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Source: United States Senator for New Jersey Bob Menendez

WASHINGTON, D.C. — U.S. Senator Bob Menendez (D-N.J.), a senior member of the Senate Banking Committee and Ranking Member of the Senate Foreign Relations Committee, along with Banking Committee colleagues Sens. Mark R. Warner (D-Va.), Tom Cotton (R-Ark.), Doug Jones (D-Ala.), Mike Rounds (R-S.D.), John Kennedy (R-La.), and Catherine Cortez-Masto (D-N.M.) today introduced bipartisan legislation to improve corporate transparency, strengthen national security, and help law enforcement combat illicit financial activity being carried out by terrorists, drug and human traffickers, and other criminals.

The Improving Laundering Laws and Increasing Comprehensive Information Tracking of Criminal Activity in Shell Holdings (ILLICIT CASH) Act would, for the first time, require shell companies – often used as fronts for criminal activity – to disclose their true owners to the U.S. Department of Treasury. It would also update decades-old anti-money laundering (AML) and combating the financing of terrorism (CFT) policies, by giving Treasury and law enforcement the tools they need to fight criminal networks. This includes improving overall communication between law enforcement, financial institutions, and regulators, and facilitating the adoption of critical 21st century technologies.

“It’s still far too easy for rogue regimes, corrupt oligarchs, human traffickers and drug cartels to use American shell companies to launder money through the United States,” said Sen. Menendez. “Our bill gives our national security and law enforcement professionals new tools to make sure our financial system can no longer be a safe haven for illegal actors.”

According to research from the University of Texas and Brigham Young University, the U.S. remains one of the easiest places in the world to set up an anonymous shell company. A recent report by Global Financial Integrity shows that, in all 50 U.S. states, more information is required to obtain a library card than to register a company. Human traffickers, terrorist groups, arms dealers, transnational criminal organizations, kleptocrats, drug cartels, and rogue regimes have all used U.S.-registered shell companies to hide their identities and facilitate illicit activities. Meanwhile, U.S. intelligence and law enforcement agencies find it increasingly difficult to investigate these illicit financial networks without access to information about the beneficial ownership of corporate entities involved.

At the same time, U.S. AML-CFT laws have not kept pace with the growing exploitation of the global financial system to facilitate criminal activity. According to a United Nations Report, money laundering activity and illicit cross-border financial flows have generated upwards of $300 billion annually in criminal proceeds. While tracking these growing sums is increasingly difficult, U.S. laws have also failed to adequately address the small dollar financing of global terrorist groups.

Included among the components of the ILLICIT CASH Act are the following measures authored by Sen. Menendez:

  • Increased penalties for banks that repeatedly fail to report suspicious financial activity, such as Deutsche Bank. 
  • Creation of a cryptocurrency task force comprising financial regulators, technology experts, national security experts, law enforcement, and others to analyze the impact of financial technology on financial crimes compliance, including countering proliferation finance and sanctions evasion.
  • Require a GAO study on how cryptocurrencies and online marketplaces are used to facilitate human trafficking.

The ILLICIT CASH Act would:

  • Establish federal reporting requirements mandating that all beneficial ownership information be maintained in a comprehensive federal database, with strict privacy protections, accessible by federal and local law enforcement.
  • Prevent foreign banks from obstructing money laundering or terrorist financing investigations by requiring these banks to produce records in a manner that establishes their authenticity and reliability for evidentiary purposes, and compelling them to comply with subpoenas.
  • Create a hub of financial expert investigators at FinCEN to investigate potential AML-CFT activity in collaboration with federal government agencies.
  • Require law enforcement to coordinate with financial regulators to provide periodic feedback to financial institutions on their suspicious activity reports.
  • Ensure the inclusion of current and future payment systems in the AML-CFT regime by updating the definition of “coins and currency” to include digital currency.

MIL OSI USA News