Limited Corporate Transparency Opens the Door for Fraud & Other Crimes
Knowing who owns a company provides transparency into where its funds are coming from and where they are going. Sometimes, drug cartels and fraudsters may disguise a company’s ownership to help them launder money or even access federal funding they otherwise couldn’t get.
Today’s WatchBlog post looks at our recent work on the importance of knowing who owns a company—or its “beneficial ownership”—and how not knowing increases fraud risks.
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Disguising beneficial ownership, cheating taxpayers
The registered owners of a company may or may not be the people who ultimately benefit from or control it. The person or people who do benefit are known as the “beneficial owners.” Disguising beneficial ownership information can help criminals commit fraud and other illegal activities. These actors can hide a company’s ownership in several ways, including using:
- Stolen identities to act as a company’s owners
- “Shell” companies or created corporate entities to obscure ownership
- “Straw” owners (or an “owner in name only”) who have limited authority and little or no control over company assets
- Professional enablers or stolen identities of professionals—such as doctors or lawyers—to provide legitimacy to fraudulent claims
- Pass-through billing schemes to obscure billing and enable fraud, such as the submission of false invoices
Using Stolen Identities and Shell Companies to Defraud Medicare
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Misrepresenting Ownership and Using Professional Enablers to Scam Medicare
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Companies are not required to provide their beneficial ownership information when applying for federal awards such as contracts or grants.
As a result, these programs, which are funded by taxpayer dollars, may be exploited by criminals and fraudsters. Hundreds of billions of federal dollars are vulnerable to beneficial ownership-related fraud risks. Awards, such as contracts with foreign businesses, are among those vulnerable to beneficial ownership fraud risks.
Despite the risks, most companies are exempt from reporting their beneficial ownership
In 2024, the Department of the Treasury began requiring that some U.S. and foreign companies report their ownership information to the Financial Crimes Enforcement Network (FinCEN). This information was then added to a registry intended to help prevent and combat money laundering, terrorist financing, corruption, and tax fraud.
But then, in 2025, FinCEN expanded exceptions for reporting this ownership information. Specifically, a new rule exempted all U.S. companies and U.S. persons who are beneficial owners of foreign companies from reporting requirements. This expanded exemption applies to about 99% of entities previously required to report.
We recently sat down with expert Mike Clements to discuss this rule change and how it could affect corporate transparency. Listen to our conversation below:
More could be done to understand how expanded exemptions affect transparency of ownership and the risks of not knowing this information. But so far, Treasury hasn't determined how to address these risks and their effects on policymakers’ and law enforcement’s efforts to counter criminal activity. We recommended it do so. Learn more by reading our recent report.
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