A national security crisis is unfolding before our eyes and we can’t even see it. A failure by the federal government to enforce the law is allowing hidden Chinese companies to use opacity loopholes and vacuum up American companies, technology, and secrets.
An anonymous Bermuda shell company bought an insurance provider for the CIA and FBI, giving the new owners access to the identities of contractors and employees, including those undercover. An anonymous Delaware-registered private equity firm signed a contract to buy a highly specialized U.S. chipmaker. An anonymous Missouri shell company bought a trailer park property next to the Air Force base that housed America’s B-2 stealth bombers.
Recommended Stories
Who was behind these companies? Turns out, they were Chinese-owned, and they all almost made off with U.S. assets that compromised American security. In each case, the discovery of foreign ownership was accidental. Because of a loophole in the enforcement of U.S. law, there is no way of knowing how many similar transactions we are missing, allowing hidden foreign entities to acquire critical American technology or sensitive companies. We are leaving our national security to chance.
HEGSETH SAYS IRAN IS ‘DIGGING OUT’ BOMBED FACILITIES AND WARNS OF CONTINUED US MILITARY PRESENCE
The United States has safeguards to protect against the foreign acquisition of sensitive American companies and assets. In 1975, Gerald Ford established the Committee on Foreign Investment in the U.S. to prevent foreign adversaries from buying critical national security assets.
Unfortunately, CFIUS review has a fatal weak spot: the committee needs to know whether the acquiring company is foreign.
Shockingly, the government has made that simple fact hopelessly difficult to figure out. Because the U.S. allows the rampant use of shell companies — any foreign person or entity can easily set up an anonymous Delaware, Nevada, or South Dakota company — it is child’s play for hostile foreign actors to hide their identity.
And that is exactly what is happening. The Chinese Communist Party has told its citizens and entities to disguise Chinese ownership wherever possible, giving rise to the proliferation of Chinese-owned anonymous front companies worldwide. We know that Iran’s Islamic Revolutionary Guard Corps regularly uses anonymous shell companies, as do Mexican drug cartels, Russian cybercriminals, and international terrorist groups.
The Trump administration has promised to “reduce the exploitation of public and private sector capital, technology, and technical knowledge by foreign adversaries,” directly calling out China. And FBI Director Kash Patel has noted that the CCP conducts “the greatest level of espionage against the United States of America,” highlighting the “troubling” nature of Chinese land purchases near military bases. And yet the federal government is not even asking whether an anonymous shell company buying up sensitive real estate or U.S. technology assets is hiding a foreign owner.
In Florida, which is home to numerous military installations, defense contractors, combatant commands, and “the world’s busiest spaceport,” foreign intelligence entities appear to be everywhere, snapping up information, assets, and information. According to one FBI counterintelligence agent quoted recently in Vanity Fair: “The Chinese and the Russians are all over Florida. They’re trying to steal whatever they can get their hands on.”
The U.S. could stop the anonymous company loophole today — and it should. Current law, under the Corporate Transparency Act, already outlaws all U.S anonymous shell companies. But U.S. lawmakers decided not to enforce it and some members of Congress are even trying to repeal it, despite protests from law enforcement officials. If anything, the current law does not go far enough, failing to address foreign anonymous companies operating in the U.S., such as the Chinese company disguised as a Bermuda entity to purchase the CIA-connected insurance entity.
Unless we crack down on anonymous companies, CFIUS will remain hopelessly outgunned by the criminals. More than 2 million corporations, trusts, and companies are formed in the U.S. every year. Any one of them could be an adversarial actor camouflaged as an American entity.
The Trump administration recently proposed a “Known Investor Program,” which would collect ownership information for low-risk foreign investors into the U.S., so why not demand that information for high-risk investors, too? It is as if the Transportation Security Administration demanded identification from law-abiding Pre-Check passengers at the airport, while letting terrorists on the plane without showing ID at all.
GOLDEN DOME WILL BE OPERATIONAL BY SUMMER 2028
Requiring companies to “show their ID” isn’t hard. Companies that operate within the country should have to disclose their owners, full stop. It is time to expose the hidden foreign actors from the shadows.
Protecting U.S. national security is impossible when the government refuses to find out who owns the companies buying up critical U.S. assets. To unmask the malign foreign entities behind anonymous companies, the government needs to open its eyes.
Josh Birenbaum is the deputy director of the Center on Economic and Financial Power at the Foundation for Defense of Democracies.
