Nunn Introduces Bipartisan Legislation to Halt China’s Abuse of American Shell Companies

DES MOINES – U.S. Representative Zach Nunn (IA-03) today introduced bipartisan legislation to crack down on shell companies operated by the Chinese Communist Party and support real American small businesses. The Protect Small Businesses and Prevent Illicit Financial Activity Act will close loopholes allowing China’s shell companies to exist in our communities while easing the burden of regulations on real American businesses.  The bill is co-led by Financial Services Subcommittee on National Security, Illicit Finance, and International Financial Institutions Ranking Member Joyce Beatty (OH-03).

“The Chinese Communist Party is notorious for operating shell companies in the United States to jeopardize our national security, steal our intellectual property, and undermine our economy,” Rep. Nunn said. “With this legislation, China and other adversaries will no longer be able to exploit a major loophole that is harming national security and real American small 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.

“Leading with transparency in support of American small businesses while protecting against bad foreign actors is embedded in the fabric of democracy in the United States,” Rep. Joyce Beatty said. “Congress passed the Corporate Transparency Act (CTA) to prevent bad actors from using shell companies to engage in money laundering, tax fraud, bribery, and other illicit activity. We all know that illicit finance is a serious threat to our national security, and I’m proud to support this legislation that guarantees the necessary time and information that American small businesses need to comply with new reporting requirements. As a former small business owner myself, I remain a longtime champion of small businesses throughout my district and across the country.” 

Rep. Nunn’s bill, the Protect Small Businesses and Prevent Illicit Financial Activity Act, will fix this fatal 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

Text of the bill can be found here.

###