New law makes it easier to identify owners of shell companies

| Jan 22, 2021 | White Collar Crimes |

When it comes to matters like opening shell companies, avoiding taxes and having off-shore bank accounts, the line between lawful and unlawful actions can be razor-thin. Add to this the fact that state, federal and even international laws are always changing, and these issues can become incredibly complicated.

For instance, recently, Congress passed a law that makes it easier for federal law enforcement agents to track down a shell company’s owner.

The Corporate Transparency Act

Congress passed the Corporate Transparency Act to combat the financing of terrorism and money laundering. It requires certain entities to disclose information about beneficial owners. These are owners who:

  • Have significant control over the limited liability company (LLC) or corporation
  • Own at least 25 percent of the interest in an LLC or corporation
  • Receive a “substantial benefit” from the assets of the LLC or corporation

When entities file the beneficial ownership information, the data is stored in a confidential database, which federal law enforcement agents and banking institutions will be able to access.

The law also assigns stiff penalties for violations. Parties can face fines and prison sentences of up to three years if they:

  • Fail to provide any ownership information
  • Provide fraudulent information
  • Willfully fail to provide complete information
  • Deliberately fail to update information

Thus, even if your intentions are legitimate, you could still wind up facing criminal charges if you fail to comply with these new requirements.

Protecting yourself against criminal charges

White collar crimes like money laundering, corruption and fraud are highly complex and divisive issues.

Whether a party faces charges for this type of crime could ultimately come down to a single piece of paper or transaction. Further, the investigation alone can be disruptive and embarrassing.

With everything from money to your reputation and freedom on the line in these cases, legal guidance will be vital if you face allegations of financial misconduct. You can also prevent troubles from arising in the first place by consulting an attorney before carrying out potentially problematic transactions.

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