Proposed bill for “beneficial owners”

Small firms not exempt

      The Senate Judiciary Committee is considering bipartisan legislation to require US corporations and limited liability companies to identify so-called “beneficial owners” involved with their firms.

      The legislation aims to reduce situations in which anonymous owners--potentially linked with terrorist networks or global money laundering activities--receive federal contracts or threaten national security in other ways.

      Senate Bill 1454 is likely to impact small and mid-sized firms, as it exempts many large firms operating in the United States.

      The legislation aims to increase transparency in ownership to protect against international crime rings and terrorists.

      "In the defense industry, anonymous companies can obtain contracts with the Defense Dept. One report uncovered an Afghan company that was contracted to supply our troops but was secretly owned by the Taliban. That's scary,” co-sponsor Sen. Charles Grassley, R-IA, said in support of the bill.

      Under the bill, the prime contractor must provide, in all bids and proposals, the names, addresses, driver’s license numbers and other information about the “beneficial owners” of their companies.

      A "beneficial owner" is defined as a person who, “directly or indirectly” exercises substantial control through ownership interests, voting rights, an agreement or otherwise, or who receives substantial benefits from the assets of the company.

      Companies that have more than 20 full-time employees in the U.S., file income tax returns in the U.S. with more than $5 million in gross sales, have an operating presence at a physical location within the U.S., and have more than 100 shareholders would be exempt. Banks, investment firms, utilities and non-profits also would be exempt.

      Penalties for failure to comply would be up to three years in prison and a fine of up to $1 million.

      A U.S. Chamber of Commerce spokesman said at the hearing that the bill, if passed, could work against new entrants to the federal markets, and would hurt small and mid-size firms that were not exempt.

      “While these proposals may be well-intentioned, they are poorly designed and fundamentally flawed. Their overly broad and vague definitions, unworkable requirements, and severe penalties would do far more to impede law abiding small and medium-sized business than to hamper the use of so -called “shell companies” to facilitate illicit activity,” the chamber spokesman said in a statement.

      Read more at http://goo.gl/rfQ1DA.

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