Key money-laundering channel in US shut down by new law

WION Web Team
Washington, DC, United States of America Published: Jan 03, 2021, 09.14 AM(IST)

The foundation aims to raise $100 million and described it as 'one of the largest efforts by an institution to atone for slavery' Photograph:( AFP )

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The Corporate Transparency Act was included in the US defence appropriations bill passed into law by Congress late Friday, overriding President Donald Trump's veto.

A major avenue for global money laundering and tax evasion in the United States has been closed off, courtesy a new law requiring disclosure of owners of shell companies used to hide billions of dollars.

The Corporate Transparency Act was included in the US defence appropriations bill passed into law by Congress late Friday, overriding President Donald Trump's veto.

The law forces "beneficial owners" behind shell companies to report their identities to the US Treasury's Financial Crimes Enforcement Network, or FinCEN.

This is being considered as a huge step against kleptocrats, organised crime and rich tax evaders who have been able to anonymously wash their suspect wealth through the world's largest economy.

The United Nations estimates that $800 billion to $2 trillion is laundered through the global financial system every years.

While much of the attention on has focussed on tax havens like Panama and the Cayman Islands, experts say that the size of the US economy, and its ability to absorb billions of dollars without notice, has made it crucial for converting illicit funds into legitimate assets.

In early 2020, the Tax Justice Network ranked the Cayman Islands and the United States as the global leaders in helping people conceal their finances from law and tax enforcement. 

To this end, Gary Kalman, the US director of Transparency International, said money has flowed into the United States from China and Russia because it was the easiest place to launder it, through properties, corporate assets, securities and art.

By forcing company owners to divulge their identities, he said, the US is establishing a "global norm" for the world's financial system.

The legislation sets penalties for not reporting a company's beneficial owners of up to two years in jail and a $10,000 fine.

FACT said the law could result in a sharp drop in all-cash business transactions, especially in real estate, a favoured way for outsiders to move large sums into the US economy.

FACT also says that anonymous companies underpin trade in counterfeit luxury goods, pharmaceuticals and industrial equipment.

(with inputs)

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