Importantly, the bill imposes new penalties on financial institutions and personnel that violate the law and creates a whistleblower program to encourage and protect those who identify such bad acts.

H.R. 2513, as amended, has the strong support of financial institutions. It is also supported by NGOs like the AFL-CIO, Global Witness, Oxfam America, Friends of the Earth U.S., Jubilee USA Network, and the Small Business Majority, all of which are members of the transparency-focused FACT Coalition. It is widely supported by law enforcement organizations such as the Fraternal Order of Police, the National District Attorneys Association, and the Federal Law Enforcement Officers Association. In addition, this legislation is supported by the Department of the Treasury and the Federal Bureau of Investigation.

I commend Congresswoman Maloney and Congressman Cleaver for their very hard work on the legislation, as well as their collaboration to put together a comprehensive bill to reform how this country fights against illicit finance.

I urge passage of H.R.

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Ms. WATERS. Mr. Chair, I yield 5 minutes to the gentlewoman from New York (Mrs. Carolyn B. Maloney), the sponsor of the bill and chair of the Subcommittee on Investor Protection, Entrepreneurship, and Capital Markets.

Mrs. CAROLYN B. MALONEY of New York. Mr. Chairman, I thank the gentlewoman for yielding and for her leadership on the Financial Services Committee and on this bill.

Mr. Chair, I rise in support of H.R. 2513, the Corporate Transparency Act. This bill would crack down on the illicit use of anonymous shell companies. This is one of the most pressing national security problems that we face as a country because anonymous shell companies are the vehicle of choice for money launderers, criminals, and terrorists.

The reason they are so popular is because they cannot be traced back to their true owners. Shell companies allow criminals and terrorists to move money around in the United States financial system and finance their operations freely and legally.

Unfortunately, we know that the U.S. is one of the easiest places in the entire world to set up an anonymous shell company. The reason why these shell companies are anonymous is because States do not require companies to name their true beneficial owners, the individuals who are collecting the profits and who outright own the company.

As any FBI agent or prosecutor will tell you, far too many of their investigations hit a dead-end at an anonymous shell company. They know there is illegal money, yet they can't pursue and stop it.

Because they can't find out who the real owner of that shell company is, they can't follow the money past the shell company, past this pile of cash that they know is financing illegal activity. The trail goes cold, and the investigation is stopped dead in its tracks.

Treasury actually conducted a pilot program a couple of years ago when they collected beneficial ownership information for real estate transactions in Manhattan and Miami over a 6-month period. The results were stunning.

Treasury found that about 30 percent of the transactions reported in those 6 months involved a beneficial owner or purchaser representative that had previously been the subject of a suspicious activity report. In other words, these were potentially suspicious people buying these properties. And this was after the Treasury Department had announced to the world through the press that they would be collecting beneficial ownership information in these two cities for 6 months, so this didn't even capture the money launderers who simply avoided those two cities for that 6-month period.

Our bill would fix this problem 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 information would only be available to law enforcement and to financial institutions so they can comply with their know-your-customer rules.

This bill would plug a huge hole in our national security defenses and would be a massive benefit to law enforcement.

We have a very large coalition supporting the bill. We have the support of 127 NGOs. All of the law enforcement groups in our Nation support this bill, all of the banking trade associations, the credit union trade associations, human rights groups, antitrafficking groups, State secretaries of state, and most of the real estate industry, and many more because law enforcement has said that enacting this bill will make our residents and our country safer.

I want to specifically thank the FACT Coalition, Global Witness, and Global Financial Integrity for their support. I want to thank the Bank Policy Institute, which has been a strong supporter from the beginning. And I want to thank my personal staff, especially Ben Harney.

I also want to thank my Republican partners on this bill, most notably Peter King from New York and Blaine Luetkemeyer from Missouri. They have been both fantastic to work with, and I believe the changes that they negotiated in good faith on this bill have made it an even better bill.

The two people I want to thank the most are Congresswoman Waters, who has been a steadfast supporter of this bill for years, and Congressman Cleaver, who has worked so hard on the COUNTER Act, which has been added to this bill. His leadership on the anti-money laundering reforms in the COUNTER Act have been indispensable.

Mr. Chairman, this bill will make our country safer, and I urge a strong ``yes'' vote for this bill.

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Ms. WATERS. Mr. Chairman, I yield 3 minutes to the gentleman from Illinois (Mr. Foster), who is the chair on the Task Force on Artificial Intelligence.

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Ms. WATERS. Mr. Chairman, I yield 5 minutes to the gentleman from Missouri (Mr. Cleaver), who is the sponsor of the COUNTER Act which is part of this bill. He is also the chair of the Subcommittee on National Security, International Development and Monetary Policy.

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Ms. WATERS. Mr. Chair, I yield myself such time as I may consume.

Mr. Chair, the United States is vulnerable. According to a 2017 report by the Government Accountability Office, ``GAO was unable to identify ownership information for about one-third of GSA's 1,406 high- security leases as of March 2016 because ownership information was not readily available for all buildings.''

This finding was a leading factor in Congress voting to adopt a provision in the fiscal year 2018 National Defense Authorization Act for the Department of Defense to collect beneficial ownership information for all high-security office space it leases.

As a matter of fact, there is more information required to obtain a library card. According to a 2019 Global Financial Integrity analysis, ``The Library Card Project: The Ease of Forming Anonymous Companies in the United States,'' in all 50 States and the District of Columbia, ``more personal information is needed to obtain a library card than to establish a legal entity that can be used to facilitate tax evasion, money laundering, fraud, and corruption.''

The British model: The United Kingdom has a beneficial ownership directory, and an analysis found that the average number of owners per business in the U.K. is 1.13. Eighty-eight percent had two or fewer owners. The most common number of owners is one. More than 99 percent of businesses listed less than six owners.

According to the U.S. Small Business Administration, approximately 78 percent of all businesses in the U.S. are nonemployer firms, meaning there is only one person in the enterprise. This suggests that the experience in the U.S. would be similar to that in the U.K.

Mr. Chair, I would like to share with you that this legislation has tremendous support, for example, from Main Street Alliance, a network of over 30,000 small businesses; American Bankers Association; Bank Policy Institute; Mid-Size Bank Coalition of America; National Foreign Trade Council; Consumer Bankers Association; Financial Services Forum; Bankers Association for Finance and Trade; American Land Title Association; National Association of Realtors; One; FACT Coalition, a collection of 100-plus NGOs, including AFL-CIO, Global Witness, Oxfam America, Friends of the Earth U.S., Jubilee USA Network, Public Citizen, and Small Business Majority.

We could go on and on and on, but I think it is important to know that members of the Financial Services Committee, Representatives Maloney, Luetkemeyer, and Cleaver, have worked in good faith, along with the Department of the Treasury, nonprofit groups, and the financial services sector, to find consensus to close a massive loophole in our anti-money laundering framework.

The resulting pieces of legislation to modernize the anti-money laundering processes and to create a secure financial ownership registry of legal entities held at the Financial Crimes Enforcement Network at the Department of the Treasury represent the best path forward to provide law enforcement with needed information to pursue money criminals looking to exploit our financial system.

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Ms. WATERS. Mr. Chair, I yield 3 minutes to the gentlewoman from New York (Mrs. Carolyn B. Maloney) sponsor of the legislation, H.R. 2513.

Mrs. CAROLYN B. MALONEY of New York. Mr. Chair, critics on the other side of the aisle have made wild claims about the bill costing small businesses millions of dollars. But in the U.K., where they already collect this information, the cost of compliance for the average small business was only about $200, and that is a one-time cost. To me, that is a very modest price to pay for national security.

Every law enforcement agency in this country is asking for this reform, in order to make us safer.

In the U.K., the median company had 1.1 owners, which means that the vast majority of small businesses only have one owner, so that these businesses only have to file one name.

We are asking for only four pieces of information, and it is basic: name, date of birth, current address, and driver's license.

Does that sound burdensome? For most small business owners, it would take less than 5 minutes to fill out the form.

According to studies, it was pointed out earlier, you have to disclose more information to get a library card than you need to disclose to create a corporation or an LLC. And you don't hear people complaining about filling out forms for library cards.

I think the idea that the disclosure would be unduly burdensome is simply and completely false.

The bill also goes out of its way to exempt every category of business that already discloses their beneficial owners, either to regulators or the public filings. This includes banks, credit unions, insurance companies, and investment advisers, brokers, utilities, and nonprofits.

The bill even exempts companies with more than 20 employees and over $5 million in revenues because, if you have 20 employees, you are actually generating a significant amount of revenues and you are, certainly, a real business and not a shell company that is being used to launder money.

In fact, in almost all the cases where law enforcement has uncovered a shell company that is being used for illicit purposes, the company had either zero employees or one employee. That is why we felt very comfortable exempting companies with more than 20 employees.

I think we have gone way out of our way to ensure that the bill is appropriately tailored and is not burdensome to small businesses.

I would like to repeat that, usually, national security bills are bipartisan, and I am proud that we had significant support in the vote from our friends on the other side of the aisle. I urge my colleagues on both sides of the aisle to support this important bill that will make our citizens safer, will help law enforcement do their jobs, and, therefore, will save lives in our country.

This is a serious bill. Most countries already have it, and we are way behind. We are the money laundering capital of the world. It is just plain common sense to protect our citizens.

Vote for national security, and vote for this bill.

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Ms. WATERS. Mr. Chairman, I would like to inquire as to how much time I have left.

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Ms. WATERS. Mr. Chair, I would like to thank Representatives Maloney and Cleaver for their work on these reforms.

I would like to just add that H.R. 2513 is an important, commonsense measure that stops criminals from being able to hide behind anonymous shell companies. It closes loopholes in the Bank Secrecy Act, increases penalties for those who break the law, and helps provide financial institutions with new tools to more easily and accurately fulfill their obligations under the law.

Mr. Chair, I yield back the balance of my time.

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Ms. WATERS. Mr. Chair, I claim the time in opposition, although I do not oppose the amendment.

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Ms. WATERS. Mr. Chairman, the Burgess amendment would require an annual report to Congress that examines the aggregated submissions to the beneficial ownership database, thus providing a snapshot of the size, type, and location of reporting entities.

I agree that an examination of this data will be helpful to FinCEN as it contemplates rulemakings and to Congress should we consider future refinements of the law. So I would encourage Members to support the amendment.

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Ms. WATERS. Mr. Chairman, I yield the balance of my time to the gentlewoman from New York (Mrs. Carolyn B. Maloney), the sponsor of this important legislation.

Mrs. CAROLYN B. MALONEY of New York. Mr. Chair, I support this amendment, which would simply require Treasury to submit an annual report to Congress with basic statistics on the beneficial ownership information that is filed under the bill.

This is very similar to a recent report that the U.K. conducted, that they started collecting beneficial information. The U.K.'s report was very helpful because it highlighted that the vast majority of companies have only one beneficial owner, which makes compliance with the bill extremely easy.

I think that the data that Treasury would be required to report to Congress under this amendment would be helpful in case we decide that we need to tweak the bill in the future to address any unforeseeable future issues that arise.

So I want to thank the gentleman from Texas for offering the amendment. I think it is a very good idea, and I urge my colleagues to support it and to support the underlying bill, which will increase national security for our country.

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Ms. WATERS. Mr. Chairman, I yield back the balance of my time.

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Ms. WATERS. Mr. Chairman, I demand a recorded vote.

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Ms. WATERS. Mr. Chair, I claim the time in opposition, although I do not oppose.

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Ms. WATERS. Mr. Chairman, the Hill amendment requires FinCEN to develop protocols governing how law enforcement and others can access the beneficial ownership database.

Today, in order for law enforcement to access FinCEN's Bank Secrecy Act database, they must comply with a stringent process requiring assessment, training, and review.

H.R. 2513 also includes protocols governing access to the new beneficial ownership database, including creating an audit trail of the law enforcement agencies that access the data.

Mr. Hill's amendment would provide an added measure of protection, reinforcing the importance of clear procedures to ensure that such information is not inappropriately accessed or misused by law enforcement agencies. I will vote in support of this amendment.

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Ms. WATERS. Mr. Chairman, I yield the balance of my time to the gentlewoman from New York (Mrs. Carolyn B. Maloney), the sponsor of this important legislation.

Mrs. CAROLYN B. MALONEY of New York. Mr. Chairman, I support this amendment, and I would like to thank Mr. Hill for offering it.

This amendment would require FinCEN to establish stringent procedures to ensure the beneficial ownership information isn't being inappropriately accessed or misused by law enforcement agencies.

I believe the underlying bill already addresses these issues-- certainly, it was the intent to protect against unauthorized access and misuse of beneficial ownership information--but I am not opposed to making that language even more explicit.

His amendment would also require FinCEN to submit an annual report to Congress detailing the number of times beneficial ownership information was accessed, either by law enforcement or by financial institutions.

I think this information would be very helpful because it would tell us how useful the information is to both law enforcement and financial institutions. So while Mr. Hill and I have had disagreements over this bill, I think this amendment is a helpful addition to the bill, and I want to thank him for offering it.

I urge my colleagues to support it and the underlying bill.

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Ms. WATERS. Mr. Chairman, I yield back the balance of my time.

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Ms. WATERS. Mr. Chair, I claim the time in opposition to the amendment.

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Ms. WATERS. Mr. Chair, I firmly oppose the Davidson amendment because it would gut the bill.

After years of working to ensure that criminals, terrorists, and enemies of the United States can no longer use loopholes to cloak their dangerous acts from law enforcement, this amendment heedlessly tries to jettison this significant layer of defense.

If the amendment is adopted, there would be no requirement to share the identities of the beneficial owners of corporations and LLCs that currently do not make such disclosures.

If adopted, there would be no ability for law enforcement to get information that it needs to unmask the wrongdoers who abuse State laws to hide their global criminal activities.

To make things worse, the amendment would repeal the FinCEN customer due diligence, or CDD, rule, which currently requires banks to identify and verify the beneficial ownership of corporate customers. It prevents criminals, kleptocrats, and others looking to hide ill-gotten proceeds from accessing the financial system anonymously.

The Director of FinCEN said that the CDD rule is ``but one critical step toward closing this national security gap. The second critical step . . . is collecting beneficial ownership information at the corporate formation stage.''

An outright and immediate repeal of this rule endangers the financial system by leaving a dangerous new gap in information about bank customers while the implementation of H.R. 2513 gears up.

The safer approach, and one supported by the financial institutions, is to require the Treasury to remove identified redundancies after the database becomes operational. This is precisely what H.R. 2513 already does.

Mr. Chairman, the AFL-CIO, Oxfam, the FACT Coalition, FBI, Treasury, DOJ, FinCEN, as well as the Fraternal Order of Police, the Federal Law Enforcement Officers Association, and most State attorneys general have urged Congress to pass H.R. 2513 to develop a Federal beneficial ownership database.

The Davidson amendment would undermine this effort before it can begin.

Mr. Chair, I urge my colleagues to vote ``no'' on this amendment, and

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Ms. WATERS. Mr. Chair, I yield the balance of my time to the gentlewoman from New York (Mrs. Carolyn B. Maloney), the sponsor of this important legislation.

Mrs. CAROLYN B. MALONEY of New York. Mr. Chair, I thank the chairwoman for yielding.

Mr. Chair, I strongly oppose this amendment, which would completely gut the bill and would dramatically weaken our national security.

Right now, the only protection we have in place against bad actors using anonymous shell companies to launder their money through the U.S. is FinCEN's customer due diligence rule, which requires financial institutions to find out the beneficial owners of the corporations and the entities that open accounts with them.

The FinCEN rule, which is very important, is still only half a measure. When FinCEN passed the rule, they explicitly said that Congress still needed to pass the bill that is before us today.

Mr. Davidson's amendment would not only delete the underlying bill but would also repeal the FinCEN rule. In other words, it is worse than the status quo and practically invites criminals and money launderers to use the U.S. financial system.

Mr. Chair, this is a deeply irresponsible amendment, and I strongly urge my colleagues to oppose it and to support the underlying bill.

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Ms. WATERS. Mr. Chair, I yield back the balance of my time.

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Ms. WATERS. Mr. Chair, I demand a recorded vote.

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Ms. WATERS. Mr. Chair, I move that the Committee do now rise.

The motion was agreed to.

Accordingly, the Committee rose; and the Speaker pro tempore (Mr. Pappas) having assumed the chair, Mr. Cuellar, Acting Chair of the Committee of the Whole House on the state of the Union, reported that that Committee, having had under consideration the bill (H.R. 2513) 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, had come to no resolution thereon.

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