What do Mexican drug cartels, Chinese fentanyl manufacturers, human traffickers, and Iran’s military suppliers all have in common?
All of them have relied on anonymous shell companies set up in the United States to obscure their identities, break the law, launder the proceeds of their crimes, or evade sanctions. These are not isolated incidents, but rather patterns of abuse.
Representing prosecutors for a majority of my career, I’ve seen firsthand how these illicit networks often span states and even continents. Their use of these anonymous shell companies to commit and conceal their crimes makes it incredibly difficult for our country’s law enforcement to follow the money and bring those responsible to justice. Instead, criminals use such front companies as financial “getaway vehicles.”
To protect our financial borders and bring an end to these criminal enterprises, our officers and prosecutors need to be able to identify the true owners behind anonymous shell companies and follow the dirty money trail they leave in their wake.
Law enforcement and their representatives all across the United States understand this. So why did a lone federal judge in Texas just issue a ruling that would keep these tools for transparency out of the hands of law enforcement?
In a lengthy opinion issued this past Tuesday in the Eastern District of Texas, the court questioned Congress’ longstanding authorities under the U.S. Constitution to address money laundering. In 2021, Congress exercised its constitutional authorities to pass the bipartisan Corporate Transparency Act (CTA), with the vociferous support of the Trump Administration.
The law requires certain U.S. companies to disclose their true, or “beneficial,” owners to a confidential and secure directory housed at the U.S. Treasury Department. These companies are only required to report basic identifying information that they largely know by heart—such as their name and business address—or have in their wallet, such as their driver’s license number. These filings typically take 20 minutes or less.
But, while simple and straightforward, these disclosures are extremely important for law enforcement. They serve as the financial equivalent of installing streetlights in a neighborhood - helping investigators prevent crime and catch those who break the law. With the CTA, federal, state, and local law enforcement officials will have greater clarity regarding shady corners of America’s financial system.
Millions of entities have already filed their ownership information, and these disclosures have widespread, popular support. In a recent, nationwide poll conducted by McLaughlin and Associates, 81 percent of respondents agreed that “asking some small businesses to do 20 minutes of paperwork identifying their true owner is a small price to pay for keeping our communities safe from drug trafficking, terrorist financing, and other financial crimes.”
Perhaps most pressingly, America has been fighting the scourge of a crime crisis that has plagued our country over the past five years. At a time when more than 100,000 Americans die each year from fentanyl-related overdoses, reports of sex and labor trafficking are exploding, and even more minor illegal activities, such as retail theft, are tied to larger criminal enterprises, this much has become clear: The status quo isn’t working.
The CTA would make a genuine, positive difference in this fight to restore public safety. If we care about a return to common sense approaches to ensuring the well-being of the communities we live in, the CTA is simply a must-have for those who work to keep us safe.
We must make sure that our law enforcement communities have tools provided by the Corporate Transparency Act to follow the money that endangers our safety and security. I look forward to celebrating the day - hopefully soon - that this misguided decision no longer stands in the way of public safety.
Frank Russo is Associate General Counsel & Director of the Prosecutors and Law Enforcement Advisory Council and Center for Combating Human Trafficking at the Conservative Political Action Coalition (CPAC). Before CPAC, Mr. Russo was the Director of Government and Legislative Affairs at the National District Attorneys Association.