TCI News Now!

By Stewart Miller
Guardian Business Reporter

The argument often put forward that the United States is in no position to insist on tighter procedures to govern the recording of beneficial ownership of corporations in places like The Bahamas and other offshore financial centres, due to contrary practices in its own states, may come to an end soon.

Bob Roach, chief investigator on US Senator Carl Levin’s Permanent Subcommittee on Investigations, brought the news during a presentation on Tuesday at the 9th Annual Offshore Alert Conference held in Miami Beach, Florida. Roach was providing participants with an update of US congressional offshore initiatives.

“Senator Levin is planning on reintroducing his State Incorporation law, which would require states to obtain beneficial owner information on the corporations and limited liability companies (LLCs) that are formed in a particular state,” Roach said.

The tax investigator said he can say with certainty that his boss, Senator Levin, is planning the reintroduction. He first introduced the Incorporation Transparency and Law Enforcement Assistance Act in May 2008.

“We struggled with this for probably four years or more now. The states have been very recalcitrant on this issue,” Roach said.

But according to Roach, despite the lack of support on the state level, Levin will press ahead with getting the law passed. He is working closely with the Obama administration and is hoping for bi-partisan support for the bill, according to Roach. He added that Levin was working with Republican Senator Chuck Grassley of Iowa on the bill.

The United States has put pressure on many offshore financial centres to improve transparency in regard to the beneficial owner of corporate entities. Many have essentially told the US to practice what it preaches.

“Many of these issues of transparency that my boss often talks about, as we said it’s really a two-way street, and that transparency needs to be existing in our incorporation procedures as much as we would like to see that in other jurisdictions,” said Roach.

Under the soon-to-be proposed legislation, the focus would be on getting beneficial owner information, with an accent on information on non-US beneficial owners, according to Roach. He explained that foreign persons wanting to establish a US corporation would have to provide an in-state formation agent with certification. It was in an effort to move away from abuses to various US entities that often occur through entities that are set up online from other international locations, “with no idea of who the people are or where they come from,” he said.

Under the law, the in-state formation agent must either have the relevant beneficial owner information or certify that it is in possession of it before incorporation of the entity.

If passed the incorporation law would allow an exemption for publicly traded corporations and any LLCs they may form, according to Roach. He also said other exemptions will exist in cases where there are other ways of determining who the beneficial owners are, or where the entity was not likely to be abused for purposes like money laundering or tax evasion. Formation agents will also be mandated to establish and implement anti-money laundering programs.

Asked whether or not the registry of the beneficial owners would have to be made public or not, Roach said that is a matter that the law would leave up to the states. The US State Department recently recommended that The Bahamas should establish a public registry of the beneficial owners of all entities licensed in the offshore sector in its 2011 International Narcotics Control Strategy Report.

Roach said that Levin was “planning to introduce it pretty soon.”

Levin is also planning to reintroduce the Stop Tax Haven Abuse Act, Roach told conference attendees. Though the final form was still being finalized, according to Roach with the passing of the Hiring Incentive to Restore Employment (HIRE) Act in June 2010, some of the issues in the act were already addressed.

However, there are a few key provisions that Roach said Levin is looking to include in the new legislation, such as the granting of special authorities to the Treasury secretary to identify non-cooperative institutions and non-cooperative jurisdictions. US banks would be prohibited from opening accounts or executing credit card transactions originating from such identified institutions or jurisdictions under the act if passed. The Treasury Secretary has similar authority under the US Patriot Act.

Republished with permission of the Nassau Guardian http://www.thenassauguardian.com

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