Anonymous shell companies have undermined America's economy and national security for years. Congress finally made sure this shady practice is banned.
Astrid Riecken/The Washington Post/Getty Images
- Congress must override Trump's veto and approve legislation to end the abuse of anonymous shell companies that undermine American economic and national security.
- Bad actors are exploiting the secrecy of US incorporation law to jeopardize American citizens' health and safety including during COVID-19.
- The trade inflows of counterfeit and pirated goods pose a substantial threat to legitimate commerce, markets, and financial systems.
- David M. Luna is President and CEO of Luna Global Networks & Convergence Strategies LLC. He is a former US diplomat and national security official.
- This is an opinion column. The thoughts expressed are those of the author.
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On Friday, the US Senate overrode President Donald Trump's veto on the National Defense Authorization Act (NDAA). The US House of Representatives had similarly voted earlier to override his veto. As such, this historic anti-corruption legislation ending anonymous companies in the United States passed by both Chambers of Congress is now law.
Illicit trade, which includes a convergence of numerous trafficking, smuggling, financial and cyber crimes, fuels a multi-trillion-dollar illegal economy globally every year. While the COVID-19 pandemic has brought economic malaise to most sectors, the illicit economy is booming. This is especially true across e-commerce marketplaces that are generating tremendous prosperity for scammers, fraudsters, kleptocrats, organized criminals, terrorists, and other threat networks. As criminal entrepreneurs profit from American creativity and innovation, they need ways to launder their new-found wealth.
Fortunately, the newly-enacted law will attack a critical vulnerability of this illicit economy: anonymous shell companies. This will level the playing field for many legitimate businesses and industries across the country that get harmed, for example, by counterfeiters and online criminals. Included as part of the NDAA - which President Trump had inexplicably vetoed - is the Corporate Transparency Act, which will modernize our nation's anti-money laundering rules and help law enforcement identify the true, or "beneficial" owner of a company at the time of its formation. Such data will help US officials fight corruption, organized crime, and terrorism.
The legislation was supported by the US Chamber of Commerce, the US Council for International Business (USCIB), and a diverse coalition across industries and communities including leaders from business, financial, real estate, and law enforcement sectors.
Through the use of anonymous shell companies, criminals have avoided detection in ways that have financed other threats and harmed American consumers, including through the sale and trafficking of counterfeit medicines from India and China worth hundreds of millions of dollars including those used to treat breast cancer, cholesterol, high blood pressure, and other serious health conditions; knock-off parts across the Pentagon's supply chains that have cost the US military tens of millions of dollars and put our soldiers at risk; and other contraband that finance insecurity that undermines US foreign policy and national security interests.
The business and national security need for this reform is truly urgent: today's criminals, kleptocrats, and other bad actors, are exploiting the secrecy of US incorporation law to conceal their identities and reinvest dirty money throughout our economy - in real estate, sport cars, yachts, luxury apparel, and other goods and services - by first passing their cash through anonymous shell companies. These anonymized dollars then flow freely throughout the US financial system, out of view from law enforcement and national security officials.
Terrorist groups also manipulate anonymous shell companies to finance their infrastructure, operations, and campaigns of terror in the US and internationally. Oligarchs do as well, including those aligned with adversarial countries that are conducting massive cyberattacks against our government and private sector as was reported in recent weeks.
In the United States, the trade inflows of counterfeit and pirated goods pose a substantial threat to legitimate commerce, markets, and financial systems. This includes critical national industries, regional and local economies, and the reputational values of American brands and companies.
COVID-19 has only exacerbated the counterfeit threat, as criminals continue to exploit the fear and misery of consumers by selling counterfeit medical supplies, personal protective equipment (PPE), cleaning disinfectants, and other goods - including through the use of the dark web, social media, and internet. We too must be vigilant against such predatory criminality as countries begin the distribution of COVID-19 vaccines, securing our global supply chains and shutting down illicit websites selling possible fakes.
Illicit commerce, fueled by anonymous shell companies, puts the safety and health of all Americans in danger when criminals put counterfeit medicines, electronics, tainted food, fake automotive and airplane parts, toxic toys, pirated film and other illegal goods into our distribution networks and supply chain.
Left unchecked, criminal infiltration and penetration into the American economy will continue to imperil the integrity of public and private institutions, supply chains, businesses, communities, and the physical welfare of people across the country. We cannot continue to hamstring law enforcement officials that protect our nation, critical infrastructure, financial systems, businesses, and citizens.
Congressional leadership in overriding the president's veto and enacting this important legislation into law helps to uphold the integrity of the American economy. American leadership in this arena will not only protect our businesses and keep consumers safe and healthy, but it will also give our law enforcement agencies the authorities and tools needed to protect our homeland, markets, and communities against determined bad actors and threat networks.
David M. Luna is President and CEO of Luna Global Networks & Convergence Strategies LLC. He is a former US diplomat and national security official; current Chair of the Business at OECD Anti-Illicit Trade (AIT) Expert Group; Chair of AIT Committee of the US Council for International Business (USCIB); Senior Fellow for National Security and co-Director of the Anti-Illicit Trade Institute (AITI), at the Terrorism, Transnational Crime, Corruption Center, Schar School of Policy and Government, George Mason University.
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