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> Larger companies that employ more than 20 people, have revenues above $5 million and a physical presence in the US, are exempt from the act. Churches, chariti

by csomar 6y ago

> Larger companies that employ more than 20 people, have revenues above $5 million and a physical presence in the US, are exempt from the act. Churches, charities and other non-profits are also exempt. So it seems that the cost of money laundering has gone from a few thousands dollars for a Delaware C-Corp to running a fake business that employs 20 people and has an office. The minimum to launder under this scheme is $5m per year. This seems like the government stumping on small money launderers while giving the big guys a tax: employ some people, and rent some real-estate.

mensetmanusman 6y ago
Wouldn’t that force every small business to hire legal experts to prove they aren’t shell companies?
- csomar 6y ago
  Small businesses are usually LLC. This will most likely target C-Corps than anything else. But yes, this will make life hard for anyone running a remote C-Corp and does not have enough revenue to be "legitimate". This also will inflate costs for small businesses running legitimate operations: Rent will go up, Harder to recruit people and Less profit or no profit. I lived near a place like this. It was impossible to run a profitable coffee-shop or restaurant because there was lots of competition, little customers and sky-high rent costs. It seemed like 90% of the activity right there was simply fake or driven by the money laundering economy.
  - stephen_g 6y ago
    None of what you said seems to follow from what is explained in the comments above or the article. From my reading, literally all the small business has to do to be “legitimate” is to accurately disclose the beneficial owners’ names, addresses and a Government issued ID (which I assume can be foreign for foreign owners as long as it can be verified). There’s nothing about not being allowed to have an anonymous shell company that inflates the costs of legitimate business...
    - csomar 6y ago
      > literally all the small business has to do to be These are the most dangerous words ever. Especially that this requirement is probably ineffective. It is a small paperwork, yes, but it is there. A couple years later, it is reviewed and judged to be ineffective and new requirements are added to this paperwork. Then we end up with hundreds of paperwork to fill and submit just to be able to run a business.
  - blinding-streak 6y ago
    > This also will inflate costs for small businesses running legitimate operations It's inherently obvious you didn't read the article at all. None of what you state is true. Just do yourself a favor and read the article.
- tylermenezes 6y ago
  No, it will force small businesses in a handful of states to provide their beneficial owners, as they already do in most states and when opening bank accounts nationwide.
  - jadeddrag 6y ago
    Probably a dumb question, but are the disclosures only available to the government (federal?), or will the disclosures be available to the general public (and litigious lawyers) too?
    - sroussey 6y ago
      Government only.
      - nullc 6y ago
        I can find nothing in the bill that guarantees this, nor provides for any penalty for unauthorized disclosure. Am I missing something you can direct me to? I can state that in practice, in attempting to social engineer my own legally protected information from banks and local government I have had nearly 100% success rate in obtaining it. The only solution is to not give them access to the data in the first place. If this information is available 'only to law enforcement' as some have suggested here, that often means that essentially any law enforcement anywhere in the country for any reason. If you don't know someone who can look up tags for you, or addresses off drivers licenses ... you need to get out more. That level of protection is better than nothing, but it isn't particularly protected.
        sroussey 6y ago
        Yes, it keeps randoms out. Be careful asking friends in law enforcement to look something up for you. Requests are logged. And if another law enforcement group has an alert set, you will get a visit asking why you were asking.
- fortran77 6y ago
  That's my worry, too. For my 3 person consulting business we already have to spend about 8 hours a week on "compliance".
tpoacher 6y ago
Exactly! This kind of legislature is pointless. Either fix everything at once, or don't. There's zero point in making small incremental changes that do not benefit everyone, and still allow a proportion of thugs to get away with it. It is obviously a political stunt by a government desperate to score some 'wins' on its way out.
- js8 6y ago
  Most (new) laws have loopholes. The solution is to close the loopholes, not abandon laws.
- namdnay 6y ago
  > Either fix everything at once, or don't. There's zero point in making small incremental changes that do not benefit everyone ?! That’s an interesting perspective, especially on a software development forum :)
- cerebellum42 6y ago
  > Either fix everything at once, or don't. There's zero point in making small incremental changes that do not benefit everyone Have you ever had any look at how laws actually get passed in the US and pretty much any country with some sort of democratically legitimized government? Your demand in any of these systems would simply lead to no laws getting passed at all, most of the time, total legislative gridlock. Legislature is an incremental process by nature, and especially so in systems of government where the interests of more than one side are represented, so compromises have to be made at every step of the way.
- tpoacher 6y ago
  For what it's worth, this was supposed to be an "agreement onto absurdity" satirical response, to point out the flaw of following parent's reasoning to its natural conclusion. Though, given people didn't pick up on the sarcasm, at the very least I'm glad it's at least being downvoted instead of upvoted!
  - cerebellum42 6y ago
roenxi 6y ago
> This seems like the government stumping on small money launderers while giving the big guys a tax... It is a little different. Using your numbers, previously $5 million got a big player ~1,000 shell companies, now it gets them 1. The law would make a legal manoeuvrer several orders of magnitude more costly. That is more powerful than a $5 million per business tax.
- csomar 6y ago
  The way I see it, before, he had two choices: Run a single money laundering operation where he recruit people, have an office, etc... and have a sizable amount going through it. Or create 1.000 shell company. Having a single shell company with no presence and employees move dozens of millions of dollars will raise eyebrows from the bank. But a 1.000 shell that move dozens don't. After this, he has only one choice: Run the fake business.
JumpCrisscross 6y ago
> This seems like the government stumping on small money launderers while giving the big guys a tax: employ some people, and rent some real-estate I did work on this bill (my Congresswoman is its author). Let me defend the thresholds. The point of this bill is to require beneficial ownership disclosure for shell companies. Legal ownership of an entity is one thing. The beneficial owner is the human who ultimately owns and controls the entity [1]. Tracing the beneficial owners of economically-active entities (i.e. not shell companies [2]) is expensive. Imagine doing this for Apple. You would need to look through every ETF that holds it to its mutual fund owners to their pension fund owners to their holding companies to their pensioners. That is a multimillion dollar exercise, largely useless and reasonably opposed. This expense in its extreme stopped similar legislation in the past. As a result, someone from Russia could create a BVI company that opens a Delaware LLC and gain near-total transactional anonymity. This bill tries to exempt economically active entities. The thresholds are easy to identify, reducing paperwork, while low with respect to most companies. (Small businesses have simple ownership structures and a small number of beneficial owners.) The bill is not a general anti-money laundering bill. If you have employees and revenues, you are engaging in sophisticated money laundering. If you have a thousand shell entities, you are doing something else (and more common). [1] https://en.m.wikipedia.org/wiki/Beneficial_ownership https://en.m.wikipedia.org/wiki/Beneficial_ownership [2] https://en.m.wikipedia.org/wiki/Shell_corporation https://en.m.wikipedia.org/wiki/Shell_corporation
- Triv888 6y ago
  > This bill tries to exempt economically active entities. A company with 5 emplyees is not active?
  - jxf 6y ago
    A company with 5 employees is very unlikely to have a complicated ownership structure and so wouldn't be hamstrung by the act. You are penalized if you are small, complicated, and anonymous. You aren't penalized _just_ for being small, or complicated, or anonymous.
  - deleted 6y ago
    [deleted]
someonehere 6y ago
This sounds like the same reason we have a death tax. Those that can’t afford to setup the right paperwork are essentially screwed and have to pay their fair share. Meanwhile those with teams of lawyers have the ability to skirt paying their fair share. Great.
- xxpor 6y ago
  Inheritance taxes don't kick in until $11.5 million.
  - chrisweekly 6y ago
    Where did you get that number? As the executor of my father's estate, I can attest to paying taxes based on a much lower threshold.
    - Godel_unicode 6y ago
      Gp is talking about at the federal level, where that is indeed the number. You probably had to pay state taxes, those have much lower limits in some states.
    - sroussey 6y ago
      It doubled a couple years ago, which was temporary, so will halve in a few years time. That will catch people unaware.
      - nullc 6y ago
        2020/2021 are good years to die, tax wise. Covid19 is doing the taxpayers a solid. :-/
  - throwaway0a5e 6y ago
    My state taxes inherited out of state real property at an absurd rate (I wanna say 20%, might be 15, in any case, that's a big chunk of change). In practice it's just a big f you to anyone who's parents live out of state and die owning their home and didn't have the foresight to put it in trust or sign it over to the kid(s) prior to dying. There is no justifiable purpose for this tax other than revenue. Property out of state has zero cost to the people of the state. It's a pure money grab and it's only affecting the middle class (because anyone who can justify the cost of estate planning will not be subject to this tax). Edit: I'd be curious to see why people find this comment so disagreeable? Or is it just ideologically inconvenient to point this stuff out?
coliveira 6y ago
Also, look at the second sentence: churches, charities and other non-profits are isent. Creating a church was already a great business, now it will be even better.
- taurath 6y ago
  Considering how many churches are money laundering for say televangelists, they could probably use some competition
launderthis 6y ago
its simply the cost of enforcement. The tax will help make sure the public is getting a cut, you cant just have a shell company on the backs of the american system without paying some locals. The tax will help fund enforcement efforts for better security, some of these "big" companies will be corrupt and there will be more money to help catch these bad actors. Also there probably has been some data done on how these shell companies run and with this one law you take out 90% of corruption. There might be some good actors that get caught in this too and have to go out of business. If there is such thing as a good shell company??? You cant catch every drug dealer so you either focus on the big offenders and make them pay or you make drugs legal. I think its better for society if we do the former. Drugs are unhealthy.

by csomar 6y ago

mensetmanusman 6y ago

Wouldn’t that force every small business to hire legal experts to prove they aren’t shell companies?

csomar 6y ago
Small businesses are usually LLC. This will most likely target C-Corps than anything else. But yes, this will make life hard for anyone running a remote C-Corp and does not have enough revenue to be "legitimate". This also will inflate costs for small businesses running legitimate operations: Rent will go up, Harder to recruit people and Less profit or no profit. I lived near a place like this. It was impossible to run a profitable coffee-shop or restaurant because there was lots of competition, little customers and sky-high rent costs. It seemed like 90% of the activity right there was simply fake or driven by the money laundering economy.
- stephen_g 6y ago
  None of what you said seems to follow from what is explained in the comments above or the article. From my reading, literally all the small business has to do to be “legitimate” is to accurately disclose the beneficial owners’ names, addresses and a Government issued ID (which I assume can be foreign for foreign owners as long as it can be verified). There’s nothing about not being allowed to have an anonymous shell company that inflates the costs of legitimate business...
  - csomar 6y ago
    > literally all the small business has to do to be These are the most dangerous words ever. Especially that this requirement is probably ineffective. It is a small paperwork, yes, but it is there. A couple years later, it is reviewed and judged to be ineffective and new requirements are added to this paperwork. Then we end up with hundreds of paperwork to fill and submit just to be able to run a business.
- blinding-streak 6y ago
  > This also will inflate costs for small businesses running legitimate operations It's inherently obvious you didn't read the article at all. None of what you state is true. Just do yourself a favor and read the article.
tylermenezes 6y ago
No, it will force small businesses in a handful of states to provide their beneficial owners, as they already do in most states and when opening bank accounts nationwide.
- jadeddrag 6y ago
  Probably a dumb question, but are the disclosures only available to the government (federal?), or will the disclosures be available to the general public (and litigious lawyers) too?
  - sroussey 6y ago
    Government only.
    - nullc 6y ago
      I can find nothing in the bill that guarantees this, nor provides for any penalty for unauthorized disclosure. Am I missing something you can direct me to? I can state that in practice, in attempting to social engineer my own legally protected information from banks and local government I have had nearly 100% success rate in obtaining it. The only solution is to not give them access to the data in the first place. If this information is available 'only to law enforcement' as some have suggested here, that often means that essentially any law enforcement anywhere in the country for any reason. If you don't know someone who can look up tags for you, or addresses off drivers licenses ... you need to get out more. That level of protection is better than nothing, but it isn't particularly protected.
      - sroussey 6y ago
        Yes, it keeps randoms out. Be careful asking friends in law enforcement to look something up for you. Requests are logged. And if another law enforcement group has an alert set, you will get a visit asking why you were asking.
fortran77 6y ago
That's my worry, too. For my 3 person consulting business we already have to spend about 8 hours a week on "compliance".

tpoacher 6y ago

Exactly! This kind of legislature is pointless. Either fix everything at once, or don't. There's zero point in making small incremental changes that do not benefit everyone, and still allow a proportion of thugs to get away with it. It is obviously a political stunt by a government desperate to score some 'wins' on its way out.

js8 6y ago
Most (new) laws have loopholes. The solution is to close the loopholes, not abandon laws.
namdnay 6y ago
> Either fix everything at once, or don't. There's zero point in making small incremental changes that do not benefit everyone ?! That’s an interesting perspective, especially on a software development forum :)
cerebellum42 6y ago
> Either fix everything at once, or don't. There's zero point in making small incremental changes that do not benefit everyone Have you ever had any look at how laws actually get passed in the US and pretty much any country with some sort of democratically legitimized government? Your demand in any of these systems would simply lead to no laws getting passed at all, most of the time, total legislative gridlock. Legislature is an incremental process by nature, and especially so in systems of government where the interests of more than one side are represented, so compromises have to be made at every step of the way.
tpoacher 6y ago
For what it's worth, this was supposed to be an "agreement onto absurdity" satirical response, to point out the flaw of following parent's reasoning to its natural conclusion. Though, given people didn't pick up on the sarcasm, at the very least I'm glad it's at least being downvoted instead of upvoted!
- cerebellum42 6y ago

roenxi 6y ago

> This seems like the government stumping on small money launderers while giving the big guys a tax... It is a little different. Using your numbers, previously $5 million got a big player ~1,000 shell companies, now it gets them 1. The law would make a legal manoeuvrer several orders of magnitude more costly. That is more powerful than a $5 million per business tax.

csomar 6y ago
The way I see it, before, he had two choices: Run a single money laundering operation where he recruit people, have an office, etc... and have a sizable amount going through it. Or create 1.000 shell company. Having a single shell company with no presence and employees move dozens of millions of dollars will raise eyebrows from the bank. But a 1.000 shell that move dozens don't. After this, he has only one choice: Run the fake business.

JumpCrisscross 6y ago

> This seems like the government stumping on small money launderers while giving the big guys a tax: employ some people, and rent some real-estate I did work on this bill (my Congresswoman is its author). Let me defend the thresholds. The point of this bill is to require beneficial ownership disclosure for shell companies. Legal ownership of an entity is one thing. The beneficial owner is the human who ultimately owns and controls the entity [1]. Tracing the beneficial owners of economically-active entities (i.e. not shell companies [2]) is expensive. Imagine doing this for Apple. You would need to look through every ETF that holds it to its mutual fund owners to their pension fund owners to their holding companies to their pensioners. That is a multimillion dollar exercise, largely useless and reasonably opposed. This expense in its extreme stopped similar legislation in the past. As a result, someone from Russia could create a BVI company that opens a Delaware LLC and gain near-total transactional anonymity. This bill tries to exempt economically active entities. The thresholds are easy to identify, reducing paperwork, while low with respect to most companies. (Small businesses have simple ownership structures and a small number of beneficial owners.) The bill is not a general anti-money laundering bill. If you have employees and revenues, you are engaging in sophisticated money laundering. If you have a thousand shell entities, you are doing something else (and more common). [1] https://en.m.wikipedia.org/wiki/Beneficial_ownership https://en.m.wikipedia.org/wiki/Beneficial_ownership [2] https://en.m.wikipedia.org/wiki/Shell_corporation https://en.m.wikipedia.org/wiki/Shell_corporation

Triv888 6y ago
> This bill tries to exempt economically active entities. A company with 5 emplyees is not active?
- jxf 6y ago
  A company with 5 employees is very unlikely to have a complicated ownership structure and so wouldn't be hamstrung by the act. You are penalized if you are small, complicated, and anonymous. You aren't penalized _just_ for being small, or complicated, or anonymous.
- deleted 6y ago
  [deleted]

someonehere 6y ago

This sounds like the same reason we have a death tax. Those that can’t afford to setup the right paperwork are essentially screwed and have to pay their fair share. Meanwhile those with teams of lawyers have the ability to skirt paying their fair share. Great.

xxpor 6y ago
Inheritance taxes don't kick in until $11.5 million.
- chrisweekly 6y ago
  Where did you get that number? As the executor of my father's estate, I can attest to paying taxes based on a much lower threshold.
  - Godel_unicode 6y ago
    Gp is talking about at the federal level, where that is indeed the number. You probably had to pay state taxes, those have much lower limits in some states.
  - sroussey 6y ago
    It doubled a couple years ago, which was temporary, so will halve in a few years time. That will catch people unaware.
    - nullc 6y ago
      2020/2021 are good years to die, tax wise. Covid19 is doing the taxpayers a solid. :-/
- throwaway0a5e 6y ago
  My state taxes inherited out of state real property at an absurd rate (I wanna say 20%, might be 15, in any case, that's a big chunk of change). In practice it's just a big f you to anyone who's parents live out of state and die owning their home and didn't have the foresight to put it in trust or sign it over to the kid(s) prior to dying. There is no justifiable purpose for this tax other than revenue. Property out of state has zero cost to the people of the state. It's a pure money grab and it's only affecting the middle class (because anyone who can justify the cost of estate planning will not be subject to this tax). Edit: I'd be curious to see why people find this comment so disagreeable? Or is it just ideologically inconvenient to point this stuff out?

coliveira 6y ago

Also, look at the second sentence: churches, charities and other non-profits are isent. Creating a church was already a great business, now it will be even better.

taurath 6y ago
Considering how many churches are money laundering for say televangelists, they could probably use some competition

launderthis 6y ago

its simply the cost of enforcement. The tax will help make sure the public is getting a cut, you cant just have a shell company on the backs of the american system without paying some locals. The tax will help fund enforcement efforts for better security, some of these "big" companies will be corrupt and there will be more money to help catch these bad actors. Also there probably has been some data done on how these shell companies run and with this one law you take out 90% of corruption. There might be some good actors that get caught in this too and have to go out of business. If there is such thing as a good shell company??? You cant catch every drug dealer so you either focus on the big offenders and make them pay or you make drugs legal. I think its better for society if we do the former. Drugs are unhealthy.