On Wednesday, two House Financial Services Committee subcommittees will hold a joint hearing about two bills, one of which is the Counter Terrorism and Illicit Finance Act.

Section 9 of this bill, titled “Transparent Incorporation Practices,” is directed squarely at the smallest businesses in America. It imposes a new beneficial ownership reporting requirement, meaning that every business in America would either have to file these reports with the Financial Crimes Enforcement Network or file a report indicating which exemption applies.

Any ownership changes would have to be reported within 60 days, and failure to comply could result in fines up to $10,000 and prison up to three years.

The bill exempts several groups from this reporting requirement: publically traded companies, banks, credit unions, broker-dealers, insurance companies, accounting firms, utilities, governments, and tax-exempt organizations. Businesses with more than 20 employees would also be exempt. Only businesses with 20 or fewer employees would be subject to the reporting rules.

These reports must include their current residential or business street address, and a unique identifying number of the firms’ shareholders or limited liability company members. The unique identifying number must come from a nonexpired passport issued by the U.S. government or a nonexpired driver’s license issued by a state. There are bureaucratic verification requirements imposed on the business.

Partnerships (including limited partnerships), limited liability partnerships, business trusts, and associations would be exempt because the reporting requirements only apply to corporations and limited liability companies. So any true money launderer would simply use those legal forms to lawfully avoid this requirement.

In the final analysis, all this bill would do is impose a massive paperwork burden on America’s smallest companies. It will do absolutely nothing to hinder terrorism or money laundering.