[Congressional Bills 114th Congress]
[From the U.S. Government Publishing Office]
[S. 2489 Introduced in Senate (IS)]

<DOC>






114th CONGRESS
  2d Session
                                S. 2489

   To ensure that persons who form corporations in the United States 
   disclose the beneficial owners of those corporations, in order to 
  prevent the formation of corporations with hidden owners, stop the 
  misuse of United States corporations by wrongdoers, and assist law 
 enforcement in detecting, preventing, and punishing terrorism, money 
   laundering, tax evasion, and other criminal and civil misconduct 
     involving United States corporations, and for other purposes.


_______________________________________________________________________


                   IN THE SENATE OF THE UNITED STATES

                            February 3, 2016

    Mr. Whitehouse (for himself and Mrs. Feinstein) introduced the 
 following bill; which was read twice and referred to the Committee on 
                             the Judiciary

_______________________________________________________________________

                                 A BILL


 
   To ensure that persons who form corporations in the United States 
   disclose the beneficial owners of those corporations, in order to 
  prevent the formation of corporations with hidden owners, stop the 
  misuse of United States corporations by wrongdoers, and assist law 
 enforcement in detecting, preventing, and punishing terrorism, money 
   laundering, tax evasion, and other criminal and civil misconduct 
     involving United States corporations, and for other purposes.

    Be it enacted by the Senate and House of Representatives of the 
United States of America in Congress assembled,

SECTION 1. SHORT TITLE.

    This Act may be cited as the ``Incorporation Transparency and Law 
Enforcement Assistance Act''.

SEC. 2. FINDINGS.

    Congress finds the following:
            (1) Nearly 2,000,000 corporations and limited liability 
        companies are being formed under the laws of the States each 
        year.
            (2) Very few States obtain meaningful information about the 
        beneficial owners of the corporations and limited liability 
        companies formed under their laws.
            (3) A person forming a corporation or limited liability 
        company within the United States typically provides less 
        information to the State of incorporation than is needed to 
        obtain a bank account or driver's license and typically does 
        not name a single beneficial owner.
            (4) Terrorists and other criminals have exploited the 
        weaknesses in State formation procedures to conceal their 
        identities when forming corporations or limited liability 
        companies in the United States, and have then used the newly 
        created entities to support terrorist organizations, drug 
        trafficking organizations, and international organized crime 
        groups, as well as commit misconduct affecting interstate and 
        international commerce such as trafficking in illicit drugs, 
        illegal arms trafficking, money laundering, tax evasion, health 
        care fraud, Internet-based fraud, securities fraud, financial 
        fraud, intellectual property crimes, and acts of corruption.
            (5) Among those who have abused State incorporation 
        procedures is Victor Bout, a Russian arms dealer who used at 
        least 12 companies incorporated in Texas, Florida, and Delaware 
        to carry out his activities, and has been convicted, in part, 
        for conspiring to sell weapons to a terrorist organization 
        trying to kill citizens of the United States and Federal 
        officers and employees. In addition, Iranian interests used a 
        shell company formed in New York to purchase a 36-story 
        building on Fifth Avenue in Manhattan and forwarded millions of 
        dollars in rent each year to Iran until authorities in the 
        United States learned of the transfers and seized the building.
            (6) Law enforcement efforts to investigate corporations and 
        limited liability companies suspected of wrongdoing have been 
        impeded by the lack of available beneficial ownership 
        information, as documented in reports and testimony by 
        officials from the Department of Justice, the Department of 
        Homeland Security, the Financial Crimes Enforcement Network of 
        the Department of the Treasury, the Internal Revenue Service, 
        the Government Accountability Office, and others.
            (7) In July 2006, a leading international anti-money 
        laundering and anti-terrorist financing organization, the 
        Financial Action Task Force on Money Laundering (in this 
        section referred to as ``FATF''), of which the United States is 
        a member, issued a report that criticized the United States for 
        failing to comply with a FATF standard on the need to collect 
        beneficial ownership information and urged the United States to 
        correct this deficiency by July 2008.
            (8) In response to the FATF report and to strengthen 
        measures to protect homeland security, Federal officials have 
        repeatedly urged the States to improve their formation 
        practices by obtaining beneficial ownership information for the 
        corporations and limited liability companies formed under the 
        laws of such States. But the States continue to form millions 
        of corporations with hidden owners.
            (9) Many States have established automated procedures that 
        allow a person to form a new corporation or limited liability 
        company within the State within 24 hours of filing an online 
        application, without any prior review of the application by a 
        State official.
            (10) Dozens of Internet websites highlight the anonymity of 
        beneficial owners allowed under the formation practices of some 
        States, point to those practices as a reason to incorporate in 
        those States, and list those States together with offshore 
        jurisdictions as preferred locations for the formation of new 
        corporations, essentially inviting terrorists and other 
        wrongdoers to form entities within the United States.
            (11) In contrast to practices in the United States, all 28 
        countries in the European Union are already required to have 
        formation agents identify the beneficial owners of the 
        corporations formed by those agents under the laws of those 
        countries.
            (12) To reduce the vulnerability of the United States to 
        wrongdoing by United States corporations and limited liability 
        companies with hidden owners, protect interstate and 
        international commerce from terrorists and other criminals 
        misusing United States corporations and limited liability 
        companies, strengthen law enforcement investigations of suspect 
        corporations and limited liability companies, set minimum 
        standards for and level the playing field among State formation 
        practices, and bring the United States into compliance with 
        international anti-money laundering and anti-terrorist 
        financing standards, Federal legislation is needed to require 
        the States to obtain beneficial ownership information for the 
        corporations and limited liability companies formed under the 
        laws of such States.

SEC. 3. TRANSPARENT INCORPORATION PRACTICES.

    (a) Transparent Incorporation Practices.--Part E of title I of the 
Omnibus Crime Control and Safe Streets Act of 1968 (42 U.S.C. 3750 et 
seq.) is amended by adding at the end the following:

            ``Subpart 4--Transparent Incorporation Practices

``SEC. 531. TRANSPARENT INCORPORATION PRACTICES.

    ``(a) Incorporation Systems.--
            ``(1) In general.--To protect the United States from the 
        misuse affecting interstate or foreign commerce of corporations 
        and limited liability companies with hidden owners, each State 
        that receives funding under subpart 1 shall, not later than 3 
        years after the date of enactment of this subpart, use an 
        incorporation system that meets the following requirements:
                    ``(A) Identification of beneficial owners.--Except 
                as provided in paragraphs (2) and (4), each applicant 
                to form a corporation or limited liability company 
                under the laws of the State is required to provide to 
                the State during the formation process a list of the 
                beneficial owners of the corporation or limited 
                liability company that--
                            ``(i) identifies each beneficial owner by 
                        name, current residential or business street 
                        address, and a unique identifying number from a 
                        nonexpired passport issued by the United States 
                        or a nonexpired drivers license or 
                        identification card issued by a State;
                            ``(ii) if any beneficial owner exercises 
                        control over the corporation or limited 
                        liability company through another legal entity, 
                        such as a corporation, partnership, or trust, 
                        identifies each such legal entity and each such 
                        beneficial owner who will use that entity to 
                        exercise control over the corporation or 
                        limited liability company; and
                            ``(iii) if the applicant is not a 
                        beneficial owner, provides the identification 
                        information described in clause (i) relating to 
                        the applicant.
                    ``(B) Updated information.--For each corporation or 
                limited liability company formed under the laws of the 
                State--
                            ``(i) the corporation or limited liability 
                        company is required by the State to submit to 
                        the State an updated list of the beneficial 
                        owners of the corporation or limited liability 
                        company and the information described in 
                        subparagraph (A) for each such beneficial owner 
                        not later than 60 days after the date of any 
                        change in the beneficial owners of the 
                        corporation or limited liability company;
                            ``(ii) in the case of a corporation or 
                        limited liability company formed or acquired by 
                        a formation agent and retained by the formation 
                        agent as a beneficial owner for transfer to 
                        another person, the formation agent is required 
                        by the State to submit to the State an updated 
                        list of the beneficial owners and the 
                        information described in subparagraph (A) for 
                        each such beneficial owner not later than 10 
                        days after the date on which the formation 
                        agent transfers the corporation or limited 
                        liability company to another person; and
                            ``(iii) the corporation or limited 
                        liability company is required by the State to 
                        submit to the State an annual filing containing 
                        the list of the beneficial owners of the 
                        corporation or limited liability company and 
                        the information described in subparagraph (A) 
                        for each such beneficial owner.
                    ``(C) Retention of information.--Beneficial 
                ownership information relating to each corporation or 
                limited liability company formed under the laws of the 
                State is required to be maintained by the State until 
                the end of the 5-year period beginning on the date that 
                the corporation or limited liability company terminates 
                under the laws of the State.
                    ``(D) Information requests.--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, criminal, or administrative 
                        subpoena or summons from a State agency, 
                        Federal agency, or congressional committee or 
                        subcommittee requesting such information;
                            ``(ii) a written request made by a Federal 
                        agency on behalf of another country under an 
                        international treaty, agreement, or convention, 
                        or an order under section 3512 of title 18, 
                        United States Code, or section 1782 of title 
                        28, United States Code, issued in response to a 
                        request for assistance from a foreign country; 
                        or
                            ``(iii) a written request made by the 
                        Financial Crimes Enforcement Network of the 
                        Department of the Treasury.
                    ``(E) No bearer share corporations.--A corporation 
                or limited liability company formed under the laws of 
                the State may not issue a certificate in bearer form 
                evidencing either a whole or fractional interest in the 
                corporation or limited liability company.
            ``(2) States that license formation agents.--
                    ``(A) In general.--To meet the requirements under 
                this section, a State described in subparagraph (B) may 
                permit an applicant to form a corporation or limited 
                liability company under the laws of the State, or a 
                corporation or limited liability company formed under 
                the laws of the State, to provide the required 
                information to a licensed formation agent residing in 
                the State, instead of to the State directly, if the 
                application under paragraph (1)(A) or the update under 
                paragraph (1)(B) contains--
                            ``(i) the name, current business address, 
                        contact information, and licensing number of 
                        the licensed formation agent that has agreed to 
                        maintain the information required under this 
                        section; and
                            ``(ii) a certification by the licensed 
                        formation agent that the licensed formation 
                        agent has possession of the information 
                        required under this section and will maintain 
                        the information in the State licensing the 
                        licensed formation agent in accordance with 
                        this section.
                    ``(B) States described.--A State described in this 
                subparagraph is a State that--
                            ``(i) receives funding under subpart 1; and
                            ``(ii) maintains a formal licensing system 
                        for formation agents that requires a formation 
                        agent to register with the State, meet 
                        standards for fitness and honesty, maintain a 
                        physical office and records within the State, 
                        undergo regular monitoring, and be subject to 
                        sanctions for noncompliance with State 
                        requirements.
                    ``(C) Licensed formation agent duties.--A licensed 
                formation agent that receives beneficial ownership 
                information in accordance with this section shall--
                            ``(i) maintain the information in the State 
                        in which the corporation or limited liability 
                        company is being or has been formed in the same 
                        manner as required for States under paragraph 
                        (1)(C);
                            ``(ii) provide the information under the 
                        same circumstances as required for States under 
                        paragraph (1)(D); and
                            ``(iii) perform the duties of a formation 
                        agent under paragraph (3).
                    ``(D) Termination of relationship.--
                            ``(i) In general.--Except as provided in 
                        clause (ii), a licensed formation agent that 
                        receives beneficial ownership information 
                        relating to a corporation or limited liability 
                        company under State law in accordance with this 
                        paragraph and that resigns, dissolves, or 
                        otherwise ends a relationship with the 
                        corporation or limited liability company shall 
                        within 60 days--
                                    ``(I) notify the State in writing 
                                that the licensed formation agent has 
                                resigned or ended the relationship; and
                                    ``(II) transmit all beneficial 
                                ownership information relating to the 
                                corporation or limited liability 
                                company in the possession of the 
                                licensed formation agent to the 
                                licensing State.
                            ``(ii) Exception.--If a licensed formation 
                        agent receives written instructions from a 
                        corporation or limited liability company, the 
                        licensed formation agent may transmit the 
                        beneficial ownership information relating to 
                        the corporation or limited liability company to 
                        another licensed formation agent that is within 
                        the same State and has agreed to maintain the 
                        information in accordance with this section.
                            ``(iii) Notice to state.--If a licensed 
                        formation agent provides beneficial ownership 
                        information to another licensed formation agent 
                        under clause (ii), the licensed formation agent 
                        providing the information shall, within the 60-
                        day period specified under clause (i), notify 
                        in writing the State under the laws of which 
                        the corporation or limited liability company is 
                        formed of the identity of the licensed 
                        formation agent receiving the information.
            ``(3) Certain beneficial owners.--If an applicant to form a 
        corporation or limited liability company or a beneficial owner, 
        officer, director, or similar agent of a corporation or limited 
        liability company who is required to provide identification 
        information under this section does not have a nonexpired 
        passport issued by the United States or a nonexpired drivers 
        license or identification card issued by a State, each 
        application described in paragraph (1)(A) and each update 
        described in paragraph (1)(B) shall include a certification by 
        a formation agent residing in the State that the formation 
        agent--
                    ``(A) has obtained for each such person a current 
                residential or business street address and a legible 
                and credible copy of the pages of a nonexpired passport 
                issued by the government of a foreign country bearing a 
                photograph, date of birth, and unique identifying 
                information for the person;
                    ``(B) has verified the name, address, and identity 
                of each such person;
                    ``(C) will provide the information described in 
                subparagraph (A) and the proof of verification 
                described in subparagraph (B) upon request under the 
                same circumstances as required for States under 
                paragraph (1)(D); and
                    ``(D) will retain the information and proof of 
                verification under this paragraph in the State in which 
                the corporation or limited liability company is being 
                or has been formed until the end of the 5-year period 
                beginning on the date that the corporation or limited 
                liability company terminates under the laws of the 
                State.
            ``(4) Exempt entities.--
                    ``(A) In general.--An incorporation system 
                described in paragraph (1) shall require that an 
                application for an entity described in clause (i) or 
                (ii) of subsection (d)(2)(B) that is proposed to be 
                formed under the laws of a State and that will be 
                exempt from the beneficial ownership disclosure 
                requirements under this section shall include in the 
                application a certification by the applicant, or a 
                prospective officer, director, or similar agent of the 
                entity--
                            ``(i) identifying the specific provision of 
                        subsection (d)(2)(B) under which the entity 
                        proposed to be formed would be exempt from the 
                        beneficial ownership disclosure requirements 
                        under paragraphs (1), (2), and (3);
                            ``(ii) stating that the entity proposed to 
                        be formed meets the requirements for an entity 
                        described under such provision of subsection 
                        (d)(2)(B); and
                            ``(iii) providing identification 
                        information for the applicant or prospective 
                        officer, director, or similar agent making the 
                        certification in the same manner as provided 
                        under paragraph (1) or (3).
                    ``(B) Existing entities.--On and after the date 
                that is 2 years after the date on which a State begins 
                requiring beneficial ownership information in 
                compliance with this section, an entity formed under 
                the laws of the State before such effective date shall 
                be considered to be a corporation or limited liability 
                company for purposes of this subsection unless an 
                officer, director, or similar agent of the entity 
                submits to the State a certification--
                            ``(i) identifying the specific provision of 
                        subsection (d)(2)(B) under which the entity is 
                        exempt from the requirements under paragraphs 
                        (1), (2), and (3);
                            ``(ii) stating that the entity meets the 
                        requirements for an entity described under such 
                        provision of subsection (d)(2)(B); and
                            ``(iii) providing identification 
                        information for the officer, director, or 
                        similar agent making the certification in the 
                        same manner as provided under paragraph (1) or 
                        (3).
                    ``(C) Exempt entities with an ownership interest.--
                As part of the beneficial ownership information 
                required under subsection (a)(1), neither an applicant 
                seeking to form a corporation or limited liability 
                company nor a corporation or limited liability company 
                providing updated information is required to identify 
                the beneficial owners of any entity that qualifies as 
                an exempt entity under subsection (d)(2)(B).
    ``(b) Penalties.--
            ``(1) In general.--It shall be unlawful for any person to 
        affect interstate or foreign commerce by failing to comply with 
        this subpart by--
                    ``(A) knowingly providing, or attempting to 
                provide, false or fraudulent beneficial ownership 
                information, including a false or fraudulent 
                identifying photograph, to a State or formation agent;
                    ``(B) willfully failing to provide complete or 
                updated beneficial ownership information to a State or 
                formation agent;
                    ``(C) knowingly disclosing the existence of a 
                subpoena, summons, or other request for beneficial 
                ownership information, except--
                            ``(i) to the extent necessary to fulfill 
                        the authorized request; or
                            ``(ii) as authorized by the entity that 
                        issued the subpoena, summons, or other request; 
                        or
                    ``(D) in the case of a formation agent, knowingly 
                failing to obtain or maintain credible, legible, and 
                updated beneficial ownership information, including any 
                required identifying photograph.
            ``(2) Civil and criminal penalties.--In addition to any 
        civil or criminal penalty that may be imposed by a State, any 
        person who violates paragraph (1)--
                    ``(A) shall be liable to the United States for a 
                civil penalty of not more than $1,000,000; and
                    ``(B) may be fined under title 18, United States 
                Code, imprisoned for not more than 3 years, or both.
    ``(c) Rules.--To carry out this subpart, the Attorney General of 
the United States, the Secretary of Homeland Security, and the 
Secretary of the Treasury may issue joint guidance or a joint rule to 
clarify application of the definitions under subsection (d) or to 
specify how to verify beneficial ownership or other identification 
information provided under this section, including under subsection 
(a)(3). Failure to issue any such guidance or rule shall not delay the 
effective date of the requirements under this subpart.
    ``(d) Definitions.--For the purposes of this section:
            ``(1) Beneficial owner.--
                    ``(A) In general.--Except as provided in 
                subparagraph (B), the term `beneficial owner' means a 
                natural person who, directly or indirectly--
                            ``(i) exercises substantial control over a 
                        corporation or limited liability company; or
                            ``(ii) has a substantial interest in or 
                        receives substantial economic benefits from the 
                        assets of a corporation or limited liability 
                        company.
                    ``(B) Exceptions.--The term `beneficial owner' 
                shall not include--
                            ``(i) a minor child;
                            ``(ii) a person acting as a nominee, 
                        intermediary, custodian, or agent on behalf of 
                        another person;
                            ``(iii) a person acting solely as an 
                        employee of a corporation or limited liability 
                        company and whose control over or economic 
                        benefits from the corporation or limited 
                        liability company derives solely from the 
                        employment status of the person;
                            ``(iv) a person whose only interest in a 
                        corporation or limited liability company is 
                        through a right of inheritance, unless the 
                        person also meets the requirements of 
                        subparagraph (A); or
                            ``(v) a creditor of a corporation or 
                        limited liability company, unless the creditor 
                        also meets the requirements of subparagraph 
                        (A).
                    ``(C) Anti-abuse rule.--The exceptions under 
                subparagraph (B) shall not apply if used for the 
                purpose of evading, circumventing, or abusing the 
                provisions of subparagraph (A) or subsection (a).
            ``(2) Corporation; limited liability company.--
                    ``(A) In general.--Subject to subparagraph (B), the 
                terms `corporation' and `limited liability company'--
                            ``(i) have the meanings given such terms 
                        under the laws of the applicable State; and
                            ``(ii) include any non-United States entity 
                        eligible for registration or registered to do 
                        business as a corporation or limited liability 
                        company under the laws of the applicable State.
                    ``(B) Exempt entities.--Subject to subsection 
                (a)(4), the terms `corporation' and `limited liability 
                company' do not include an entity that--
                            ``(i) is--
                                    ``(I) a business concern that is an 
                                issuer of a class of securities 
                                registered under section 12 of the 
                                Securities Exchange Act of 1934 (15 
                                U.S.C. 781) or that is required to file 
                                reports under section 15(d) of that Act 
                                (15 U.S.C. 78o(d));
                                    ``(II) a business concern 
                                constituted or sponsored by a State, a 
                                political subdivision of a State, under 
                                an interstate compact between 2 or more 
                                States, by a department or agency of 
                                the United States, under the laws of 
                                the United States, or by an 
                                international organization of which the 
                                United States is a member;
                                    ``(III) a depository institution 
                                (as defined in section 3 of the Federal 
                                Deposit Insurance Act (12 U.S.C. 
                                1813));
                                    ``(IV) a credit union (as defined 
                                in section 101 of the Federal Credit 
                                Union Act (12 U.S.C. 1752));
                                    ``(V) a bank holding company (as 
                                defined in section 2 of the Bank 
                                Holding Company Act of 1956 (12 U.S.C. 
                                1841));
                                    ``(VI) a broker or dealer (as 
                                defined in section 3 of the Securities 
                                Exchange Act of 1934 (15 U.S.C. 78c)) 
                                that is registered under section 15 of 
                                the Securities Exchange Act of 1934 (15 
                                U.S.C. 78o);
                                    ``(VII) an exchange or clearing 
                                agency (as defined in section 3 of the 
                                Securities Exchange Act of 1934 (15 
                                U.S.C. 78c)) that is registered under 
                                section 6 or 17A of the Securities 
                                Exchange Act of 1934 (15 U.S.C. 78f and 
                                78q-1);
                                    ``(VIII) an investment company (as 
                                defined in section 3 of the Investment 
                                Company Act of 1940 (15 U.S.C. 80a-3)) 
                                or an investment advisor (as defined in 
                                section 202(11) of the Investment 
                                Advisors Act of 1940 (15 U.S.C. 80b-
                                2(11))), if the company or adviser is 
                                registered with the Securities and 
                                Exchange Commission, or has filed an 
                                application for registration which has 
                                not been denied, under the Investment 
                                Company Act of 1940 (15 U.S.C. 80a-1 et 
                                seq.) or the Investment Advisor Act of 
                                1940 (15 U.S.C. 80b-1 et seq.);
                                    ``(IX) an insurance company (as 
                                defined in section 2 of the Investment 
                                Company Act of 1940 (15 U.S.C. 80a-2)) 
                                which is formed under the laws of and 
                                regulated by a State;
                                    ``(X) a registered entity (as 
                                defined in section 1a of the Commodity 
                                Exchange Act (7 U.S.C. 1a)), or a 
                                futures commission merchant, 
                                introducing broker, commodity pool 
                                operator, or commodity trading advisor 
                                (as defined in section 1a of the 
                                Commodity Exchange Act (7 U.S.C. 1a)) 
                                that is registered with the Commodity 
                                Futures Trading Commission;
                                    ``(XI) a public accounting firm 
                                registered in accordance with section 
                                102 of the Sarbanes-Oxley Act (15 
                                U.S.C. 7212);
                                    ``(XII) a public utility that 
                                provides telecommunications service, 
                                electrical power, natural gas, or water 
                                and sewer services within the United 
                                States;
                                    ``(XIII) a church or nonprofit 
                                entity that is described in section 
                                501(c)(3) or 527 of the Internal 
                                Revenue Code of 1986;
                                    ``(XIV) any business concern that--
                                            ``(aa) employs more than 20 
                                        employees on a full-time basis 
                                        in the United States;
                                            ``(bb) files income tax 
                                        returns in the United States 
                                        demonstrating more than 
                                        $5,000,000 in gross receipts or 
                                        sales;
                                            ``(cc) has an operating 
                                        presence at a physical location 
                                        within the United States; and
                                            ``(dd) has more than 100 
                                        shareholders; or
                                    ``(XV) any corporation or limited 
                                liability company which is owned, in 
                                whole or in substantial part, by an 
                                entity described in subclause (I), 
                                (II), (III), (IV), (V), (VI), (VII), 
                                (VIII), (IX), (X), (XI), (XII), (XIII), 
                                or (XIV); or
                            ``(ii) is within any class of business 
                        concerns which the Attorney General of the 
                        United States, the Secretary of Homeland 
                        Security, and the Secretary of the Treasury 
                        jointly determine in writing, upon the request 
                        of a State, and through an order, guidance, or 
                        rule should be exempt from the requirements of 
                        subsection (a), because requiring beneficial 
                        ownership information from the business concern 
                        would not serve the public interest and would 
                        not assist law enforcement efforts to detect, 
                        prevent, or punish criminal or civil 
                        misconduct.
            ``(3) Formation agent.--The term `formation agent' means a 
        person who, for compensation, acts on behalf of another person 
        to form, or assist in the formation, of a corporation or 
        limited liability company under the laws of a State.''.
    (b) Funding Authorization.--
            (1) In general.--To carry out section 531 of title I of the 
        Omnibus Crime Control and Safe Streets Act of 1968, as added by 
        this Act, and to protect the United States against the misuse 
        affecting interstate or foreign commerce of corporations or 
        limited liability companies with hidden owners, during the 3-
        year period beginning on the date of enactment of this Act, 
        funds shall be made available to each State (as that term is 
        defined under section 901(a)(2) of the Omnibus Crime Control 
        and Safe Streets Act of 1968 (42 U.S.C. 3791(a)(2))), to pay 
        reasonable costs to comply with the requirements of such 
        section 531 from one or more of the following sources:
                    (A) Upon written request by a State, and without 
                further appropriation, the Attorney General of the 
                United States shall make available or transfer to the 
                State funds from excess unobligated balances (as 
                defined in section 524(c)(8)(D) of title 28, United 
                States Code) in the Department of Justice Assets 
                Forfeiture Fund established under section 524(c) of 
                title 28, United States Code.
                    (B) Upon written request by a State, after 
                consultation with the Attorney General of the United 
                States, and without further appropriation, the 
                Secretary of the Treasury shall make available or 
                transfer to the State funds from unobligated balances 
                described in section 9703(g)(4)(B) of title 31, United 
                States Code, in the Department of the Treasury 
                Forfeiture Fund.
            (2) Eligible costs.--The Attorney General and Secretary of 
        the Treasury, in their sole discretion, shall determine what 
        costs are reasonable for purposes of paragraph (1), taking into 
        account the maximum amount of funds available for distribution 
        to States under paragraph (3).
            (3) Maximum amounts.--
                    (A) Department of justice.--The Attorney General of 
                the United States may not make available to States a 
                total of more than $10,000,000 under paragraph (1)(A).
                    (B) Department of the treasury.--The Secretary of 
                the Treasury may not make available to States a total 
                of more than $30,000,000 under paragraph (1)(B).
            (4) Funding availability.--The amounts available to be 
        provided to, and any amounts provided to, a State under 
        paragraph (1) shall be exempt from, and shall not be reduced 
        under, any order under section 251A of the Balanced Budget and 
        Emergency Deficit Control Act of 1985 (2 U.S.C. 901a).
    (c) State Compliance Report.--Nothing in this Act or an amendment 
made by this Act authorizes the Attorney General of the United States 
to withhold from a State any funding otherwise available to the State 
under subpart 1 of part E of title I of the Omnibus Crime Control and 
Safe Streets Act of 1968 (42 U.S.C. 3750 et seq.) because of a failure 
by that State to comply with subpart 4 of part E of title I of the 
Omnibus Crime Control and Safe Streets Act of 1968, as added by this 
Act. Not later than 42 months after the date of enactment of this Act, 
the Comptroller General of the United States shall submit to the 
Committee on the Judiciary of the Senate and the Committee on the 
Judiciary of the House of Representatives a report identifying which 
States are in compliance with subpart 4 of part E of title I of the 
Omnibus Crime Control and Safe Streets Act of 1968 and, for any State 
not in compliance, what measures must be taken by that State to achieve 
compliance with such subpart 4.
    (d) Effect on State Law.--
            (1) In general.--This Act and the amendments made by this 
        Act do not supersede, alter, or affect any statute, regulation, 
        order, or interpretation in effect in any State, except where a 
        State has elected to receive funding from the Department of 
        Justice under subpart 1 of part E of title I of the Omnibus 
        Crime Control and Safe Streets Act of 1968 (42 U.S.C. 3750 et 
        seq.), and then only to the extent that such State statute, 
        regulation, order, or interpretation is inconsistent with this 
        Act or an amendment made by this Act.
            (2) Not inconsistent.--A State statute, regulation, order, 
        or interpretation is not inconsistent with this Act or an 
        amendment made by this Act if such statute, regulation, order, 
        or interpretation--
                    (A) requires additional information, more 
                frequently updated information, or additional measures 
                to verify information related to a corporation, limited 
                liability company, or beneficial owner, than is 
                specified under this Act or an amendment made by this 
                Act; or
                    (B) imposes additional limits on public access to 
                the beneficial ownership information obtained by the 
                State than is specified under this Act or an amendment 
                made by this Act.
            (3) State records.--Nothing in this Act or the amendments 
        made by this Act limits the authority of a State, by statute or 
        otherwise, to disclose or to not disclose to the public all or 
        any portion of the beneficial ownership information provided to 
        the State under subpart 4 of part E of title I of the Omnibus 
        Crime Control and Safe Streets Act of 1968, as added by this 
        Act.
            (4) No duty of verification.--This Act and the amendments 
        made by this Act do not impose any obligation on a State to 
        verify the name, address, or identity of a beneficial owner 
        whose information is submitted to such State under subpart 4 of 
        part E of title I of the Omnibus Crime Control and Safe Streets 
        Act of 1968, as added by this Act.
    (e) Federal Contractors.--Not later than the first day of the first 
full fiscal year beginning at least 1 year after the date of enactment 
of this Act, the Administrator for Federal Procurement Policy shall 
revise the Federal Acquisition Regulation maintained under section 
1303(a)(1) of title 41, United States Code, to require any contractor 
who is subject to the requirement to disclose beneficial ownership 
information under subpart 4 of part E of title I of the Omnibus Crime 
Control and Safe Streets Act of 1968, as added by this Act, to provide 
the information required to be disclosed under such subpart 4 to the 
Federal Government as part of any bid or proposal for a contract with a 
value threshold in excess of the simplified acquisition threshold under 
section 134 of title 41, United States Code.

SEC. 4. ANTI-MONEY LAUNDERING AND ANTI-TERRORIST FINANCING OBLIGATIONS 
              OF FORMATION AGENTS.

    (a) Anti-Money Laundering and Anti-Terrorist Financing Obligations 
of Formation Agents.--Section 5312(a)(2) of title 31, United States 
Code, is amended--
            (1) in subparagraph (Y), by striking ``or'' at the end;
            (2) by redesignating subparagraph (Z) as subparagraph (AA); 
        and
            (3) by inserting after subparagraph (Y) the following:
                    ``(Z) any person engaged in the business of forming 
                corporations or limited liability companies; or''.
    (b) Deadline for Implementing Rule for Formation Agents.--
            (1) Proposed rule.--Not later than 120 days after the date 
        of enactment of this Act, the Secretary of the Treasury, in 
        consultation with the Secretary of Homeland Security and the 
        Attorney General of the United States, shall publish a proposed 
        rule in the Federal Register requiring persons described in 
        section 5312(a)(2)(Z) of title 31, United States Code, as 
        amended by this section, to establish anti-money laundering 
        programs under subsection (h) of section 5318 of that title.
            (2) Final rule.--Not later than 270 days after the date of 
        enactment of this Act, the Secretary of the Treasury shall 
        publish the rule described in this subsection in final form in 
        the Federal Register.
            (3) Exclusions.--Any rule promulgated under this subsection 
        shall exclude from the category of persons engaged in the 
        business of forming a corporation or limited liability 
        company--
                    (A) any government agency; and
                    (B) any attorney or law firm that uses a paid 
                formation agent operating within the United States to 
                form the corporation or limited liability company.

SEC. 5. STUDIES AND REPORTS.

    (a) Other Legal Entities.--Not later than 2 years after the date of 
enactment of this Act, the Comptroller General of the United States 
shall conduct a study and submit to the Committee on the Judiciary of 
the Senate and the Committee on the Judiciary of the House of 
Representatives a report--
            (1) identifying each State that has procedures that enable 
        persons to form or register under the laws of the State 
        partnerships, trusts, charitable organizations, or other legal 
        entities, and the nature of those procedures;
            (2) identifying each State that requires persons seeking to 
        form or register partnerships, trusts, charitable 
        organizations, or other legal entities under the laws of the 
        State to provide information about the beneficial owners (as 
        that term is defined in section 531 of title I of the Omnibus 
        Crime Control and Safe Streets Act of 1968, as added by this 
        Act) or beneficiaries of such entities, and the nature of the 
        required information;
            (3) evaluating whether the lack of available beneficial 
        ownership information for partnerships, trusts, charitable 
        organizations, or other legal entities--
                    (A) raises concerns about the involvement of such 
                entities in terrorism, money laundering, tax evasion, 
                securities fraud, trafficking in illicit drugs, or 
                other criminal or civil misconduct; and
                    (B) has impeded investigations into entities 
                suspected of such misconduct; and
            (4) evaluating whether the failure of the United States to 
        require beneficial ownership information for partnerships, 
        trusts, charitable organizations, or other legal entities 
        formed or registered in the United States has elicited 
        international criticism and what steps, if any, the United 
        States has taken or is planning to take in response.
    (b) Effectiveness of Incorporation Practices.--Not later than 5 
years after the date of enactment of this Act, the Comptroller General 
of the United States shall conduct a study and submit to the Committee 
on the Judiciary of the Senate and the Committee on the Judiciary of 
the House of Representatives a report assessing the effectiveness of 
incorporation practices implemented under this Act and the amendments 
made by this Act in--
            (1) providing law enforcement agencies with prompt access 
        to reliable, useful, and complete beneficial ownership 
        information; and
            (2) strengthening the capability of law enforcement 
        agencies to combat incorporation abuses and other civil and 
        criminal misconduct.
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