FinCEN’s Unused Arsenal

Born on the minuscule Caribbean island of Nevis, Alexander Hamilton’s leadership of the U.S. Treasury Department transformed American finance from a liability into a source of national strength. In the 21st century, Nevis has emerged as a waypoint for financial loophole scrutiny. Its shell companies have enabled a $220 million payday-loan scheme defrauding 620,000 Americans and concealed the spoofing profits of a trader who partly triggered the 2010 flash crash, a $1 trillion market disruption. [1] Such is the island’s notoriety that Russian operatives amplified disinformation linking Emmanuel Macron to a Nevis-incorporated company before the 2017 French presidential election. [2] Yet the popular focus on small nodes facilitating illicit finance obfuscates the hub. Immune to foreign pressure, the United States offers a capacious and reputable address to friend and foe, its statutory authorities unexercised.

Former Treasury Secretary Janet Yellen put it plainly when she called the United States “the best place to hide and launder ill-gotten gains.” [3] Deep capital markets, high public trust in the rule of law, and a permissive corporate formation environment attract legitimate investment and illicit actors alike. The Treasury Department’s Financial Crimes Enforcement Network (FinCEN) is the primary steward of America’s anti-money laundering (AML) regime. Authorized under the Bank Secrecy Act of 1970, FinCEN processes millions of Suspicious Activity Reports annually. The bureau uses the intelligence gathered to evaluate threats, assist law enforcement, and administer Special Measures against jurisdictions and institutions of primary money laundering concern.

Recognizing domestic vulnerabilities in America’s financial infrastructure, Congress expanded FinCEN’s powers through the USA PATRIOT Act of 2001, the Intelligence Reform and Terrorism Prevention Act of 2004, and the Corporate Transparency Act of 2021. However, the bureau has left these explicit congressional authorities largely dormant. To close the door on foreign adversaries, kleptocratic networks, and criminal organizations, FinCEN should require full disclosure of company ownership, hold liable professionals who enable illicit finance, and build an up-to-date, transaction-monitoring database.

The Shell Company Problem and the Corporate Transparency Act

One of the clearest examples of this vulnerability lies in the ease with which anonymous companies can be created in the United States. Every U.S. state requires less information to form a company than to obtain a library card. [4] That standard reflects not simply a regulatory gap, but a political choice to prioritize ease of incorporation over accountability and leave existing authority unexercised. A 2011 World Bank survey found the United States to be the leading jurisdiction for shell companies used in grand corruption cases. [5] An American address confers legal standing and reputational cover that Nevis cannot.

The costs of corporate anonymity hit closer to home than shell companies care to admit. Viktor Bout used American shell companies to deceive the Pentagon into awarding him contracts to supply U.S. troops in Iraq. Joking to a reporter in 2003 that he was “second only to Osama” on America’s most-wanted list, Bout went on to collect $60 million from the public purse. [6][7] If the arms trafficker the press dubbed “The Merchant of Death” could exploit American anonymity, Ukrainian oligarch Ihor Kolomoisky could also do so unnoticed. As his Ponzi scheme allegedly looted $5 billion from Ukraine’s largest private bank, Kolomoisky laundered the proceeds via Delaware shell companies into 22 American properties. Unbeknownst to brokers or local officials, he became Cleveland’s largest commercial landlord and acquired steel mills across the Midwest. Deliberately neglected, those assets produced industrial accidents that maimed workers, impaired U.S. steel production, and hollowed out whole communities. [8]

The Bout and Kolomoisky cases demonstrate that corporate anonymity is not a victimless administrative loophole. Its consequences reach from U.S. battlefields to American industrial towns, enabling actors whose activities undermine national security, economic stability, and public trust. In response, Congress passed the Corporate Transparency Act (CTA) in 2021 to reduce America’s domestic shell company vulnerability. The law requires most U.S. companies to file a one-time disclosure with FinCEN’s Beneficial Ownership Information Register. By identifying who owns or controls the entity, the CTA extends liability to intermediaries who claim ignorance and to illicit actors who hide behind layered ownership structures. [9] 

As of early 2025, any power this Act had was severely weakened. Citing the compliance burden, Treasury’s March 2025 interim final rule redefined “reporting company” to exclude domestic entities. This exempted the 32 million companies the law addressed and left it in force only for foreign registrants. [10] In practice, compliance takes about ten minutes of basic identifying information, at no cost and no new legal exposure for legitimate businesses. [11] The CTA remains on the books, but FinCEN no longer enforces it against the domestic companies it sought to expose.

Professional Intermediaries

Shell companies rely on intermediaries willing to ask no questions. For example, Section 352 of the PATRIOT Act extended Bank Secrecy Act program requirements to real estate closings and settlements, investment companies, and other industries FinCEN deemed vulnerable to money laundering. Within months, FinCEN granted most of these sectors a “temporary exemption,” to further study the rule. [12] More than two decades later, real estate closing professionals carry no AML obligation for commercial transactions. In the meantime, a 2018 Financial Action Task Force and Egmont Group report, drawing on 100 case studies from 34 jurisdictions, found that about half the professional intermediaries involved in financial crime cases were complicit rather than merely negligent. [13] When FinCEN proposed extending the requirement to investment advisers in 2024, it delayed the rule by two years in January 2026, citing the same need for more time to review that it invoked in 2002. [14] 

Brokers and closing agents turn that opening into a service they can sell. The Islamic Republic of Iran operated a 36-story skyscraper in Midtown Manhattan for two decades, earning millions in rental income from blue-chip tenants before federal prosecutors moved to seize the nearly $1 billion property; the brokers and managers who ran it never had to ask who owned it. [15] Teodoro Nguema Obiang Mangue, son of the president of Equatorial Guinea, a nation whose oil wealth funds one of the highest per capita incomes in Africa while most of its people live in poverty, funneled over $110 million in suspect funds into the United States between 2004 and 2008. Two real estate agents helped him buy a $30 million Malibu house with funds wired straight from Equatorial Guinea. When one escrow agent balked at his $38.5 million jet purchase without a source of funds, another closed the deal without one.

Money moves through venture funds with the same unchecked ease. A 2018 Pentagon report warned that Chinese venture investors were gaining access to the “crown jewels” of American innovation through Danhua Capital, a firm based just outside Stanford and financed by a state-owned development group tied to the Beijing municipal government. It backed startups in drones, artificial intelligence, and cybersecurity, including a data management and security company that counted the Department of Energy and Air Force among its customers, and most troubling, a drone startup selected by the Department of Transportation to help integrate drones into U.S. airspace. Venture firms carry no obligation to disclose who operates them, allowing Chinese-backed companies to move within the U.S. defense ecosystem with anonymity. [16] FinCEN has the authority to hold these advisers liable and has declined to use it, leaving the professionals most useful to foreign adversaries and kleptocratic actors outside the AML regime entirely.

Cross-border Transaction Monitoring

After the reorganization of the intelligence community post- 9/11, Congress also authorized a framework to centralize cross-border transaction monitoring. Most international dollar payments must clear through a handful of American correspondent banks, which federal law already requires to retain the underlying records. Integrating this data would produce a map of global financial flows that no constellation of individual Suspicious Activity Reports could replicate. Despite a feasibility report, impact study, and proposed rule in 2010, the database has never been built. [17] The authorization to build the platform has sat unused for two decades, an opportunity cost measured in unmapped networks and uninvestigated flows. The intelligence gains foregone by this delay are easier to appreciate when examining cases where financial data has been successfully consolidated and analyzed.

Although the database was never constructed, smaller-scale efforts have provided a glimpse of its potential utility. In 2017, the FBI partnered with FinCEN to map Russian illicit financial networks. Working from a manually assembled dataset drawn from four Balkan and Cypriot banks, the investigation identified new targets, expanded understanding of existing cases, and mapped previously concealed networks. [18] A permanent database would generate this intelligence routinely, without the laborious assembly limiting its scale and reach.

Though already required to maintain records of international payments, banks would benefit from a database that would reduce their regulatory burden. Direct access to these transactions would absolve the need for intermediaries to file certain suspicious activity reports. Canada and Australia have built analogous platforms under comparable common-law systems, and both governments have cited them as central tools in illicit finance investigations. Their experience demonstrates that centralized transaction-monitoring systems are not only technically feasible, but also compatible with the legal and privacy protections expected in common-law democracies. [19] Where requiring ownership disclosure and extending AML obligations to professional intermediaries close the doors that anonymity holds open, America’s position at the center of global dollar flows makes possible an intelligence asset that no offshore jurisdiction can replicate or avoid. The continued absence of a comparable American system therefore reflects a policy choice rather than a technological, legal, or institutional constraint.

Conclusion

When Thomas Jefferson became President in 1801, he dispatched his new Treasury Secretary, Albert Gallatin, to uncover the mischief his rival, Alexander Hamilton, had committed as the first Secretary. To Jefferson’s dismay, Gallatin reported that he “…found the most perfect system ever formed. Any changes that should be made in it would injure it. Hamilton made no blunders, committed no frauds. He did nothing wrong.” [20] Though a modern AML regime will likely elude such lofty standards, the gap between FinCEN’s latent authority and its practice represents a correctable failure.

For 25 years, Congress has provided FinCEN with tools to safeguard the U.S. from adversaries laundering their money. Instead, policy choices have permitted shell companies to continue operations on U.S. soil, ignored complicit gatekeepers, and refrained from overseeing foreign financial flows. If the U.S. government wants to align domestic and foreign statecraft, it should use Congress’s laws to close the back door at home. Hamilton did not leave Nevis so the U.S. could emulate it. Instead, FinCEN ought to follow his precedent by transforming American finance from a vulnerability into a source of national strength. H

Alex Sturza ‘26 served as the President of the AHS chapter at George Washington University, where he majored in International Affairs with a concentration in Comparative Political, Economic, and Social Systems.

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NOTES:

[1] Oliver Bullough, “Nevis: How the World’s Most Secretive Offshore Haven Refuses to Clean Up,” The Guardian, July 12, 2018, https://www.theguardian.com/news/2018/jul/12/nevis-how-the-worlds-most-secretive-offshore-haven-refuses-to-clean-up.

[2] Jean-Baptiste Jeangène Vilmer, “The ‘Macron Leaks’ Operation: A Post-Mortem,” Atlantic Council, June 1, 2019, https://www.atlanticcouncil.org/wp-content/uploads/2019/06/The_Macron_Leaks_Operation-A_Post-Mortem.pdf.

[3] “Remarks by Secretary of the Treasury Janet L. Yellen at the Summit for Democracy,” U.S. Department of the Treasury, December 9, 2021, https://home.treasury.gov/news/press-releases/jy0524.

[4] “The Library Card Project: The Ease of Forming Anonymous Companies in the United States,” Global Financial Integrity, March 21, 2019, https://gfintegrity.org/report/the-library-card-project.

[5] “Corrupt Money Concealed in Shell Companies and Other Opaque Legal Entities, Finds New StAR Study,” World Bank Group, August 30, 2016, https://www.worldbank.org/en/news/press-release/2011/10/24/corrupt-money-concealed-in-shell-companies-and-other-opaque-legal-entities-finds-new-star-study.

[6] Nicholas Schmidle, “Disarming Viktor Bout,” The New Yorker, August 27, 2014, https://www.newyorker.com/magazine/2012/03/05/disarming-viktor-bout.

[7] “Arms Dealer Reportedly Flew into Iraq,” United Press International, August 22, 2007, https://www.upi.com/Top_News/2007/08/22/Arms-dealer-reportedly-flew-into-Iraq/16321187765271.

[8] Michael Sallah and Tanya Kozyreva, “With Deutsche Bank’s Help, an Oligarch’s Buying Spree Trails Ruin across the US Heartland,” International Consortium of Investigative Journalists, September 22, 2020, https://www.icij.org/investigations/fincen-files/with-deutsche-banks-help-an-oligarchs-buying-spree-trails-ruin-across-the-us-heartland.

[9] Jamie Schafer, “Gatekeepers Beware: The New US Corporate Transparency Act Could Be a Game-Changer,” Financial Times, December 18, 2023, https://www.ft.com/content/25478f33-f73c-424f-a3ad-84cbb4fc50c2.

[10] “Beneficial Ownership Information Reporting Requirement Revision and Deadline Extension,” Federal Register, March 26, 2025. https://www.federalregister.gov/documents/2025/03/26/2025-05199/beneficial-ownership-information-reporting-requirement-revision-and-deadline-extension.

[11] Nate Sibley, “Five Myths about the Corporate Transparency Act,” Hudson Institute, February 11, 2025, https://www.hudson.org/legal-affairs/five-myths-about-corporate-transparency-act-nate-sibley.

[12] “Concealment of Beneficial Ownership,” Financial Action Task Force (FATF), July 2018, https://www.fatf-gafi.org/content/dam/fatf-gafi/reports/FATF-Egmont-Concealment-beneficial-ownership.pdf.

[13] Vivian Wang, “Manhattan Skyscraper Linked to Iran Can Be Seized by U.S., Jury Finds,” The New York Times, June 29, 2017, https://www.nytimes.com/2017/06/29/z

[14] Timothy Lloyd, “FBI Concerned over Laundering Risks in Private Equity, Hedge Funds – Leaked Document,” Reuters, July 14, 2020, https://www.reuters.com/article/business/fbi-concerned-over-laundering-risks-in-private-equity-hedge-funds-leaked-docu-idUSKCN24F1TE.

[15] Vivian Wang, “Manhattan Skyscraper Linked to Iran Can Be Seized by U.S., Jury Finds,” The New York Times, June 29, 2017, https://www.nytimes.com/2017/06/29/z.

[16] “Delaying the Effective Date of the Anti-Money Laundering/Countering the Financing of Terrorism Program and Suspicious Activity Report Filing Requirements for Registered Investment Advisers and Exempt Reporting Advisers,” Federal Register, January 2, 2026, https://www.federalregister.gov/documents/2026/01/02/2025-24184/delaying-the-effective-date-of-the-anti-money-launderingcountering-the-financing-of-terrorism.

[17] “Financial Crimes Enforcement Network; Cross-Border Electronic Transmittals of Funds,” Federal Register, September 30, 2010, https://www.federalregister.gov/documents/2010/09/30/2010-24417/financial-crimes-enforcement-network-cross-border-electronic-transmittals-of-funds.

[18] “Report to Congress pursuant to Section 243 of the Countering America’s Adversaries through Sanctions Act of 2017 Regarding Interagency Efforts in the United States to Combat Illicit Finance Relating to the Russian Federation,” U.S. Department of the Treasury, August 6, 2018, https://home.treasury.gov/system/files/136/U_CAATSA_243_Report_FINAL.pdf.

[19] Joshua Kirschenbaum and David Murray, “An Effective American Regime to Counter Illicit Finance,” Alliance for Securing Democracy at the German Marshall Fund, December 18, 2018, https://securingdemocracy.gmfus.org/an-effective-american-regime-to-counter-illicit-finance.

[20] Ron Chernow, Alexander Hamilton (New York, NY: Penguin Group, 2004), 647.

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