US makes corporate transparency commitment with 20 nations

WASHINGTON (AP) – Treasury Secretary Janet Yellen will announce America’s commitment to enhancing corporate transparency along with more than 20 other countries at the Summit for Democracy on Tuesday.

While the Biden administration is already pursuing regulations to establish a new database on small business ownership, the commitment to be announced Tuesday morning promises to maintain that database, known as the beneficial ownership registry, and ensure that law enforcement will have access to the registry, and that individuals’ personal data will be protected, among other things.

The registry will contain personal information on the owners of at least 32 million U.S. businesses as part of an effort to combat corruption.

Colombia, Malta and Japan are some of the countries included in the commitment.

“Unmasking shell corporations is the single most significant thing we can do to make our financial system inhospitable to corrupt actors,” Yellen said in prepared remarks to be delivered at the Treasury Department. She added that efforts with allies over the last year to track sanctioned Russian assets have “underscored our vulnerability” in tracking business ownership.

“The beneficial ownership database will deter dirty money from entering the U.S.,” Yellen says in her speech. The United States is making the push to combat illicit finance, in part, as a response to Russia’s invasion of Ukraine, as the U.S. tries to more easily identify wealthy Russians who are accused of hiding stolen money and assets in the U.S. and around the world.

The U.S. is hosting the second Summit for Democracy this week with the governments of Costa Rica, the Netherlands, South Korea and Zambia.

Last September, Treasury began rulemaking to create the small business ownership database. The rule will require most American businesses with fewer than 20 employees to register with the government as of Jan. 1, 2024.

“We have seen corrupt foreign officials bury stolen funds in U.S.-based shell companies; kleptocrats launder kickbacks through anonymous purchases of foreign real estate; and elites move corrupt proceeds through complicit or unwitting financial gatekeepers like attorneys or wealth managers,” Yellen says.

The National Small Business Association filed a lawsuit in November to stop the U.S. database from being created, arguing that it is unduly burdensome on small firms and infringes on states’ rights to regulate businesses.

Nate Sibley, a research fellow with Hudson Institute’s Kleptocracy Initiative said the “beneficial ownership registry, properly implemented, is an essential and long overdue tool for tackling money laundering and sanctions evasion.”

“It’s absurd that the U.S. promulgates the most aggressive global sanctions and law enforcement campaigns but can’t see who is burying money in its own backyard,” Sibley said.

Ian Gary, executive director of the Financial Accountability and Corporate Transparency Coalition said the Biden administration should also move to “put in place new regulations to tackle the scourge of money laundering in the $50 trillion U.S. real estate sector.”

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