TITLE Act

II 116TH CONGRESS 1ST SESSION S. 1889 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 detect- ing, preventing, and punishing terrorism, money laundering, tax evasion, and other criminal and civil misconduct involving United States corpora- tions, and for other purposes. IN THE SENATE OF THE UNITED STATES JUNE 18, 2019 Mr. WHITEHOUSE (for himself and Mr. GRASSLEY) 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 corpora- tions, 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 mis- conduct involving United States corporations, and for other purposes. Be it enacted by the Senate and House of Representa- 1 tives of the United States of America in Congress assembled, 2 VerDate Sep 11 2014 05:16 Jun 19, 2019 Jkt 089200 PO 00000 Frm 00001 Fmt 6652 Sfmt 6201 E:\BILLS\S1889.IS S1889 kjohnson on DSK79L0C42 with BILLS 2 •S 1889 IS SECTION 1. SHORT TITLE. 1 This Act may be cited as the ‘‘True Incorporation 2 Transparency for Law Enforcement Act’’ or the ‘‘TITLE 3 Act’’. 4 SEC. 2. FINDINGS. 5 Congress finds the following: 6 (1) Nearly 2,000,000 corporations and limited 7 liability companies are being formed under the laws 8 of the States each year. 9 (2) Very few States obtain meaningful informa- 10 tion about the beneficial owners of the corporations 11 and limited liability companies formed under their 12 laws. 13 (3) A person forming a corporation or limited 14 liability company within the United States typically 15 provides less information to the State of incorpora- 16 tion than is needed to obtain a bank account or driv- 17 er’s license and typically does not name a single ben- 18 eficial owner. 19 (4) Terrorists and other criminals have ex- 20 ploited the weaknesses in State formation proce- 21 dures to conceal their identities when forming cor- 22 porations or limited liability companies in the United 23 States, and have then used the newly created enti- 24 ties to support terrorist organizations, drug traf- 25 ficking organizations, and international organized 26 VerDate Sep 11 2014 05:16 Jun 19, 2019 Jkt 089200 PO 00000 Frm 00002 Fmt 6652 Sfmt 6201 E:\BILLS\S1889.IS S1889 kjohnson on DSK79L0C42 with BILLS 3 •S 1889 IS crime groups, as well as commit misconduct affect- 1 ing interstate and international commerce such as 2 trafficking in illicit drugs, illegal arms trafficking, 3 sex trafficking, money laundering, tax evasion, 4 health care fraud, Internet-based fraud, securities 5 fraud, financial fraud, intellectual property crimes, 6 and acts of corruption. 7 (5) Among those who have abused State incor- 8 poration procedures is Victor Bout, a Russian arms 9 dealer who used at least 12 companies incorporated 10 in Texas, Florida, and Delaware to carry out his ac- 11 tivities, and has been convicted, in part, for con- 12 spiring to sell weapons to a terrorist organization 13 trying to kill citizens of the United States and Fed- 14 eral officers and employees. In addition, Iranian in- 15 terests used a shell company formed in New York to 16 purchase a 36-story building on Fifth Avenue in 17 Manhattan and forwarded millions of dollars in rent 18 each year to Iran until authorities in the United 19 States learned of the transfers and seized the build- 20 ing. 21 (6) Law enforcement efforts to investigate cor- 22 porations and limited liability companies suspected 23 of wrongdoing have been impeded by the lack of 24 available beneficial ownership information, as docu- 25 VerDate Sep 11 2014 05:16 Jun 19, 2019 Jkt 089200 PO 00000 Frm 00003 Fmt 6652 Sfmt 6201 E:\BILLS\S1889.IS S1889 kjohnson on DSK79L0C42 with BILLS 4 •S 1889 IS mented in reports and testimony by officials from 1 the Department of Justice, the Department of 2 Homeland Security, the Financial Crimes Enforce- 3 ment Network of the Department of the Treasury, 4 the Internal Revenue Service, the Government Ac- 5 countability Office, and others. 6 (7) In December 2016, a leading international 7 anti-money laundering and anti-terrorist financing 8 organization, the Financial Action Task Force on 9 Money Laundering (in this section referred to as 10 ‘‘FATF’’), of which the United States is a member, 11 issued a report that criticized the United States for 12 failing to comply with a FATF standard on the need 13 to collect beneficial ownership information. The re- 14 port called the United States framework in this area 15 ‘‘seriously deficient’’ and urged the United States to 16 correct this deficiency. 17 (8) In response to the FATF report and to 18 strengthen measures to protect homeland security, 19 Federal officials have repeatedly urged the States to 20 improve their formation practices by obtaining bene- 21 ficial ownership information for the corporations and 22 limited liability companies formed under the laws of 23 such States. But the States continue to form mil- 24 lions of corporations with hidden owners. 25 VerDate Sep 11 2014 05:16 Jun 19, 2019 Jkt 089200 PO 00000 Frm 00004 Fmt 6652 Sfmt 6201 E:\BILLS\S1889.IS S1889 kjohnson on DSK79L0C42 with BILLS 5 •S 1889 IS (9) Many States have established automated 1 procedures that allow a person to form a new cor- 2 poration or limited liability company within the 3 State within 24 hours of filing an online application, 4 without any prior review of the application by a 5 State official. 6 (10) Dozens of Internet websites highlight the 7 anonymity of beneficial owners allowed under the 8 formation practices of some States, point to those 9 practices as a reason to incorporate in those States, 10 and list those States together with offshore jurisdic- 11 tions as preferred locations for the formation of new 12 corporations, essentially inviting terrorists and other 13 wrongdoers to form entities within the United 14 States. 15 (11) In contrast to practices in the United 16 States, countries around the world are working to 17 collect beneficial ownership information. The United 18 Kingdom now collects beneficial ownership informa- 19 tion for all companies formed under its laws and 20 makes the information available to the public. All 28 21 countries in the European Union are required to cre- 22 ate, maintain, and update registries of the beneficial 23 ownership information of the corporations formed 24 under the laws of those countries. The information 25 VerDate Sep 11 2014 05:16 Jun 19, 2019 Jkt 089200 PO 00000 Frm 00005 Fmt 6652 Sfmt 6201 E:\BILLS\S1889.IS S1889 kjohnson on DSK79L0C42 with BILLS 6 •S 1889 IS must be freely available to law enforcement agencies, 1 financial institutions, and third parties that can 2 demonstrate a legitimate interest in the information. 3 Afghanistan, Ghana, Kenya, Nigeria, South Africa, 4 the Ukraine, and many other countries are in the 5 process of establishing mechanisms to collect bene- 6 ficial ownership information for the companies cre- 7 ated under their laws. 8 (12) To reduce the vulnerability of the United 9 States to wrongdoing by United States corporations 10 and limited liability companies with hidden owners, 11 protect interstate and international commerce from 12 terrorists and other criminals misusing United 13 States corporations and limited liability companies, 14 strengthen law enforcement investigations of suspect 15 corporations and limited liability companies, set min- 16 imum standards for and level the playing field 17 among State formation practices, and bring the 18 United States into compliance with international 19 anti-money laundering and anti-terrorist financing 20 standards, Federal legislation is needed to require 21 the States to obtain beneficial ownership information 22 for the corporations and limited liability companies 23 formed under the laws of such States. 24 VerDate Sep 11 2014 05:16 Jun 19, 2019 Jkt 089200 PO 00000 Frm 00006 Fmt 6652 Sfmt 6201 E:\BILLS\S1889.IS S1889 kjohnson on DSK79L0C42 with BILLS 7 •S 1889 IS SEC. 3. TRANSPARENT INCORPORATION PRACTICES. 1 (a) TRANSPARENT INCORPORATION PRACTICES.— 2 Part E of title I of the Omnibus Crime Control and Safe 3 Streets Act of 1968 (34 U.S.C. 10151 et seq.) is amended 4 by adding at the end the following: 5 ‘‘Subpart 4—Transparent Incorporation Practices 6 ‘‘SEC. 531. TRANSPARENT INCORPORATION PRACTICES. 7 ‘‘(a) INCORPORATION SYSTEMS.— 8 ‘‘(1) IN GENERAL.—To protect the United 9 States from the misuse affecting interstate or for- 10 eign commerce of corporations and limited liability 11 companies with hidden owners, each State that re- 12 ceives funding under subpart 1 shall, not later than 13 3 years after the date of enactment of this subpart, 14 use an incorporation system that meets the following 15 requirements: 16 ‘‘(A) IDENTIFICATION OF BENEFICIAL 17 OWNERS.—Except as provided in paragraph 18 (3), each applicant to form a corporation or 19 limited liability company under the laws of the 20 State is required to provide to the State during 21 the formation process information on the bene- 22 ficial owners of the corporation or limited liabil- 23 ity company that— 24 ‘‘(i) identifies each beneficial owner by 25 name, current residential or business street 26 VerDate Sep 11 2014 05:16 Jun 19, 2019 Jkt 089200 PO 00000 Frm 00007 Fmt 6652 Sfmt 6201 E:\BILLS\S1889.IS S1889 kjohnson on DSK79L0C42 with BILLS 8 •S 1889 IS address, date of birth, and a unique identi- 1 fying number from a nonexpired passport 2 issued by the United States or a non- 3 expired drivers license or identification 4 card issued by a State; 5 ‘‘(ii) if any beneficial owner exercises 6 control over the corporation or limited li- 7 ability company through another legal enti- 8 ty, such as a corporation, partnership, or 9 trust, identifies each such legal entity and 10 each such beneficial owner who will use 11 that entity to exercise control over the cor- 12 poration or limited liability company; and 13 ‘‘(iii) if the applicant is not a bene- 14 ficial owner, provides the identification in- 15 formation described in clause (i) relating 16 to the applicant. 17 ‘‘(B) UPDATED INFORMATION.—For each 18 corporation or limited liability company formed 19 under the laws of the State— 20 ‘‘(i) the corporation or limited liability 21 company is required by the State to submit 22 to the State an updated list of the bene- 23 ficial owners of the corporation or limited 24 liability company and the information de- 25 VerDate Sep 11 2014 05:16 Jun 19, 2019 Jkt 089200 PO 00000 Frm 00008 Fmt 6652 Sfmt 6201 E:\BILLS\S1889.IS S1889 kjohnson on DSK79L0C42 with BILLS 9 •S 1889 IS scribed in subparagraph (A) for each such 1 beneficial owner not later than 60 days 2 after the date of any change in the bene- 3 ficial owners of the corporation or limited 4 liability company; 5 ‘‘(ii) in the case of a corporation or 6 limited liability company formed or ac- 7 quired by a formation agent and retained 8 by the formation agent as a beneficial 9 owner for transfer to another person, the 10 formation agent is required by the State to 11 submit to the State an updated list of the 12 beneficial owners and the information de- 13 scribed in subparagraph (A) for each such 14 beneficial owner not later than 10 days 15 after the date on which the formation 16 agent transfers the corporation or limited 17 liability company to another person; and 18 ‘‘(iii) the corporation or limited liabil- 19 ity company is required by the State to 20 submit to the State an annual filing con- 21 taining the list of the beneficial owners of 22 the corporation or limited liability company 23 and the information described in subpara- 24 graph (A) for each such beneficial owner. 25 VerDate Sep 11 2014 05:16 Jun 19, 2019 Jkt 089200 PO 00000 Frm 00009 Fmt 6652 Sfmt 6201 E:\BILLS\S1889.IS S1889 kjohnson on DSK79L0C42 with BILLS 10 •S 1889 IS ‘‘(C) RETENTION OF INFORMATION.—Ben- 1 eficial ownership information relating to each 2 corporation or limited liability company formed 3 under the laws of the State is required to be 4 maintained by the State until the end of the 5- 5 year period beginning on the date that the cor- 6 poration or limited liability company terminates 7 under the laws of the State. 8 ‘‘(D) INFORMATION REQUESTS.—Bene- 9 ficial ownership information relating to each 10 corporation or limited liability company formed 11 under the laws of the State shall be provided by 12 the State not later than 30 days after receipt 13 of— 14 ‘‘(i) a civil, criminal, or administrative 15 subpoena or a summons, or an equivalent 16 of such a subpoena or summons, from a 17 local, State, or Federal agency or a con- 18 gressional committee or subcommittee; 19 ‘‘(ii) a written request made by a Fed- 20 eral agency on behalf of another country 21 under an international treaty, agreement, 22 or convention, or an order under section 23 3512 of title 18, United States Code, or 24 section 1782 of title 28, United States 25 VerDate Sep 11 2014 05:16 Jun 19, 2019 Jkt 089200 PO 00000 Frm 00010 Fmt 6652 Sfmt 6201 E:\BILLS\S1889.IS S1889 kjohnson on DSK79L0C42 with BILLS 11 •S 1889 IS Code, issued in response to a request for 1 assistance from a foreign country; 2 ‘‘(iii) a written request made by the 3 Financial Crimes Enforcement Network of 4 the Department of the Treasury; or 5 ‘‘(iv) a written request made by a fi- 6 nancial institution, with the consent of the 7 customer, for purposes of compliance by 8 the financial institution with customer due 9 diligence requirements under subsections 10 (a)(2) and (h)(2) of section 5318 of title 11 31, United States Code, which the request- 12 ing financial institution shall maintain and 13 safeguard in accordance with all applicable 14 Federal and State laws related to bank 15 records, and destroy upon satisfaction of 16 those due diligence requirements, con- 17 sistent with all applicable Federal and 18 State laws related to bank records. 19 ‘‘(E) NO BEARER SHARE CORPORA- 20 TIONS.—A corporation or limited liability com- 21 pany formed under the laws of the State may 22 not issue a certificate in bearer form evidencing 23 either a whole or fractional interest in the cor- 24 poration or limited liability company. 25 VerDate Sep 11 2014 05:16 Jun 19, 2019 Jkt 089200 PO 00000 Frm 00011 Fmt 6652 Sfmt 6201 E:\BILLS\S [Text truncated for display. Full text available on Congress.gov.]