November 17, 2011 / 4:41 PM / 8 years ago

US House bill targets anonymous shell corporations

* Like Senate version, bill would force more disclosure

* Odds of approval may be better this time around

* States remain opposed, other groups on the fence

By Patrick Temple-West

WASHINGTON, Nov 17 (Reuters) - Owners of shell corporations could face stricter disclosure laws when incorporating under legislation introduced this week in the U.S. House of Representatives that breathes new life into an old proposal.

The House bill is supported by a wide range of law enforcement associations, as well as the U.S. Justice and Treasury departments. It would require states to collect names and addresses and other information from shell company owners and limited liability partnerships.

Under current law, many states do not require individuals to give their names or contact information when incorporating, leading to abuse of shell companies by those who prefer to conduct financial operations in the shadows.

The House bill, introduced by Democrats, joins similar bipartisan legislation introduced in the Senate in August by Democrat Carl Levin and Republican Chuck Grassley.

This is at least the third time lawmakers have considered proposals to crack down on shell company incorporation. With both chambers involved and wide support from law enforcement, the legislation may have a better chance of passage this time.

Some state government group remain opposed. In the past, resistance has also come from business groups and lawyers.

“Senator Levin and I are making progress trying to convince our colleagues that law enforcement needs our help to close this loophole,” Democratic Representative Carolyn Maloney, the House bill’s lead sponsor, said in a statement.

“We have been working to address the concerns raised by those who have been objecting to the bill and my next step will be to call for a hearing,” she said.

Levin said he welcomes the House bill.

“While there are some differences between the House bill and our Senate bill, they have the common aim to stop the practice of allowing U.S. corporations with hidden owners,” Levin said in a statement on Wednesday.

The bill’s supporters cite recent prosecutions involving shell companies. Earlier this year, a former Russian military officer was found guilty of using Oregon shell companies to wire more than $150 million abroad for Russian clients.

Both versions of the bill include exemptions for businesses that already disclose ownership information because they are regulated at the state or federal level.

The House version differs on defining “beneficial owner,” or the individuals who would have to provide personal information. The House bill is not retroactive and would only apply to newly-incorporating businesses and LLCs.

State-level secretaries of state, who would be charged with collecting the new corporate information, oppose the bill.

“Our members want to assist law enforcement,” said Kay Stimson, a spokesperson for the National Association of Secretaries of State. But “there’s a way for this to be done without creating an entirely separate process.”

In January 2010, the tax-collecting U.S. Internal Revenue Service revised reporting requirements for businesses applying for an Employer Identification Number. This new requirement gives law enforcement a channel to access a corporation’s ownership information, Stimson said.

The American Bar Association, another opponent of prior shell company disclosure bills due to concerns about lawyers being exposed to liability, is reviewing the latest bills. (Reporting by Patrick Temple-West; Editing by Kevin Drawbaugh and Gerald E. McCormick

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