Treasury Secretary Janet Yellen announced that 100,000 businesses have joined a new database aimed at collecting “beneficial ownership” information, as part of the U.S. government’s efforts to unveil the owners of shell companies. Yellen stated that the Treasury database sends the message that the United States is not a haven for illicit money. The initiative is part of the broader goal of increasing corporate transparency and preventing the misuse of shell companies.
The Corporate Transparency Act, signed into law in 2021, granted Treasury the authority to establish rules on beneficial ownership. As of January 1, 2024, most U.S. firms must report identifying information about their direct or indirect owners or controllers. This rule applies to the majority of American businesses with fewer than 20 employees, approximately 32.6 million companies.
Despite the initiative, the National Small Business Association filed a lawsuit against Treasury in November 2022, arguing that the reporting rule violates the U.S. Constitution and is burdensome for small firms. A judge is expected to decide on the matter soon.
Yellen highlighted the importance of increasing corporate transparency to protect national security and reap economic benefits, such as safeguarding the financial system, reducing due diligence costs, enabling fair business competition, and increasing tax revenue. Additionally, Treasury is considering further measures to address risks associated with commercial real estate, a commonly used vehicle for money laundering. Yellen mentioned that illicit actors laundered at least $2.3 billion through U.S. real estate between 2015 and 2020.
