“Anti-money laundering” bill before U.S. Senate

January 1, 2010

The U.S. Senate considered legislation called “The Incorporation Transparency and Law Enforcement Assistance Act” throughout 2009 (S. 569), and they’re not done yet.  At first glance, the bill appears to be a helpful measure to force foreign-owned businesses that incorporate in America to disclose the identity of the true corporate owners (technically known as “beneficial owners”).

Sen. Carl Levin (D-Michigan), the bill’s principal sponsor and advocate, has been using terrorism-related examples lately like arms trafficker Viktor Bout and Iranian shell companies as the primary arguments for the bill’s passage.  Unfortunately, when the legislation is examined more closely, it starts to look like “yet another” Carl Levin witch-hunt against garden variety tax evaders.

The bill would require states to collect the ownership information at the time of incorporation.  The states are further required to provide that information to state or federal law enforcement upon request.  Fair enough.  But take a look at subsection (ii) of Sec. 2009 (a)(1)(D) below.  If the bill were intended only for the U.S. to uncover attempted incorporation by terrorist front groups, how does it help us to give ownership information to another country unless that country is trying to tax that corporation’s wealth?

(D) Beneficial ownership information relating to each corporation or limited liability company formed under the laws of the State shall be provided by the State upon receipt of–

(i) a civil or criminal subpoena or summons from a State agency, Federal agency, or congressional committee or subcommittee requesting such information; or

(ii) a written request made by a Federal agency on behalf of another country under an international treaty, agreement, or convention, or section 1782 of title 28, United States Code.

In fairness to Sen. Levin and the other sponsors of the bill, maybe they believe that if we play nice and fork over information to other countries, they’ll reciprocate by giving us whatever information we need in the course of terrorist investigations.  But I can’t shake the feeling that this legislation will be primarily used to pursue tax cheats, not jihadists.

In an era of recession and busted budgets, governments around the world are taking unprecedented measures to ensure that persons and corporations with wealth abroad are sufficiently taxed.

Maybe what gave it away for me was this quote from Carl Levin:  “At the same time that we are calling for an end to offshore secrecy we need to put our own house in order and meet our international commitments by obtaining ownership information for corporations formed within the United States. The Levin-Grassley-McCaskill bill would do just that.”

Or maybe it’s observations from folks like U.S. Representative Bob Bauman, who has pointed out that Carl Levin is “one of the leading demagogues attacking offshore financial activity by Americans every chance he could.”  Levin has been leading hearings for years and introducing bill after bill to kill offshore tax evasion.

If I were in a position to offer an amendment to this bill, it would be either to strike subsection (ii) or re-word the forgoing subsection (D) to say, “Beneficial ownership information relating to each corporation or limited liability company formed under the laws of the State in the course of detecting, preventing, and punishing terrorism shall by provided by the State,” etc.  If Levin is sincere in this being a mostly counter-terror measure, certainly he won’t object to narrowing in subpoena powers to terrorist investigations.

Don’t misunderstand—I’d prefer to know who is doing business in the United States—but I’m afraid this legislation as written won’t help us unmask the Alavi Foundation of tomorrow.  As the failed bombing of Flight 253 showed, even when we know the identity of the “wrongdoers” ahead of time, we still let them in.

Deliberation over the bill will continue throughout the new year.

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