[Congressional Record Volume 162, Number 88 (Monday, June 6, 2016)]
[Senate]
[Pages S3444-S3447]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]
SA 4409. Mr. WYDEN (for himself and Mr. Whitehouse) submitted an
amendment intended to be proposed by him to the bill S. 2943, to
authorize appropriations for fiscal year 2017 for military activities
of the Department of Defense, for military construction, and for
defense activities of the Department of Energy, to prescribe military
personnel strengths for such fiscal year, and for other purposes; which
was ordered to lie on the table; as follows:
At the end of subtitle I of title X , add the following:
SEC. 1097. INCORPORATION TRANSPARENCY AND LAW ENFORCEMENT
ASSISTANCE.
(a) Short Title.--This section may be cited as the ``Stop
Terrorist Financing and Shell Company Abuse Act''.
(b) Transparent Incorporation Practices.--
(1) Transparent incorporation practices.--
(A) In general.--Subchapter II of chapter 53 of title 31,
United States Code, is amended by adding after section 5332
the following:
``Sec. 5333. Transparent incorporation practices
``(a) Reporting Requirements.--
``(1) In general.--Subject to paragraph (3), not later than
the beginning of fiscal year 2017, the Secretary of the
Treasury shall issue regulations requiring each corporation
and limited liability company formed in a State that does not
have a formation system described under subsection (b) to
file with the Secretary such information as the corporation
or limited liability company would be required to provide the
State if such State had a formation system described under
subsection (b).
``(2) Disclosure of beneficial ownership information.--
Beneficial ownership information reported to the Secretary of
the Treasury pursuant to paragraph (1) shall be provided by
the Secretary of the Treasury upon receipt of--
``(A) a civil or criminal subpoena or summons from a State
agency, Federal agency, or congressional committee or
subcommittee requesting such information;
``(B) 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 or
section 1782 of title 28 issued in response to a request for
assistance from a foreign country; or
``(C) a written request made by the Financial Crimes
Enforcement Network of the Department of the Treasury.
``(3) Limitation.--In issuing regulations pursuant to
paragraph (1), the Secretary may not require the corporation
or limited liability company to file with the Internal
Revenue Service the information described in that paragraph.
``(b) Formation System.--
``(1) In general.--With respect to a State, a formation
system is described under this subsection if it meets the
following requirements:
``(A) Identification of beneficial owners.--Except as
provided in paragraphs (2) and (4), and subject to paragraph
(3), each applicant seeking 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) except as provided in subparagraph (F), identifies
each beneficial owner by--
``(I) name;
``(II) current residential or business street address; and
``(III) a unique identifying number from a nonexpired
passport issued by the United States or a nonexpired drivers
license issued by a State; and
``(ii) if the applicant is not the 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 update the list of the beneficial
owners of the corporation or limited liability company by
providing the information described in subparagraph (A) to
the State not later than 60 days after the date of any change
in the list of beneficial owners or the information required
to be provided relating to each beneficial owner;
``(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 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 or criminal 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 section 1782 of title 28, United States
Code; or
``(iii) a written request made by the Financial Crimes
Enforcement Network.
``(E) No bearer share corporations or limited liability
companies.--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.--Notwithstanding paragraph (1), 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 subsection; and
``(ii) a certification by the licensed formation agent that
the licensed formation agent has possession of the
information required under this subsection and will maintain
the information in the State licensing the licensed formation
agent in accordance with State law.
``(B) States described.--A State described in this
subparagraph is a State that 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 under State law in accordance with this paragraph
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
promptly--
``(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
[[Page S3445]]
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 promptly 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 subsection 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.--A formation system described in
paragraph (1) shall require that an application for an entity
described in subparagraph (C) or (D) of subsection (d)(2)
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 subsection 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) 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); 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 effective date of the amendments to the
formation system of a State made to comply 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, and shall be
subject to the requirements 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) 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); 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 having ownership interest.--If an
entity described in subparagraph (C) or (D) of subsection
(d)(2) has or will have an ownership interest in a
corporation or limited liability company formed or to be
formed under the laws of a State, the applicant, corporation,
or limited liability company in which the entity has or will
have the ownership interest shall provide the information
required under this subsection relating to the entity, except
that the entity shall not be required to provide information
regarding any natural person who has an ownership interest
in, exercises substantial control over, or receives
substantial economic benefits from the entity.
``(c) Penalties.--
``(1) In general.--It shall be unlawful for--
``(A) any person to affect interstate or foreign commerce
by--
``(i) knowingly providing, or attempting to provide, false
or fraudulent beneficial ownership information, including a
false or fraudulent identifying photograph, to a State or
licensed formation agent under State law in accordance with
this section;
``(ii) intentionally failing to provide complete or updated
beneficial ownership information to a State or licensed
formation agent under State law in accordance with this
section; or
``(iii) 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
``(B) 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 $10,000; and
``(B) may be fined under title 18, imprisoned for not more
than 3 years, or both.
``(d) Definitions.--For the purposes of this section:
``(1) Beneficial owner.--
``(A) In general.--The term `beneficial owner'--
``(i) means an 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; and
``(ii) does not include--
``(I) a minor child;
``(II) a person acting as a nominee, intermediary,
custodian, or agent on behalf of another person; or
``(III) a natural 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 natural person.
``(B) Anti-abuse rule.--The exclusions under clause (ii)
shall not apply if the person is acting as a nominee,
intermediary, custodian or agent on behalf of another person
or solely as an employee of a corporation or limited
liability company, as applicable, with the intent to evade
the requirements of this subsection or any regulation
promulgated under this subsection.
``(2) Corporation; limited liability company.--The terms
`corporation' and `limited liability company'--
``(A) have the meanings given such terms under the laws of
the applicable State;
``(B) 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;
``(C) do not include any entity that is, and discloses in
the application by the entity to form under the laws of the
State or, if the entity was formed before the date of the
enactment of this section, in a filing with the State under
State law--
``(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. 78l) 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, or under the laws of the
United States;
``(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 of the
Investment Advisors Act of 1940 (15 U.S.C. 80b-2)), 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));
``(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);
[[Page S3446]]
``(xii) a public utility that provides telecommunications
service, electrical power, natural gas, or water and sewer
services, within the United States;
``(xiii) a church, charity, or nonprofit entity that is
described in section 501(c), 527, or 4947(a)(1) of the
Internal Revenue Code of 1986, has not been denied tax exempt
status, and has filed the most recently due annual
information return with the Internal Revenue Service, if
required to file such a return;
``(xiv) any business concern that--
``(I) employs more than 20 employees on a full-time basis
in the United States;
``(II) files income tax returns in the United States
demonstrating more than $5,000,000 in gross receipts or
sales; and
``(III) has an operating presence at a physical office
within the United States; or
``(xv) any corporation or limited liability company formed
and owned by an entity described in clause (i), (ii), (iii),
(iv), (v), (vi), (vii), (viii), (ix), (x), (xi), (xii),
(xiii), or (xiv); and
``(D) do not include any individual business concern or
class of business concerns which the Secretary of the
Treasury, with the written concurrence of the Attorney
General of the United States, has determined in writing
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 terrorism, money laundering, tax evasion, or other
misconduct.
``(3) Formation agent.--The term `formation agent' means a
person who, for compensation--
``(A) acts on behalf of another person to assist in the
formation of a corporation or limited liability company under
the laws of a State; or
``(B) purchases, sells, or transfers the public records
that form a corporation or limited liability company.''.
(B) Rulemaking.--To carry out this Act and the amendments
made by this Act, the Secretary of the Treasury, in
consultation with the Secretary of Homeland Security and the
Attorney General of the United States, may issue guidance or
a rule to--
(i) clarify the definitions under section 5333(d) of title
31, United States Code, as added by subparagraph (A); and
(ii) specify how to verify beneficial ownership information
or other identification information for purposes of section
5333, including whether the verification procedures specified
in section 5333(b)(3) should apply to all applicants under
section 5333(b)(1) or whether such verification process
should require the notarization of signatures.
(C) Conforming amendments.--Title 31, United States Code,
is amended--
(i) in section 5321(a)--
(I) in paragraph (1), by striking ``sections 5314 and
5315'' each place it appears and inserting ``sections 5314,
5315, and 5333''; and
(II) in paragraph (6), by inserting ``(except section
5333)'' after ``subchapter'' each place it appears; and
(ii) in section 5322, by striking ``section 5315 or 5324''
each place it appears and inserting ``section 5315, 5324, or
5333''.
(D) Table of contents.--The table of contents for
subchapter II of chapter 53 of title 31, United States Code,
is amended by adding at the end the following:
``Sec. 5333. Transparent incorporation practices.''.
(E) Restrictions on public access.--A State may--
(i) restrict public access to all or any portion of the
beneficial ownership information provided to the State as
described under section 5332 of title 31, United States Code,
as added by this Act; and
(ii) by statute, regulation, order, or interpretation
adopted or issued by the State after the date of enactment of
this Act, provide for public access to all or any portion of
such information.
(F) 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 section
5333 of title 31, United States Code, as added by this Act.
(2) Funding authorization.--
(A) In general.--To carry out section 5333 of title 31,
United States Code, as added by this Act, during the 3-year
period beginning on the date of enactment of this Act, funds
shall be made available to each State to pay reasonable costs
relating to compliance with the requirements of such section.
(B) Funding sources.--To protect the United States against
the misuse of United States corporations and limited
liability companies with hidden owners, funds shall be
provided to each State to carry out the purposes described in
subparagraph (A) from one or more of the following sources:
(i) Upon application by a State, and without further
appropriation, the Secretary of the Treasury shall make
available to the State unobligated balances described in
section 9703(g)(4)(B) of title 31, United States Code, in the
Department of the Treasury Forfeiture Fund established under
section 9703(a) of title 31, United States Code.
(ii) Upon application by a State, after consultation with
the Secretary of the Treasury, and without further
appropriation, the Attorney General of the United States
shall make available to the State 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.
(C) Maximum amounts.--
(i) Department of the treasury.--The Secretary of the
Treasury may not make available to States a total of more
than $30,000,000 under subparagraph (B)(i).
(ii) 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 subparagraph (B)(ii).
(D) Rulemaking.--Not later than the end of the 180-day
period beginning on the date of the enactment of this Act,
the Secretary of the Treasury and the Attorney General shall,
jointly, issue regulations setting forth the procedures for
States to apply for funds under this paragraph, including
determining which State measures should be funded to assess,
plan, develop, test, or implement relevant policies,
procedures, or system modifications.
(3) Compliance report.--Nothing in this subsection or the
amendments made by this subsection authorizes the Secretary
of the Treasury to withhold from a State any funding
otherwise available to the State because of a failure by that
State to comply with section 5333 of title 31, United States
Code, as added by this Act. Not later than the end of the 42-
month period beginning on the date of the enactment of this
Act, the Comptroller General of the United States shall
submit to the Committee on Financial Services of the House of
Representatives and the Committee on Homeland Security and
Governmental Affairs of the Senate a report--
(A) identifying which States obtain beneficial ownership
information as described in section 5333;
(B) with respect to each State that does not obtain such
information, whether corporations and limited liability
companies formed under the laws of such State are in
compliance with such section 5333 and providing the specified
beneficial ownership information to the Secretary of the
Treasury; and
(C) whether the Department of the Treasury is in compliance
with section 5333 and, if not, what steps it must take to
come into compliance with this subsection.
(4) Federal contractors.--Not later than the first day of
the first full fiscal year beginning at least 1 year after
the date of the 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 section 5333 of title 31, United
States Code, as added by this Act, to provide the information
required to be disclosed under such section 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.
(5) Anti-money laundering obligations of formation
agents.--
(A) In general.--Section 5312(a)(2) of title 31, United
States Code, is amended--
(i) in subparagraph (Y), by striking ``or'' at the end;
(ii) by redesignating subparagraph (Z) as subparagraph
(AA); and
(iii) by inserting after subparagraph (Y) the following:
``(Z) any person who, for compensation--
``(i) acts on behalf of another person to form, or assist
in formation of, a corporation or limited liability company
under the laws of a State; or
``(ii) purchases, sells, or transfers the public records
that form a corporation or limited liability company; or''.
(B) Deadline for anti-money laundering rule for formation
agents.--
(i) Proposed rule.--Not later than 120 days after the date
of enactment of this Act, the Secretary of the Treasury, in
consultation with the Attorney General of the United States
and the Commissioner of the Internal Revenue Service, 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 paragraph, to
establish anti-money laundering programs under subsection (h)
of section 5318 of that title.
(ii) 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 paragraph in final form in
the Federal Register.
(iii) Exclusions.--Any rule promulgated under this
paragraph shall exclude from the category of persons involved
in forming a corporation or limited liability company--
(I) any government agency; and
(II) any attorney or law firm that uses a paid formation
agent operating within the United States to form the
corporation or limited liability company.
(c) Studies and Reports.--
(1) 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 Congress a
report--
(A) identifying each State that has procedures that enable
persons to form or register under the laws of the State
partnerships, trusts, or other legal entities, and the nature
of those procedures;
[[Page S3447]]
(B) identifying each State that requires persons seeking to
form or register partnerships, trusts, or other legal
entities under the laws of the State to provide information
about the beneficial owners (as that term is defined in
section 5333(d)(1) of title 31, United States Code, as added
by this Act) or beneficiaries of such entities, and the
nature of the required information;
(C) evaluating whether the lack of available beneficial
ownership information for partnerships, trusts, or other
legal entities--
(i) raises concerns about the involvement of such entities
in terrorism, money laundering, tax evasion, securities
fraud, or other misconduct; and
(ii) has impeded investigations into entities suspected of
such misconduct; and
(D) evaluating whether the failure of the United States to
require beneficial ownership information for partnerships and
trusts 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.
(2) 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 Congress a report assessing the
effectiveness of incorporation practices implemented under
this Act and the amendments made by this Act in--
(A) providing law enforcement agencies with prompt access
to reliable, useful, and complete beneficial ownership
information; and
(B) strengthening the capability of law enforcement
agencies to combat incorporation abuses, civil and criminal
misconduct, and detect, prevent, or punish terrorism, money
laundering, tax evasion, or other misconduct.
______