Financial Transparency Coalition

Today, the Southern District of New York sentenced Viktor Bout, also known as the Merchant of Death, to 25 years in prison, finally putting an end to his notorious career as a weapons trafficker. In November of last year, a jury convicted Bout on terrorism charges, including conspiring to kill Americans and conspiring to provide material support to terrorists.

While this case was narrowly focused on Bout’s conspiracy to sell weapons to the FARC in Colombia, it is effectively an indictment on his career as a gunrunner, fuelling conflict around the world and using shell companies to hide his activities as he did so. The U.S. Department of the Treasury has described Bout’s network as “one of the largest illicit arms-trafficking networks in the world.” [1]

“Bout was able to hide his identity behind anonymous companies created in the U.S. and abroad to further his efforts to traffic weapons to conflict zones,” said Stefanie Ostfeld, Global Witness Policy Advisor. “He exploited the same loophole used by terrorists, corrupt dictators, drug traffickers and tax evaders to legally hide their identities to access the U.S. financial system.”

Bout used a global network of shell companies to advance his illicit activities. To date, twelve American shell companies, incorporated in Texas, Florida and Delaware, have been identified as linked to him. [2]

Investigations continue to expose how easy it is for individuals to mask their identity behind U.S. shell companies so they can stash their ill-gotten gains in American banks or commit other crimes. Global Witness’ research has revealed that corrupt foreign politicians and pariah regimes such as Iran exploit the secrecy provided by anonymous American shell companies to access the U.S. financial system. A recent World Bank report found that the U.S. was the favorite destination of corrupt politicians trying to set up such shell companies.

Corporate secrecy fundamentally undermines U.S. laws to combat money laundering and tax evasion, as well as U.S. efforts to tackle global corruption. Congress has introduced a bill that would shed light on this problem by requiring companies to disclose their ultimate owners.

“Congress must pass the Incorporation Transparency and Law Enforcement Assistance Act, which would make it much harder for arms traffickers like Bout, and other criminals, to hide their identities and illicit activities behind U.S. shell companies. Once corrupt and other dirty money has been moved through an anonymous corporate vehicle into the financial system, it is much harder to track it down,” said Ostfeld.

/Ends

Contacts:

Washington, DC: Stefanie Ostfeld, +1 202 577 5858

Washington, DC:  Robert Palmer, +44 7545 645 406

Notes to editors

1.     On August 2, 2011, Senators Levin and Grassley introduced the bipartisan Incorporation Transparency and Law Enforcement Assistance Act (S. 1483). Representatives Maloney, Lynch and Frank introduced a companion bill (H.R. 3416) on November 14, 2011. These bills would require companies to disclose information about the real people who own or control them (often called the “beneficial owners”) at the time they are created. Multiple law enforcement organizations including the Fraternal Order of Police and Federal Law Enforcement Officers Association have endorsed the bill. The Obama Administration, through the U.S. Open Government Partnership Action Plan and its Strategy to Combat Transnational Organized Crime, also supports legislation to stop states from allowing secretive shell companies to be set up.