NY Legislature Passes Assemblymember Gallagher’s Bill to Create First-in-the-Nation Public Database of LLC Beneficial Owners, Casting Light on Shady Shell Corporations

Legislation would reveal the identities of beneficial owners operating anonymous shell companies in New York, including negligent landlords and employers, Russian oligarchs, and tax cheats

Albany, NY Yesterday, the New York State Assembly passed the LLC Transparency Act (A3484A, Gallagher / S995B, Hoylman-Sigal) following the Senate’s passage of the bill on June 6. The legislation would add “beneficial owners” of limited liability companies (LLCs) doing business in New York to a public database maintained by the Department of State. LLCs are a form of shell company that can easily be formed and operated anonymously, making them a preferred vehicle for various forms of white-collar crime, including wage theft, campaign finance violations, and money laundering. Anonymous LLCs have also been implicated in scandals as far-reaching as the Panama Papers and Pandora Papers and frustrate routine government activity, such as code enforcement. If signed into law, the bill’s public registry of beneficial owners would be the first such registry in the United States. 

“Passing this bill is making history,” said Assemblymember Emily Gallagher, prime sponsor of the LLC Transparency Act, during her statement on the bill. “It is the first publicly accessible beneficial ownership database in the country and New York is setting a new standard for transparency in the United States.”

Housing advocates have supported the legislation because of the benefits the legislation would offer to tenants, who routinely face anonymous LLC landlords that use anonymity to escape accountability, frustrate legal proceedings, or mask the size of their real estate portfolios or histories of code violations.

Housing Conservation Coordinators said, "LLCs have been used as shell corporations by property owners dealing in shady business practices for too long. This legislation is a much-needed tool in the fight against exploitative and predatory landlords who try to remain anonymous behind them. Housing Conservation Coordinators is grateful for the work of State Senator Brad Hoylman-Sigal, Assemblymember Emily Gallagher, and the New York State Legislature in passing the LLC Transparency Act."

“We’re incredibly thankful to Assemblymember Emily Gallagher and Senator Brad Hoylman-Sigal for their tremendous work getting the LLC Transparency Act through the finish line,” said Whitney Hu, Director of Civic Engagement and Research for Churches United for Fair Housing. “Tenants and our communities will be so much safer from slumlords and LLC landlords who have hidden behind anonymity and secrecy instead of being responsive to the safety of their tenants. This is a critical step in helping New York State build a more transparent, safer housing system and we urge Governor Hochul to sign this into law quickly.”

Genevieve Rand, Housing Justice for All Steering Committee member and Housing Lead at Citizen Action of New York, said, “Tenants have long suffered under a broken legal system that allows the real estate industry to defraud and abuse us from behind a shroud of shadow corporate structures. In a democracy, everyday people must be able to hold wealth and power accountable through the courts — the LLC Transparency Act finally makes that possible for tenants across the state by leaving abusive landlords with nowhere to hide.”

Transparency and good government groups offered their support for the legislation because, if enacted, it would help expose corruption facilitated by anonymous LLCs and deter financial crimes.

Tom Speaker, Policy Analyst at Reinvent Albany, said, “We thank the Legislature for passing Assemblymember Gallagher and Senator Hoylman-Sigal's LLC Transparency Act. This bill will bring much-needed sunlight to Limited Liability Corporations, which for too long have been vehicles for money laundering and drug trafficking in New York. We strongly urge the Governor to sign the bill."

“The New York legislature just took a critically important step toward protecting the security and integrity of New York’s financial system. The Governor should sign this bill quickly and move to implement it,” said Gary Kalman, Executive Director of Transparency International US. “Passing A3484A means that, for the first time, New York will eliminate the all-too-common practice of corrupt and criminal actors hiding and laundering money using anonymously owned companies. New York has been home to several high-profile scandals including stories of real estate owned by rogue governments, private equity harboring investments for sanctioned oligarchs and shoddy apartments controlled by unknown, unaccountable landlords.With this law, New York begins a new era of accountability.”

Erica Hanichak, Government Affairs Director at the Financial Accountability and Corporate Transparency Coalition, said, “The United States is the top supplier of financial secrecy in the world and a magnet for the world’s illicit funds. New York, which on its own is the world’s eleventh largest economy, has sadly become a prime destination for this dirty money. Recent crackdowns on illicit Russian finances moving through New York real estate and investments only further demonstrate this unfortunate truth. Passage of the LLC Transparency Act marks one of the first state-level advances to shore up the financial safeguards at the federal level and prevent the abuse of the U.S. financial system. In making public who truly owns corporations formed, operating, or transacting in New York, the LLC Transparency Act gives law enforcement and policymakers long-overdue tools for routing out dirty money and protecting New York real estate markets and tenants. It’s time for Albany to approve these reforms.”

The bill has been endorsed by the Hotel Trades Council, the New York District Council of Carpenters, the New York State Regional Conference of the Bricklayers and Allied Craftworkers, Bricklayers and Allied Craftworkers Local No. 1, and the North Atlantic States Regional Council of Carpenters. Organized labor’s support for beneficial ownership transparency stems from the deceptive practices of abusive employers, who play shell games with LLCs to avoid accountability, for example when confronted with judgments in wage theft cases or to hide prior labor violations.

“We applaud Senator Hoylman-Sigal, Assembly Member Gallagher and all the leaders who took steps to increase transparency and accountability across New York State by passing the ‘LLC Transparency Act.’ This bill ensures that unscrupulous contractors are no longer able to hide behind anonymous LLCs, and that publicly searchable databases are set up for those doing business with the state,” said Joseph Geiger, Executive Secretary-Treasurer of the New York City District Council of Carpenters. “As the bill heads to Governor Hochul’s desk, we urge her to stand for fairness, and to remind unscrupulous contractors that nobody can hide from the law.”

The bill has also been endorsed by the Office of the New York County District Attorney Alvin Bragg. Recent investigations by District Attorney Bragg have highlighted the ways in which anonymous shell companies have been used by the New York mafia and other criminal enterprises to rig contracts intended for minority and women owned businesses and affordable housing construction. The New York State Land Title Association, Community Service Society, New York Public Interest Research Group, Common Cause, League of Women Voters, Housing Rights Initiative, OpenOwnership and OpenCorporates have also supported the bill. 

A coalition of good government, labor, code enforcement and corporate transparency organizations is forming to call on Governor Hochul to sign this landmark legislation immediately.