New legislation being proposed in Congress meant to crackdown on illegal money laundering could pose a problem for Too Big To Jail banks on Wall Street that frequently make use of offshore business entities to avoid taxes and regulations.
Bills proposed by representatives Maxine Waters and Carolyn Maloney would close many of the loopholes corporations – particularly financial service firms – use to move money offshore. Congressman Waters’ bill would lead to harsher penalties for financial crimes.
A key aim of Waters’ bill, entitled the “Holding Individuals Accountable and Deterring Money Laundering Act,” is to strengthen the government’s ability to go after individuals for violations of the Bank Secrecy Act, which requires U.S. financial institutions to work with government agencies to detect and prevent money laundering. Among other provisions, the bill makes bank executives personally liable for misconduct and gives regulators the tools to remove or permanently ban from the industry top bankers who violate the law.
The proposed law would also give regulators increased powers to punish bank executives involved in money laundering, even if the executives themselves were not participants. This would, in theory, incentivize those responsible for managing the bank to be more vigilant in ensuring all regulations are being complied with and matches similar legislation proposed in the Senate.
Representative Maloney’s part of the package, the Incorporation Transparency and Law Enforcement Assistance Act, would help eliminate dummy or shell companies that obscure ownership.
“My bill would require that the true ownership of a corporation be identified when papers are filed,” Maloney said. “This will help stop criminal enterprises that are exploiting weaknesses in incorporation law to engage in money-laundering, drug trafficking, securities fraud and terrorist financing. This will give law enforcement officials the tools they need to root out criminal and terrorist organizations.”
Shell companies are reportedly the “vehicles of choice for money launderers, drug dealers, tax evaders and financiers of terrorism.” While hitting drug dealers may not be problematic, going after tax evaders could lead regulators down some interesting roads. Roads that may lead right back to DC.
As Lester Freamon says in The Wire “You follow drugs, you get drug addicts and drug dealers. But you start to follow the money, and you don’t know where the fuck it’s gonna take you.”