"Who owns the place?
Huge blow to organized crime. The Trump administration has passed the Corporate Transparency Act. Now all owners of MAILBOX FIRMS must be disclosed. This dries up a very large money quagmire.
Particularly hard hit by the law is the tax haven of DELAWARE, JOE BIDEN'S state of residence. 740,000 people live there, but 1.7 million companies are registered."
USA puts Switzerland under pressure in fight against money laundering
Under a new law, shell companies must declare their beneficiaries. The US state of Delaware and Switzerland are affected.
After more than a decade of tough negotiations, a law against anonymous shell companies has come into force in the USA. The Corporate Transparency Act (CTA) requires domestic and foreign companies to disclose the identity of their beneficial owner to U.S. Treasury investigators. Passage of the bill could put Switzerland under pressure.
Little more than a hundred pages long, the bill was inserted into the gigantic defense budget, which authorizes $741 billion in spending this year. The day before Christmas Eve, President Donald Trump vetoed the budget bill, in part because it did not mention his demand that lawsuit protections for social media be eliminated. But thanks to bipartisan support, both chambers of Congress then overcame his opposition with more than a two-thirds majority.
"The most significant reform in a generation"
With the CTA bill, opponents of money laundering and other financial crimes scored a major victory. "It is the most significant reform in a generation," enthuses Clark Gascoigne of the Fact Coalition, a Washington lobbying organization. "Until now, the U.S. has been the easiest place to set up anonymous shell companies," he says. "That's going to stop now."
Affected domiciliary companies must disclose their beneficial owner to the Financial Crimes Enforcement Network (FinCEN) investigative agency within two years. The name, address, date of birth and the number of an identity card are required on an annual basis. FinCEN uses this information to compile a list that is accessible to its investigators. Financial institutions can also access this information, but only if the customer agrees. Those who refuse to provide the information face a fine of up to $10,000 and up to two years in prison.
Criminals can hide money less easily
Gascoigne estimates that 80 to 90 percent of anonymous domiciliary companies are affected by the CTA law. This makes hiding money in the U.S. more difficult for tax fraudsters, terrorist organizations and others who engage in illegal activities. According to Gascoigne, two years ago, for example, the U.S. counted 9,000 massage parlors that were secretly brothels, trafficking in human beings. "Six thousand of them were registered as businesses, and of those, 70 percent concealed their ownership."
Joe Biden's state of residence, Delaware, is particularly hard hit by the new law. The small East Coast state, with a mere 740,000 voters, has 1.7 million registered businesses. Their tax revenue provided the state treasury with $1.36 billion in 2019, which covered 30 percent of the budget. In recent years, however, Delaware has also become comfortable with reform. Local politicians came to the realization that the image of a loophole state was hurting service business with legitimate companies. The incoming president has repeatedly spoken positively about the reform and has made more far-reaching steps against financial crime a focus of his government program.
Increasing pressure on Switzerland
The CTA law could put Switzerland on the spot. "The U.S. is taking a leap over Switzerland," judges Martin Hilti of Transparency International Switzerland in Bern. Hilti praises the list enshrined in the law. "It allows for quicker crackdowns, lowers the threshold for this and, what's more, has a preventive effect."
In Switzerland, by comparison, beneficial owners are only known to the respective companies. Authorities seeking information must first knock on their door. The tightening of the Anti-Money Laundering Act is making only slow progress in the Swiss parliament because of resistance from the lawyers' lobby. Even in international efforts to increase transparency, Hilti says, "Switzerland is one of two countries slowing down."
The big move by the U.S. increases reputational risk for Switzerland. On the secrecy index compiled by the Tax Justice Network, Switzerland ranks third behind the Cayman Islands and the United States. "I expect the U.S. to drop down the list," Gascoigne says. The risk is increasing that Switzerland will approach the inglorious top spot.
