U.S. Representative Zach Nunn (IA-03) passed bipartisan legislation protecting our economy and national security from China’s aggression through the House Financial Services Committee on Wednesday. The Protect Small Businesses and Prevent Illicit Financial Activity Act will close a loophole in current law that allows shell companies operated by the Chinese government to operate in the United States while also easing the burden of government regulations on real American businesses.
“The Chinese Communist Party will do anything to jeopardize our national security, steal our intellectual property, and undermine our economy,” said Rep. Zach Nunn. “Passing this bipartisan bill is a critical step towards ending their ability to operate shell companies that harm national security and real American businesses.”
In 2020, Congress passed the Corporate Transparency Act to root out these shell companies by establishing new reporting requirements for businesses; however, during implementation by the U.S. Department of Treasury’s Financial Crimes Enforcement Network (FinCEN), several changes were made that deviated significantly from the bill passed by Congress. Most notably, companies were given an option to state that they were “unable to obtain” or “unable to identify” their true ownership. The inclusion of these options undermines the effectiveness of the law by allowing bad actors to obscure the identity of nefarious owners.
Rep. Nunn’s bill, the Protect Small Businesses and Prevent Illicit Financial Activity Act will fix this critical national security flaw and make it easier for real American businesses to comply with the law by:
- Closing the loophole allowing reporting companies to omit information by selecting “unable to obtain” or “unable to identify”
- Requiring new entities to file a report within 90 days of formation or registration
- Extending the filing deadline for American businesses by 12 months while the Treasury Department fixes their flawed implementation of this new law to ensure small businesses are not overburdened with unclear and unnecessarily complicated new regulations
The bill now heads to the Floor of the full House of Representatives for consideration. Text of the bill can be found here.