TITLE Act

To ensure that persons who form corporations in the United States disclose the beneficial owners of those corporations, in order to prevent the formation of corporations with hidden owners, stop the misuse of United States corporations by wrongdoers, and assist law enforcement in detecting, preventing, and punishing terrorism, money laundering, tax evasion, and other criminal and civil misconduct involving United States corporations, and for other purposes. 1. Short title This Act may be cited as the True Incorporation Transparency for Law Enforcement Act TITLE Act 2. Findings Congress finds the following: (1) Nearly 2,000,000 corporations and limited liability companies are being formed under the laws of the States each year. (2) Very few States obtain meaningful information about the beneficial owners of the corporations and limited liability companies formed under their laws. (3) A person forming a corporation or limited liability company within the United States typically provides less information to the State of incorporation than is needed to obtain a bank account or driver's license and typically does not name a single beneficial owner. (4) Terrorists and other criminals have exploited the weaknesses in State formation procedures to conceal their identities when forming corporations or limited liability companies in the United States, and have then used the newly created entities to support terrorist organizations, drug trafficking organizations, and international organized crime groups, as well as commit misconduct affecting interstate and international commerce such as trafficking in illicit drugs, illegal arms trafficking, sex trafficking, money laundering, tax evasion, health care fraud, Internet-based fraud, securities fraud, financial fraud, intellectual property crimes, and acts of corruption. (5) Among those who have abused State incorporation procedures is Victor Bout, a Russian arms dealer who used at least 12 companies incorporated in Texas, Florida, and Delaware to carry out his activities, and has been convicted, in part, for conspiring to sell weapons to a terrorist organization trying to kill citizens of the United States and Federal officers and employees. In addition, Iranian interests used a shell company formed in New York to purchase a 36-story building on Fifth Avenue in Manhattan and forwarded millions of dollars in rent each year to Iran until authorities in the United States learned of the transfers and seized the building. (6) Law enforcement efforts to investigate corporations and limited liability companies suspected of wrongdoing have been impeded by the lack of available beneficial ownership information, as documented in reports and testimony by officials from the Department of Justice, the Department of Homeland Security, the Financial Crimes Enforcement Network of the Department of the Treasury, the Internal Revenue Service, the Government Accountability Office, and others. (7) In December 2016, a leading international anti-money laundering and anti-terrorist financing organization, the Financial Action Task Force on Money Laundering (in this section referred to as FATF seriously deficient (8) In response to the FATF report and to strengthen measures to protect homeland security, Federal officials have repeatedly urged the States to improve their formation practices by obtaining beneficial ownership information for the corporations and limited liability companies formed under the laws of such States. But the States continue to form millions of corporations with hidden owners. (9) Many States have established automated procedures that allow a person to form a new corporation or limited liability company within the State within 24 hours of filing an online application, without any prior review of the application by a State official. (10) Dozens of Internet websites highlight the anonymity of beneficial owners allowed under the formation practices of some States, point to those practices as a reason to incorporate in those States, and list those States together with offshore jurisdictions as preferred locations for the formation of new corporations, essentially inviting terrorists and other wrongdoers to form entities within the United States. (11) In contrast to practices in the United States, countries around the world are working to collect beneficial ownership information. The United Kingdom now collects beneficial ownership information for all companies formed under its laws and makes the information available to the public. All 28 countries in the European Union are required to create, maintain, and update registries of the beneficial ownership information of the corporations formed under the laws of those countries. The information must be freely available to law enforcement agencies, financial institutions, and third parties that can demonstrate a legitimate interest in the information. Afghanistan, Ghana, Kenya, Nigeria, South Africa, the Ukraine, and many other countries are in the process of establishing mechanisms to collect beneficial ownership information for the companies created under their laws. (12) To reduce the vulnerability of the United States to wrongdoing by United States corporations and limited liability companies with hidden owners, protect interstate and international commerce from terrorists and other criminals misusing United States corporations and limited liability companies, strengthen law enforcement investigations of suspect corporations and limited liability companies, set minimum standards for and level the playing field among State formation practices, and bring the United States into compliance with international anti-money laundering and anti-terrorist financing standards, Federal legislation is needed to require the States to obtain beneficial ownership information for the corporations and limited liability companies formed under the laws of such States. 3. Transparent incorporation practices (a) Transparent incorporation practices Part E of title I of the Omnibus Crime Control and Safe Streets Act of 1968 ( 42 U.S.C. 3750 4 Transparent incorporation practices 531. Transparent incorporation practices (a) Incorporation systems (1) In general To protect the United States from the misuse affecting interstate or foreign commerce of corporations and limited liability companies with hidden owners, each State that receives funding under subpart 1 shall, not later than 3 years after the date of enactment of this subpart, use an incorporation system that meets the following requirements: (A) Identification of beneficial owners Except as provided in paragraph (3), each applicant to form a corporation or limited liability company under the laws of the State is required to provide to the State during the formation process information on the beneficial owners of the corporation or limited liability company that includes— (i) identifies each beneficial owner by name, current residential or business street address, and a unique identifying number from a nonexpired passport issued by the United States or a nonexpired drivers license or identification card issued by a State; (ii) if any beneficial owner exercises control over the corporation or limited liability company through another legal entity, such as a corporation, partnership, or trust, identifies each such legal entity and each such beneficial owner who will use that entity to exercise control over the corporation or limited liability company; and (iii) if the applicant is not a beneficial owner, provides the identification information described in clause (i) relating to the applicant. (B) Updated information For each corporation or limited liability company formed under the laws of the State— (i) the corporation or limited liability company is required by the State to submit to the State an updated list of the beneficial owners of the corporation or limited liability company and the information described in subparagraph (A) for each such beneficial owner not later than 60 days after the date of any change in the beneficial owners of the corporation or limited liability company; (ii) in the case of a corporation or limited liability company formed or acquired by a formation agent and retained by the formation agent as a beneficial owner for transfer to another person, the formation agent is required by the State to submit to the State an updated list of the beneficial owners and the information described in subparagraph (A) for each such beneficial owner not later than 10 days after the date on which the formation agent transfers the corporation or limited liability company to another person; and (iii) the corporation or limited liability company is required by the State to submit to the State an annual filing containing the list of the beneficial owners of the corporation or limited liability company and the information described in subparagraph (A) for each such beneficial owner. (C) Retention of information Beneficial ownership information relating to each corporation or limited liability company formed under the laws of the State is required to be maintained by the State until the end of the 5-year period beginning on the date that the corporation or limited liability company terminates under the laws of the State. (D) Information requests Beneficial ownership information relating to each corporation or limited liability company formed under the laws of the State shall be provided by the State not later than 30 days after receipt of— (i) a civil, criminal, or administrative subpoena or a summons, or an equivalent of such a subpoena or summons, from a local, State, or Federal agency or a congressional committee or subcommittee; (ii) a written request made by a Federal agency on behalf of another country under an international treaty, agreement, or convention, or an order under section 3512 of title 18, United States Code, or section 1782 of title 28, United States Code, issued in response to a request for assistance from a foreign country; (iii) a written request made by the Financial Crimes Enforcement Network of the Department of the Treasury; or (iv) a written request made by a financial institution, with the consent of the customer, for purposes of compliance by the financial institution with customer due diligence requirements under subsections (a)(2) and (h)(2) of section 5318 of title 31, United States Code, which the requesting financial institution shall maintain and safeguard in accordance with all applicable Federal and State laws related to bank records, and destroy upon satisfaction of those due diligence requirements, consistent with all applicable Federal and State laws related to bank records. (E) No bearer share corporations A corporation or limited liability company formed under the laws of the State may not issue a certificate in bearer form evidencing either a whole or fractional interest in the corporation or limited liability company. (2) Certain beneficial owners If an applicant to form a corporation or limited liability company or a beneficial owner, officer, director, or similar agent of a corporation or limited liability company who is required to provide identification information under this section does not have a nonexpired passport issued by the United States or a nonexpired drivers license or identification card issued by a State, each application described in paragraph (1)(A) and each update described in paragraph (1)(B) shall include a certification by a formation agent residing in the State that the formation agent— (A) has obtained for each such person a current residential or business street address and a legible and credible copy of the pages of a nonexpired passport issued by the government of a foreign country bearing a photograph, date of birth, and unique identifying information for the person; (B) has verified the name, address, and identity of each such person; (C) will provide the information described in subparagraph (A) and the proof of verification described in subparagraph (B) upon request under the same circumstances as required for States under paragraph (1)(D); and (D) will retain the information and proof of verification under this paragraph in the State in which the corporation or limited liability company is being or has been formed until the end of the 5-year period beginning on the date that the corporation or limited liability company terminates under the laws of the State. (3) Exempt entities (A) In general An incorporation system described in paragraph (1) shall require that an application for an entity described in clause (i) or (ii) of subsection (d)(2)(B) that is proposed to be formed under the laws of a State and that will be exempt from the beneficial ownership disclosure requirements under this section shall include in the application a certification by the applicant, or a prospective officer, director, or similar agent of the entity— (i) identifying the specific provision of subsection (d)(2)(B) under which the entity proposed to be formed would be exempt from the beneficial ownership disclosure requirements under paragraphs (1) and (2); (ii) stating that the entity proposed to be formed meets the requirements for an entity described under such provision of subsection (d)(2)(B); and (iii) providing identification information for the applicant or prospective officer, director, or similar agent making the certification in the same manner as provided under paragraph (1). (B) Existing entities On and after the date that is 2 years after the date on which a State begins requiring beneficial ownership information in compliance with this section, an entity formed under the laws of the State before such effective date shall be considered to be a corporation or limited liability company for purposes of this subsection unless an officer, director, or similar agent of the entity submits to the State a certification— (i) identifying the specific provision of subsection (d)(2)(B) under which the entity is exempt from the requirements under paragraphs (1) and (2); (ii) stating that the entity meets the requirements for an entity described under such provision of subsection (d)(2)(B); and (iii) providing identification information for the officer, director, or similar agent making the certification in the same manner as provided under paragraph (1). (C) Exempt entities with an ownership interest As part of the beneficial ownership information required under subsection (a)(1), neither an applicant seeking to form a corporation or limited liability company nor a corporation or limited liability company providing updated information is required to identify the beneficial owners of any entity that qualifies as an exempt entity under subsection (d)(2)(B). (b) Penalties (1) In general It shall be unlawful for any person to affect interstate or foreign commerce by failing to comply with this subpart by— (A) knowingly providing, or attempting to provide, false or fraudulent beneficial ownership information, including a false or fraudulent identifying photograph, to a State or formation agent; (B) willfully failing to provide complete or updated beneficial ownership information to a State or formation agent; (C) knowingly disclosing the existence of a subpoena or summons (or the equivalent of a subpoena or summons) or a request for beneficial ownership information described in subsection (a)(1)(D), except— (i) to the extent necessary to fulfill the authorized request; or (ii) as authorized by the entity that issued the request described in subsection (a)(1)(D); or (D) in the case of a formation agent, knowingly failing to obtain or maintain credible, legible, and updated beneficial ownership information, including any required identifying photograph. (2) Civil and criminal penalties In addition to any civil or criminal penalty that may be imposed by a State, any person who violates paragraph (1)— (A) shall be liable to the United States for a civil penalty of not more than $1,000,000; and (B) may be fined under title 18, United States Code, imprisoned for not more than 3 years, or both. (c) Rules (1) In general To carry out this subpart, the Attorney General of the United States, the Secretary of Homeland Security, and the Secretary of the Treasury may issue joint guidance or a joint rule to specify how to verify beneficial ownership or other identification information provided under this section, including under subsection (a)(2). (2) Limitation Any guidance or rule issued under paragraph (1)— (A) may explain and clarify the definition of the term beneficial owner (B) may not amend or alter the definition of the term beneficial owner (3) No guidance A failure to issue guidance or a rule under paragraph (1) shall not delay the effective date of the requirements under this subpart. (d) Definitions For the purposes of this section: (1) Beneficial owner (A) In general Except as provided in subparagraph (B), the term beneficial owner (i) exercises substantial control over a corporation or limited liability company through ownership interests, voting rights, agreement, or otherwise; or (ii) has a substantial interest in or receives substantial economic benefits from the assets of a corporation or the assets of a limited liability company. (B) Exceptions The term beneficial owner (i) a minor child; (ii) a person acting as a nominee, intermediary, custodian, or agent on behalf of another person; (iii) a person acting solely as an employee of a corporation or limited liability company and whose control over or economic benefits from the corporation or limited liability company derives solely from the employment status of the person; or (iv) a creditor of a corporation or limited liability company, unless the creditor also meets the requirements of subparagraph (A). (C) Anti-abuse rule The exceptions under subparagraph (B) shall not apply if used for the purpose of evading, circumventing, or abusing the provisions of subparagraph (A) or subsection (a). (2) Corporation; limited liability company (A) In general Subject to subparagraph (B), the terms corporation limited liability company (i) have the meanings given such terms under the laws of the applicable State; and (ii) include any non-United States entity eligible for registration or registered to do business as a corporation or limited liability company under the laws of the applicable State. (B) Exempt entities Subject to subsection (a)(3), the terms corporation limited liability company (i) is— (I) a business concern that is an issuer of a class of securities registered under section 12 of the Securities Exchange Act of 1934 ( 15 U.S.C. 781 15 U.S.C. 78o(d) (II) a business concern constituted or sponsored by a State, a political subdivision of a State, under an interstate compact between two or more States, by a department or agency of the United States, under the laws of the United States, or by an international organization of which the United States is a member; (III) a depository institution (as defined in section 3 of the Federal Deposit Insurance Act ( 12 U.S.C. 1813 (IV) a credit union (as defined in section 101 of the Federal Credit Union Act ( 12 U.S.C. 1752 (V) a bank holding company (as defined in section 2 of the Bank Holding Company Act of 1956 ( 12 U.S.C. 1841 (VI) a broker or dealer (as defined in section 3 of the Securities Exchange Act of 1934 ( 15 U.S.C. 78c 15 U.S.C. 78o (VII) an exchange or clearing agency (as defined in section 3 of the Securities Exchange Act of 1934 ( 15 U.S.C. 78c 15 U.S.C. 78f (VIII) an investment company (as defined in section 3 of the Investment Company Act of 1940 ( 15 U.S.C. 80a–3 15 U.S.C. 80b–2(11) 15 U.S.C. 80a–1 15 U.S.C. 80b–1 (IX) an insurance company (as defined in section 2 of the Investment Company Act of 1940 ( 15 U.S.C. 80a–2 (X) a registered entity (as defined in section 1a of the Commodity Exchange Act ( 7 U.S.C. 1a 7 U.S.C. 1a (XI) a public accounting firm registered in accordance with section 102 of the Sarbanes-Oxley Act ( 15 U.S.C. 7212 (XII) a public utility that provides telecommunications service, electrical power, natural gas, or water and sewer services within the United States; (XIII) a religious institution or nonprofit entity that is described in section 501(c)(3) or 527 of the Internal Revenue Code of 1986; (XIV) any business concern that— (aa) employs more than 20 employees on a full-time basis in the United States; (bb) files income tax returns in the United States demonstrating more than $5,000,000 in gross receipts or sales; (cc) has an operating presence at a physical location within the United States; and (dd) has more than 100 shareholders; or (XV) any corporation or limited liability company which is owned, in whole or in substantial part, by an entity described in subclause (I), (II), (III), (IV), (V), (VI), (VII), (VIII), (IX), (X), (XI), (XII), (XIII), or (XIV); or (ii) is within any class of business concerns which the Attorney General of the United States, the Secretary of Homeland Security, and the Secretary of the Treasury jointly determine in writing, upon the request of a State, and through an order, guidance, or rule should be exempt from the requirements of subsection (a), because requiring beneficial ownership information from the business concern would not serve the public interest and would not assist law enforcement efforts to detect, prevent, or punish criminal or civil misconduct. (3) Formation agent The term formation agent . (b) Funding authorization (1) In general To carry out section 531 of title I of the Omnibus Crime Control and Safe Streets Act of 1968, as added by this Act, and to protect the United States against the misuse affecting interstate or foreign commerce of corporations or limited liability companies with hidden owners, during the 3-year period beginning on the date of enactment of this Act, funds shall be made available to each State (as that term is defined under section 901(a)(2) of the Omnibus Crime Control and Safe Streets Act of 1968 ( 42 U.S.C. 3791(a)(2) (A) Upon written request by a State, and without further appropriation, the Attorney General of the United States shall make available or transfer to the State funds from excess unobligated balances (as defined in section 524(c)(8)(D) of title 28, United States Code) in the Department of Justice Assets Forfeiture Fund established under section 524(c) of title 28, United States Code. (B) Upon written request by a State, after consultation with the Attorney General of the United States, and without further appropriation, the Secretary of the Treasury shall make available or transfer to the State funds from unobligated balances described in section 9705(g)(4)(B) of title 31, United States Code, in the Department of the Treasury Forfeiture Fund. (2) Eligible costs The Attorney General and Secretary of the Treasury, in their sole discretion, shall determine what costs are reasonable for purposes of paragraph (1), taking into account the maximum amount of funds available for distribution to States under paragraph (3). (3) Maximum amounts (A) Department of Justice The Attorney General of the United States may not make available to States a total of more than $10,000,000 under paragraph (1)(A). (B) Department of the Treasury The Secretary of the Treasury may not make available to States a total of more than $30,000,000 under paragraph (1)(B). (4) Funding availability The amounts available to be provided to, and any amounts provided to, a State under paragraph (1) shall be exempt from, and shall not be reduced under, any order under section 251A of the Balanced Budget and Emergency Deficit Control Act of 1985 ( 2 U.S.C. 901a (c) State compliance report Nothing in this Act or an amendment made by this Act authorizes the Attorney General of the United States to withhold from a State any funding otherwise available to the State under subpart 1 of part E of title I of the Omnibus Crime Control and Safe Streets Act of 1968 ( 42 U.S.C. 3750 (d) Effect on State law (1) In general This Act and the amendments made by this Act do not supersede, alter, or affect any statute, regulation, order, or interpretation in effect in any State, except where a State has elected to receive funding from the Department of Justice under subpart 1 of part E of title I of the Omnibus Crime Control and Safe Streets Act of 1968 ( 42 U.S.C. 3750 (2) Not inconsistent A State statute, regulation, order, or interpretation is not inconsistent with this Act or an amendment made by this Act if such statute, regulation, order, or interpretation— (A) requires additional information, more frequently updated information, or additional measures to verify information related to a corporation, limited liability company, or beneficial owner, than is specified under this Act or an amendment made by this Act; or (B) imposes additional limits on public access to the beneficial ownership information obtained by the State than is specified under this Act or an amendment made by this Act. (3) State records Nothing in this Act or the amendments made by this Act limits the authority of a State, by statute or otherwise, to disclose or to not disclose to the public all or any portion of the beneficial ownership information provided to the State under subpart 4 of part E of title I of the Omnibus Crime Control and Safe Streets Act of 1968, as added by this Act. (4) No duty of verification This Act and the amendments made by this Act do not impose any obligation on a State to verify the name, address, or identity of a beneficial owner whose information is submitted to such State under subpart 4 of part E of title I of the Omnibus Crime Control and Safe Streets Act of 1968, as added by this Act. (e) Federal contractors Not later than the first day of the first full fiscal year beginning at least 1 year after the date of enactment of this Act, the Administrator for Federal Procurement Policy shall revise the Federal Acquisition Regulation maintained under section 1303(a)(1) of title 41, United States Code, to require any bidder who is subject to the requirement to disclose beneficial ownership information under subpart 4 of part E of title I of the Omnibus Crime Control and Safe Streets Act of 1968, as added by this Act, to provide the information required to be disclosed under such subpart 4 to the Federal Government, or why it is exempt under section 531(d)(2)(B) of title I of the Omnibus Crime Control and Safe Streets Act of 1968, as added by this Act, as part of any bid or proposal for a contract. 4. Anti-money laundering and anti-terrorist financing obligations of formation agents (a) Anti-Money laundering and Anti-Terrorist financing obligations of formation agents Section 5312(a)(2) of title 31, United States Code, is amended— (1) in subparagraph (Y), by striking or (2) by redesignating subparagraph (Z) as subparagraph (AA); and (3) by inserting after subparagraph (Y) the following: (Z) any person engaged in the business of forming corporations or limited liability companies; or . (b) Deadline for implementing rule for formation agents (1) Proposed rule Not later than 120 days after the date of enactment of this Act, the Secretary of the Treasury, in consultation with the Secretary of Homeland Security and the Attorney General of the United States, shall publish a proposed rule in the Federal Register requiring persons described in section 5312(a)(2)(Z) of title 31, United States Code, as amended by this section, to establish anti-money laundering programs under subsection (h) of section 5318 of that title. (2) Final rule Not later than 270 days after the date of enactment of this Act, the Secretary of the Treasury shall publish the rule described in this subsection in final form in the Federal Register. (3) Exclusions Any rule promulgated under this subsection shall exclude from the category of persons engaged in the business of forming a corporation or limited liability company— (A) any government agency; and (B) any attorney or law firm that uses a paid formation agent operating within the United States to form the corporation or limited liability company. 5. Studies and reports (a) Other legal entities Not later than 2 years after the date of enactment of this Act, the Comptroller General of the United States shall conduct a study and submit to the Committee on the Judiciary of the Senate and the Committee on the Judiciary of the House of Representatives a report— (1) identifying each State that has procedures that enable persons to form or register under the laws of the State partnerships, trusts, charitable organizations, or other legal entities, and the nature of those procedures; (2) identifying each State that requires persons seeking to form or register partnerships, trusts, charitable organizations, or other legal entities under the laws of the State to provide information about the beneficial owners (as that term is defined in section 531 of title I of the Omnibus Crime Control and Safe Streets Act of 1968, as added by this Act) or beneficiaries of such entities, and the nature of the required information; (3) evaluating whether the lack of available beneficial ownership information for partnerships, trusts, charitable organizations, or other legal entities— (A) raises concerns about the involvement of such entities in terrorism, money laundering, tax evasion, securities fraud, trafficking in illicit drugs, or other criminal or civil misconduct; and (B) has impeded investigations into entities suspected of such misconduct; and (4) evaluating whether the failure of the United States to require beneficial ownership information for partnerships, trusts, charitable organizations, or other legal entities formed or registered in the United States has elicited international criticism and what steps, if any, the United States has taken or is planning to take in response. (b) Effectiveness of incorporation practices Not later than 5 years after the date of enactment of this Act, the Comptroller General of the United States shall conduct a study and submit to the Committee on the Judiciary of the Senate and the Committee on the Judiciary of the House of Representatives a report assessing the effectiveness of incorporation practices implemented under this Act and the amendments made by this Act in— (1) providing law enforcement agencies with prompt access to reliable, useful, and complete beneficial ownership information; and (2) strengthening the capability of law enforcement agencies to combat incorporation abuses and other civil and criminal misconduct.

Summary: True Incorporation Transparency for Law Enforcement Act or the TITLE Act This bill amends the Omnibus Crime Control and Safe Streets Act of 1968 to require a state that receives funding under the Edward Byrne Memorial Justice Assistance Grant program to implement certain incorporation practices, including a requirement for an entity that forms a corporation or limited liability company to provide information about its beneficial owners. The bill imposes a civil penalty and authorizes criminal penalties&#8212;a fine, a prison term for up to three years, or both&#8212;for providing false or fraudulent beneficial ownership information or for willfully failing to provide complete or updated beneficial ownership information. The bill broadens the term &quot;financial institution&quot; to include a person engaged in the business of forming corporations or limited liability companies. It directs the Department of the Treasury to require persons engaged in the business of forming corporations or limited liability companies to establish anti-money laundering programs.The Government Accountability Office must study and report on: (1) the availability of beneficial ownership information for other legal entities (e.g., partnerships), and (2) the effectiveness of incorporation practices implemented under this bill.