Treasury Secretary Janet Yellen was all smiles in pictures that captured her visit to Treasury’s Financial Crimes Enforcement Network — known as FinCEN— in Vienna, Virginia. But what she was there to accomplish will make many bad people frown in the coming months.
Yellen has announced that 100,000 businesses have joined a new database that collects “beneficial ownership” information on firms. This is part of a new government effort to unmask shell company owners.
On January 8, Monday, Yellen said that the new Treasury database sends a simple message. That “the United States is not a haven for dirty money.”
During Yellen’s visit to FinCEN in Vienna, Virginia, she discussed the database launch with the new year. She also talked about upcoming real estate rules. She believes they will increase transparency about the people and companies purchasing property in the U.S.
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Her Virginia visit serves many purposes. A major one is to display the Biden administration’s intent to increase corporate transparency. And to prevent the abuse of shell companies.
“Around the world, lack of transparency, specifically due to opaque corporate structures, makes it easier to conceal illicit activity,” Yellen said during her visit. “Information on beneficial ownership will support our law enforcement colleagues in making arrests, prosecuting offenders, and seizing ill-gotten assets.”
The bipartisan Corporate Transparency Act became law in 2021. It gave the Treasury authority to write new rules on beneficial ownership. And they are now exercising their authority. Since January 1, most U.S. firms have had to report identifying information about who owns or controls them. Directly or indirectly.
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According to the rule, most American businesses with fewer than 20 employees — a whopping 32.6 million companies — must register with the government.
In November 2022, the National Small Business Association sued the Treasury over the database. It argued that the new reporting rule violates the U.S. Constitution, saying it is unduly burdensome on small firms, violates privacy and free speech protections, and infringes on states’ powers to govern businesses.
A judge is expected to sit on the matter imminently. In the meantime, the Treasury powers on. And now, its sights are set on commercial real estate. This is not surprising as real estate is a commonly used money laundering method.
Yellen said in March 2023 that suspects laundered at least $2.3 billion through U.S. real estate between 2015 and 2020. This has left Congress no choice but to figure out how to balance money-laundering risks in the real estate sector against differing views on oversight.
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“The benefits of increasing corporate transparency through gathering beneficial ownership information —put simply, knowing who owns what — start with protecting our national security,” Yellen said.
“Corporate transparency can bring economic benefits as well: protecting our financial system, reducing due diligence costs, enabling fair business competition, and increasing tax revenue.”
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