Protect Small Business and Prevent Illicit Financial Activity Act

Madam President, several years ago, it was a December like this; there were big bills that were coming through the House and the Senate, one of them being the National Defense Authorization Act, which has passed every single year for the last six decades.

Stuck in that multi, multi, multipage bill was a little piece on beneficial ownership. Now, most everyone just didn't even notice what it would be. But in the past couple of years, the Biden administration has released the rules for beneficial ownership and what will be required to be able to deal with ``opportunities for fraud.''

What it has become is a way to be able to get from every single small business in America--I do need to emphasize these were all small business; in fact, smallest of the small businesses--every LLC, every businessowner in America a list of them of this: their name, their date of birth, their address, an I.D. number--that is simple--but then, also, a listing of all the senior officers of the company, someone who has authority over the appointment or removal of a senior officer, and this little jewel--someone who substantially influences important decisions in your company.

Every business owner in America is required by January 1--in just a couple of weeks--to turn in that document for every single business that they own.

Now, for many folks in real estate or in construction or in many other businesses, they actually start a company and raise it up for that company. And so they may not own one company or have one LLC; they may have 20 or 30. And they have to go through the paperwork for every single one of those and be able to turn in, including answering the question: Who influences your important decisions on your company? No one even knows what that means.

Well, you may say: Well, it is no big deal if they don't turn it in.

Oh, no, it is, because under the rule that has been put out, if they don't turn this form in, it is a $10,000 fine for each company that they don't turn in or 2 years in jail if they don't submit it.

Let that soak in. Every small business owner in America has to turn in who influences their decisions, or they could go to jail for 2 years.

Now, listen. All of us around this room would say: That is too much. Why is the Federal Government asking that of every pet owner, of every hair shop, of every builder, of every subcontractor? Why are we asking them who substantially influences them? And what authority do we have to have them do that?

Well, it is a good question, actually, because a Federal judge, just a couple of weeks ago, stepped in and did a preliminary injunction, just temporarily stepped in--this, by the way, was a Federal judge who was appointed by President Obama. They stepped in and put a halt on this rule. And they said this rule is--their term--``quasi-Orwellian'' and ``likely unconstitutional.''

Now, this was an Obama judge stepping into this. They put a pause on it. But the problem is, the pause is completely dependent on the judge at this point. They can unpause it at any moment.

So the simple thing that I have asked for throughout this entire year is, let's get rid of this rule. This rule should not be there at all. Congress has no right to go to every business owner and hand them a stack of forms and say to fill these out and tell us who helps you make decisions in your company.

What in the world? So we have no right to be able to do that. So I have asked all year long: We need to get rid of it entirely. I have not been successful getting that. So we have asked a simple thing: Let's take it out for 1 year. Let's just delay it. Let's get more time to be able to talk about this. This is a big issue that Congress is laying down.

Now, I have to tell you, I have not been successful getting that either. But do you know who has been? The House of Representatives. The House of Representatives passed a 1-year delay on this rule--wait for it--420 to 1; 420 to 1.

Yeah, the House said: This is a massive overreach; let's pause this for a year, at least, until we figure out what this actually means.

What does this mean for small business owners across the country? They could--in the very earliest time of next year under a new administration, any single small business in the country could face a $10,000 fine or 2 years in prison if they haven't turned this in.

But they have all turned it in already, right? It was due January 1. Actually, FinCEN has given us the latest numbers of who has turned it in.

Let me just give a few States as an example and the percentage. In New York State: 80 percent of the small businesses haven't turned this form in yet--80 percent.

In my State in Oklahoma, 77 percent of the small businesses have not turned this form in.

In Rhode Island, 72 percent of the small businesses have not turned this form in.

In West Virginia, 80 percent of the businesses have not turned this form in.

In Wisconsin, 74 percent of the businesses have not turned this form in.

That means they could all face--all those businesses could all face a $10,000 fine or 2 years in jail because they haven't submitted a form most of them don't even know exists.

Listen: Delaying for a year is not a radical proposal. And 420 to 1 in the House is a pretty good vote, especially considering the votes of the House in the past week.

That is broad bipartisan agreement. All I am asking is: Let's pause this for a year. Let's agree with the House and not have 75 to 80 percent of American small businesses suddenly be under the heavy hand of a potential fine or jail time because they don't even know this exists. But it does. It is Federal law.

So that is my simple request that I am bringing on this very last moment to be able to deal with this.

Madam President, as if in legislative session and notwithstanding rule XXII, I ask unanimous consent that the Committee on Banking, Housing, and Urban Affairs be discharged from further consideration of H.R. 5119 and the Senate proceed to its immediate consideration; I further ask that the bill be considered read a third time, be passed; and that the motion to reconsider be considered made and laid upon the table.

Madam President, my friend from Rhode Island and I, we have a lot of great conversations. I think we both agree on the problem here. There is clearly a problem that money could be laundered and hidden in American companies and shell companies. There is no question. I think what we disagree on is the answer to that problem.

In this setting, with this set of forms, the assumption is that those who are doing international money laundering would put down their accurate information and would identify themselves as international terrorists and money launderers. In this particular setting, every small business owner who owns a restaurant or a pet store or a bookstore or is a plumber or owns a roofing company--30 million, in fact, small businesses in America--they all have to prove their innocence.

The assumption is that a Russian oligarch who is trying to hide money will tell the truth when he fills his form out, and I find that hard to believe. But in the meantime, 30 million small businesses have to go through a form, and within weeks, probably 23 million of those will be in violation of the law, and they will face penalties of $10,000 or 2 years in jail. And most of those small business owners who run that restaurant down the street don't even know this rule exists.

It is the kind of stuff that drives Americans crazy, that they woke up one day and found out they may go to jail tomorrow because they didn't fill out a form that someone wanted.

That is what we are trying to pause. The problem is real. I just don't think this is the right solution for it in the way it is being implemented. Let's see if we can solve the problem without actually causing, literally, tens of millions of small business owners to be under the sword of Damocles that they could be rounded up and go to jail at any moment because they didn't get a form filled out.

That is what we are trying to solve in the days ahead, and I wish we could at least put a pause on this and think it through more before those small business owners find out.

With that, I yield the floor.

Madam President, reserving the right to object, let me start by pointing out that this is a national security bill. And the reason that it is a national security bill is because--to paraphrase a famous author--the United States is engaged in a clash of civilizations. And I describe that clash of civilizations as between rule of law countries like the United States and countries that are run by kleptocrats and oligarchs and criminals or subject to control by traffickers and international criminal organizations.

Now, if you are an oligarch or a kleptocrat or international criminal, the thing you want more than anything else is to be able to hide what you stole. And you don't want to hide what you stole in your own corrupt and crooked country. You want to hide what you stole behind rule of law.

And the result is that the United States and other countries on the rule of law side of this clash of civilizations are giving aid and comfort to our enemies by helping them hide their crooked assets.

The concern for the United States was made pretty clear by Treasury Secretary Yellen, who admitted ``there's a good argument that . . . the best place to hide and launder ill-gotten gains is actually the United States.''

So we are trying to clean that mess up. And it is not just this administration. Under President Trump, Secretary Mnuchin said:

Treasury's ability to combat tax evasion and to detect,

deter, and disrupt money laundering and terrorist financing

would be greatly enhanced through reporting of beneficial

ownership information.

The suggestion that this magically appeared in some bill? No. It was worked through two committees in the Senate. It has been bipartisan from its earliest days, both in the Judiciary Committee and in the Banking Committee. It has been through enormous effort. And, in fact, the last Trump administration, working with us on this bill in 2019, released a statement of administration policy condemning this bipartisan ``measure that will help prevent malign actors from leveraging anonymity to exploit these entities for criminal gain.''

Are there examples of what has been going on? Well, terrorist groups like Hezbollah, Putin's oligarch cronies, North Korean foreign operatives, and fentanyl traffickers all need shell companies to hide what they have stolen.

Viktor Bout, the Russian arms dealer known as the ``Merchant of Death,'' used a global network of anonymous shell companies, including at least 12 incorporated in Delaware, Florida, and Texas. Anonymous LLCs impeded New York City's ability to trace the terror finance scheme that funded the 9/11 attacks--again, shell corporations that we didn't know who was really behind.

An anonymous New York company served as a front for the Iranian government in violation of U.S. sanctions, with millions of dollars in rent illegally funneled to Iran.

A DOJ indictment last year said that cartel operatives designed a network of shell companies in Wyoming to launder illegal millions for the Sinaloa cartel. Narco traffickers in New Jersey were charged with using an American shell company to buy fentanyl-related supplies from China.

So this is a real problem, which is why the Trump administration's Statement of Administration Policy was supportive.

Now, we went through a lot of effort to get here. The first group that stood up against it was the U.S. Chamber of Commerce, and when it was exposed what they were arguing for, they actually ended up backing off and going to neutral on the bill, because they are bank members and they are anti-money laundering members.

And other Members of the Chamber said: What are we doing here?

And as soon as when that entity disappeared, up came the American Bar Association, doing the same thing. And their banking session and their anti-money laundering session and their former prosecutors and their national security folks all said: What are you doing?

And so the American Bar Association backed off.

The third in this game of political special interests whack-a-mole was NFIB, which came in to present the same stale argument to Senator Graham, Senator Grassley, and myself that were so stale and so flagrant that--well, I am not going to name names. Let's just say the NFIB had a very bad day facing down this bipartisan group.

So a lot of work has gone into this. The stakes are very high. This actually is a national security bill. And against that risk of being the loser in the clash of civilizations, because we are giving aid and comfort to our enemies by allowing them to use American shell corporations to hide what they get selling fentanyl to our citizens, here is what we ask: When you set up a corporation, you tell us your name. That is not very complicated. You can do that pretty quickly. You tell us your address. That doesn't take more than a couple of seconds to remember. What is my address? Yeah, write that down. Your date of birth? That is pretty simple too. And then either a passport or driver's license number. It is, literally, that simple. Where it gets complicated is where you have complex networks of joined shell companies in a complex corporate structure. But if that is what you have got, the very same lawyers who put that complex structure together can easily add this information.

So, in my view, delaying the Corporate Transparency Act would empower criminals who are operating through American shell companies, who outcompete and defraud honest small business owners, while emboldening and facilitating terrorist groups, foreign adversaries like Russia and China and Iran, North Korean weapons of mass destruction financing, fentanyl trafficking, and a whole array of grotesquely bad actors.

So I object. With great regard for my friend Senator Lankford, I object.

Mr. Speaker, I move to suspend the rules and pass the bill (H.R. 5119) to amend title 31, United States Code, to provide small businesses with additional time to file beneficial ownership information, and for other purposes, as amended.

Mr. Speaker, I ask unanimous consent that all Members may have 5 legislative days in which to revise and extend their remarks and include extraneous material on this bill.

Mr. Speaker, I yield myself such time as I may consume.

Mr. Speaker, American small businesses are the backbone of our economy. There are nearly 32.6 million small businesses operating in our country, and in my home State of Iowa, that makes up more than one- half of the businesses, those that are on Main Street in our hometown communities and right in the storefront where Americans shop and spend their time each week.

However, these small businesses are under attack from a Federal bureaucracy in D.C. trying to burden them in red tape, and alarmingly, also from our adversaries overseas, specifically Chinese Communist Party entities, that have infiltrated our country with shell companies that jeopardize our national security, violate our intellectual property laws, and hurt our economy both locally and globally.

Recent reports suggest that the Chinese Communist Party has more than 40,000 shell companies operating in the United States today. They use these companies to launder money, peddle drugs, and collect sensitive information on our people and our Nation. We cannot, we must not, and, today, we will not allow that to happen.

In 2020, Congress passed the Corporate Transparency Act to shut down these illegal shell companies, but, right now, foreign-owned entities use these shell companies and exploit a loophole in this law by checking a box on the required form claiming that they don't know who owns the company, which, of course, we all know--both Republican and Democrat--is completely absurd.

Once enacted, our bipartisan Protect Small Business and Prevent Illicit Financial Activity Act will finally close this loophole and will also reduce the burdensome red tape for the legitimate American businesses who are trying to do that which they have done so well for so long: serve our hometown communities.

First, these shell companies will no longer be able to exploit the system by

selecting ``unable to obtain'' or ``unable to identify,'' basically saying that we don't know who owns us, when reporting their ownership information. By removing the option to basically claim absentia when it comes to ownership, we can crack down on the Chinese Communist Party's economic incursion into the United States.

Not only will this bipartisan bill help crack down on Communist China, it will also make it much easier for legitimate American small businesses to comply with the law, no longer putting them at a detriment to their overseas competitors.

Small businesses already face unique challenges in this economy: brutal inflation, a struggling supply chain, and a bureaucracy based right here in D.C. that is intent on burying them in red tape, making them do far more work than adversary-owned entities or what foreign- owned companies do right now. Not to mention most operate with limited resources, and that is on a good day.

This bill will reduce government-imposed burdens by ensuring small businesses have sufficient time to satisfy requests for information while the government fixes this egregious loophole.

The bottom line, Mr. Speaker, is that the passage of this legislation is a critical step forward by preventing our adversaries in the Chinese Communist Party from exploiting our laws and engaging in illicit activity and will also reduce the burden of red tape on new and existing small businesses.

In closing, I thank my colleague from Ohio (Mrs. Beatty), who is the Ranking Member of National Security, Illicit Finance, and International Financial Institutions Subcommittee, for helping champion this and being a co-lead on this important legislation, and I also thank my colleagues on the other side of the aisle.

Mr. Speaker, I urge my colleagues to support this bill, and I reserve the balance of my time.

Mr. Speaker, I yield myself such time as I may consume.

First, I want to say thank you to Members on both sides of the aisle. The House Financial Services Committee has led strongly in making sure that the backbone of our economy, our small businesses, everyday Americans, and the economy of this country can remain stronger. With the passage of this bill we not only fight for the Main Street of America, but we also ask that those who would do business in the United States be held to the same standard.

As was highlighted by the gentlewoman from Texas, whether you are a terrorist entity, whether you are a laundering agency from overseas, or whether you are the Chinese Communist Party, no longer will you be part of this myriad of 40,000 entities trying to operate with impunity in the United States. We will hold you accountable. We will move forward to support those Americans who are doing it the right way, and, most importantly, we will stand strong for our national security.

Mr. Speaker, it is a privilege to move this bill on a bipartisan path with this House and the interests of the American people. I urge my colleagues to support this legislation which I am proud to lead, and I yield back the balance of my time.

Mr. Speaker, I yield myself such time as I may consume.

Mr. Speaker, I rise in support of H.R. 5119, the Protect Small Business and Prevent Illicit Financial Activity Act sponsored by the gentleman from Iowa (Mr. Nunn) along with the gentlewoman from Ohio (Mrs. Beatty).

In 2021, Congress enacted the Corporate Transparency Act, or CTA, establishing America's national Beneficial Ownership Registry. This registry will start collecting information from applicable businesses and their beneficial owners on January 1, 2024, and will crack down on the anonymous shell companies used by terrorists, drug cartels, and other financial criminals.

The collection of information on beneficial owners of certain corporations, limited liability companies, and other entities registered in the United States will help protect our financial system from illicit use by making it even more difficult for bad actors to disguise their financial activities through entities with complex ownership structures.

This bill would offer reporting businesses additional time to file their CTA information, pushing back a handful of deadlines in the September 2022 final rule on this issue. Additional time, especially for small, newly formed businesses, would improve the accuracy of the registry and streamline our law enforcement efforts.

I am pleased to support this bill that will assist with the development of America's sorely needed Beneficial Ownership Registry.

Mr. Speaker, at least 30 countries already have some kind of central beneficial ownership registry to improve transparency. It is about time we start our own program, but we need to do it the right way and give small businesses ample time to file their information accurately.

In closing, Mr. Speaker, the bill will improve the implementation of a registry that will provide much-needed transparency into business ownership and ultimately help to deter bad actors from abusing our financial system. Providing our Nation's small businesses with sufficient time to comply with the CTA will help FinCEN to develop an effective and meaningful registry.

I, again, thank Representative Nunn and Mrs. Beatty for championing this important issue. I urge my colleagues to support this bill, and I yield back the balance of my time.

Mr. Speaker, on that I demand the yeas and nays.