[Congressional Record Volume 163, Number 131 (Wednesday, August 2, 2017)]
[Senate]
[Pages S4770-S4774]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]

      By Mr. WYDEN (for himself and Mr. Rubio):
  S. 1717. A bill to amend title 31, United States Code, to ensure that 
persons who form corporations or limited liability companies in the 
United States disclose the beneficial owners of those corporations or 
limited liability companies, in order to prevent wrongdoers from 
exploiting United States corporations and limited liability companies 
for criminal gain, to assist law enforcement in detecting, preventing, 
and punishing terrorism, money laundering, and other misconduct 
involving United States corporations and limited liability companies, 
and for other purposes; to the Committee on Banking, Housing, and Urban 
Affairs.
  Mr. WYDEN. Mr. President, today I am, along with Senator Rubio, 
introducing the Corporate Transparency Act of 2017. This bill will help 
us end the abuse of anonymous shell companies by criminals who use 
these entities to launder money, finance terrorism, promote sex 
trafficking, and evade taxes.
  Each year criminals use anonymous shell companies to carry out their 
elicit schemes. Viktor Bout, the so-called ``merchant of death,'' 
utilized a vast network of shell corporations, several of which were in 
the United States, including one suspected of having provided weapons 
to the Taliban. Another anonymous U.S. company owned a large share of a 
Manhattan skyscraper and used its anonymity to facilitate $4.5 million 
in payments to an Iranian bank that was designated by OFAC as a key 
financier to Iran's nuclear and ballistic missiles program. Anonymous 
shell companies have been used to rip off taxpayers as well. In 2010, 
Michel Huarte was sentenced to 22 years in prison after using a network 
of 29 shell companies in several States to defraud Medicare, using the 
entities to submit claims of more than $50 million.
  Last year, the release of documents known as the Panama Papers leaked 
from the Panamanian law firm Mossack Fonseca highlighted the use of 
American shell companies to carry out potential crimes. Shell company 
abuse is not just in occurring in offshore tax havens, but right here 
in the United States, and this bill seeks to put a stop to that.
  In the United States, company registrations take place at the State-
level. The Corporate Transparency Act of 2017 directs the Treasury 
Department to issue regulations requiring entities formed in the United 
States to declare their beneficial owners--the real, natural persons 
who control each company and benefit from it financially. The bill 
would do this by setting minimum disclosure standards for States to 
follow. If individual States choose to collect this information on 
behalf of businesses formed there, then that's all that a new business 
would need to do to comply. Participation by the States is completely 
voluntary. If companies are formed in States that do not collect this 
information consistent with the new minimum standards, they will need 
to disclose their beneficial owners directly to the U.S. Treasury 
Department's Financial Crimes Enforcement Network.
  Collecting beneficial ownership information at the time a company is 
formed will offer the transparency law enforcement needs to investigate 
these kinds of financial crimes. Under the bill, the new beneficial 
ownership information would not be available to the public, but 
available only to appropriate state and federal authorities. Finally, 
the bill provides civil and criminal penalties for improper disclosure.
  The bill is constructed to exempt many legitimate businesses, and the 
information requested is already provided by most companies in the 
normal course of business. Collecting beneficial ownership information 
at the time of incorporation relieves later compliance burdens for 
legitimate businesses, while at the same time prevents illegitimate 
businesses from operating in secrecy.
  The House companion to this bill, H.R. 3089, was introduced with 
bipartisan support and efforts to identify the true owners of shell 
companies have the support of business groups like the Clearing House 
Association and the B-Team, law enforcement groups like the Fraternal 
Order of Police, and anti-corruption advocacy groups like the Financial 
Accountability and Corporate Transparency (FACT) Coalition and Global 
Witness.
  The Corporate Transparency Act of 2017 is a much needed step in 
stopping financial crimes and the abuse of anonymous shell companies. I 
thank Senator Rubio for joining me in introducing this bill, and I ask 
my colleagues to join me in supporting this bipartisan bill.
   Mr. President, I ask unanimous consent that the text of the bill be 
printed in the Record.
  There being no objection, the text of the bill was ordered to be 
printed in the Record, as follows:

                                S. 1717

       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 ``Corporate Transparency Act 
     of 2017''.

     SEC. 2. FINDINGS.

       Congress finds the following:

[[Page S4771]]

       (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) 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 
     commit crimes affecting interstate and international commerce 
     such as terrorism, drug trafficking, money laundering, tax 
     evasion, securities fraud, financial fraud, and acts of 
     foreign corruption.
       (5) Law enforcement efforts to investigate corporations and 
     limited liability companies suspected of committing crimes 
     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, and the Government Accountability Office, 
     and others.
       (6) In July 2006, a leading international anti-money 
     laundering organization, the Financial Action Task Force on 
     Money Laundering (in this section referred to as the 
     ``FATF''), of which the United States is a member, issued a 
     report that criticizes 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. In December 2016, FATF issued 
     another evaluation of the U.S., which found that little 
     progress has been made over the last ten years to address 
     this problem. It identified the ``lack of timely access to 
     adequate, accurate and current beneficial ownership 
     information'' as a fundamental gap in U.S. efforts to combat 
     money laundering and terrorist finance.
       (7) In response to the 2006 FATF report, the United States 
     has repeatedly urged the States to strengthen their 
     incorporation practices by obtaining beneficial ownership 
     information for the corporations and limited liability 
     companies formed under the laws of such States.
       (8) 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. In exchange for a substantial fee, 2 States 
     will form a corporation within 1 hour of a request.
       (9) Dozens of Internet Web sites highlight the anonymity of 
     beneficial owners allowed under the incorporation 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 providing an open 
     invitation to criminals and other wrongdoers to form entities 
     within the United States.
       (10) In contrast to practices in the United States, all 28 
     countries in the European Union are required to have 
     formation agents identify the beneficial owners of the 
     corporations formed under the laws of the country.
       (11) To reduce the vulnerability of the United States to 
     wrongdoing by United States corporations and limited 
     liability companies with hidden owners, to protect interstate 
     and international commerce from criminals misusing United 
     States corporations and limited liability companies, to 
     strengthen law enforcement investigations of suspect 
     corporations and limited liability companies, to set minimum 
     standards for and level the playing field among State 
     incorporation practices, and to bring the United States into 
     compliance with its international anti-money laundering 
     standards, Federal legislation is needed to require the 
     collection of 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.--
       (1) In general.--Chapter 53 of title 31, United States 
     Code, is amended by inserting after section 5332 the 
     following new section:

     ``Sec. 5333. Transparent incorporation practices

       ``(a) Reporting Requirements.--
       ``(1) In general.--Not later than the beginning of fiscal 
     year 2019, 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 
     Financial Crimes Enforcement Network 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 Financial 
     Crimes Enforcement Network pursuant to paragraph (1) shall be 
     provided by the Financial Crimes Enforcement Network 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 a financial institution, 
     with customer consent, as part of the institution's 
     compliance with due diligence requirements imposed under the 
     Bank Secrecy Act (Public Law 91508; 84 Stat. 1114), the USA 
     PATRIOT Act (Public Law 10756; 115 Stat. 272), or other 
     applicable Federal or State law.
       ``(3) Limitation.--In issuing regulations pursuant to 
     paragraph (1), the Secretary shall not require such 
     information to be filed with the Internal Revenue Service.
       ``(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 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 non-expired 
     passport issued by the United States or a non-expired 
     driver's 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;
       ``(iii) a written request made by the Financial Crimes 
     Enforcement Network; or
       ``(iv) a written request made by a financial institution, 
     with customer consent, as part of the institution's 
     compliance with due diligence requirements imposed under the 
     Bank Secrecy Act (Public Law 91508; 84 Stat. 1114), the USA 
     PATRIOT Act (Public Law 10756; 115 Stat. 272), or other 
     applicable Federal or State law.
       ``(E) Notice.--The State discloses clearly and 
     conspicuously that the beneficial ownership information 
     collected under the formation system may be provided to the 
     entities described in subparagraph (D), pursuant to the 
     requirements of such subparagraph.
       ``(F) 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.--

[[Page S4772]]

       ``(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 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 non-expired passport issued by the United States or a 
     non-expired driver's 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 non-expired 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) willfully 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;
       ``(II) as authorized by the entity that issued the 
     subpoena, summons, or other request; or
       ``(III) as prescribed by a State; 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.--The term `beneficial owner'--
       ``(A) 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; and
       ``(B) does 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).
       ``(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

[[Page S4773]]

     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 Advisers 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 Advisers 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);
       ``(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.''.
       (2) 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--
       (A) clarify the definitions under section 5333(d) of title 
     31, United States Code, as added by paragraph (1); and
       (B) specify how to verify beneficial ownership information 
     or other identification information for purposes of such 
     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.
       (3) Conforming amendments.--Title 31, United States Code, 
     is amended--
       (A) 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
       (B) in section 5322, by striking ``section 5315 or 5324'' 
     each place it appears and inserting ``section 5315, 5324, or 
     5333''.
       (4) Table of contents.--The table of contents of chapter 53 
     of title 31, United States Code, is amended by inserting 
     after the item relating to section 5332 the following:

``Sec. 5333. Transparent incorporation practices.''.
       (5) Restrictions on public access.--A State may--
       (A) 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
       (B) 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.
       (6) 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.
       (b) Funding Authorization.--
       (1) In general.--To carry out section 5333 of title 31, 
     United States Code, 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.
       (2) 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 
     paragraph (1) from one or more of the following sources:
       (A) 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.
       (B) 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.
       (3) Maximum amounts.--
       (A) 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 (2)(A).
       (B) 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 (2)(B).
       (4) 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 subsection, including 
     determining which State measures should be funded to assess, 
     plan, develop, test, or implement relevant policies, 
     procedures, or system modifications.
       (c) Compliance Report.--Nothing in this section or the 
     amendments made by this section 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. 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--
       (1) identifying which States obtain beneficial ownership 
     information as described in such section 5333;
       (2) 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 Financial Crimes 
     Enforcement Network; and
       (3) whether the Department of the Treasury is in compliance 
     with such section 5333 and, if not, what steps it must take 
     to come into compliance with this section.
       (d) 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

[[Page S4774]]

     is subject to the requirement to disclose beneficial 
     ownership information under section 5333 of title 31, United 
     States Code, 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.
       (e) Anti-Money Laundering Obligations of Formation 
     Agents.--
       (1) In general.--Section 5312(a)(2) of title 31, United 
     States Code, is amended--
       (A) in subparagraph (Y), by striking ``or'' at the end;
       (B) by redesignating subparagraph (Z) as subparagraph (AA); 
     and
       (C) 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''.
       (2) Deadline for anti-money laundering rule for formation 
     agents.--
       (A) 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 subsection, to 
     establish anti-money laundering programs under subsection (h) 
     of section 5318 of that title.
       (B) 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.
       (C) Exclusions.--Any rule promulgated under this subsection 
     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.

     SEC. 4. 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 Congress a 
     report--
       (1) 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;
       (2) 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;
       (3) evaluating whether the lack of available beneficial 
     ownership information for partnerships, trusts, or other 
     legal entities--
       (A) raises concerns about the involvement of such entities 
     in terrorism, money laundering, tax evasion, securities 
     fraud, or other 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 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.
       (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 Congress 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, civil and criminal 
     misconduct, and detect, prevent, or punish terrorism, money 
     laundering, tax evasion, or other misconduct.
                                 ______