New rules for Delaware limited liability companies are coming after a series of embarrassing headlines for the First State.
President Donald Trump’s former campaign manager Paul Manafort was charged with using 9 Delaware LLCs to launder money. And Mexican drug lord El Chapo allegedly used one to launder drug money.
But new rules starting Jan. 1st require registered agents to verify their clients’ identities and make sure they’re not on the U.S.’s sanctions list. Agents must compare their clients against that list at least once each quarter.
Kris Knight, Chief Deputy for the Delaware Department of State, said most bigger agents already check the sanctions list because it’s a federal regulation. But now it’s also state law.
“Smaller agents; maybe they just didn’t know what the federal requirements were," he said. "Maybe they didn’t know do everything that we’re requiring of them. So this is really geared toward making sure the 20 percent is doing everything the 80 percent is doing.”
Delaware Coalition for Open Government’s Nick Wasileski said it’s a good start, but is still seeking a review of the state LLC law.
“And that investigation is to try to understand why bad actors are attracted to Delaware and what changes in the language of the LLC Act may need to occur,” he said.
That Delaware makes it easy to set up an LLC and doesn’t require its true owner to be publicly disclosed may factor into the attractiveness of registering here.
The new rules don’t change the disclosure requirements and may not stop bad behavior from people not on the sanctions list.
Knight said DOS will conduct random audits to make sure registered agents are complying with the new rules. He adds agents who don’t follow the rules won’t be able to do business in the First State.