Financial Transparency Coalition

Civil Society Experts Call on Delaware to Create Public Registry of Beneficial Ownership Information

WASHINGTON, DC – Global Financial Integrity (GFI) and Global Witness expressed disappointment that the Delaware House of Representatives passed two bills this evening that do little to stop criminals from using Delaware companies to launder their illicit proceeds.

The two pieces of legislation are House Bill 327 and House Bill 328, which would establish a chain of people that need to be consulted, in turn, in order to identify a person at a limited liability company or limited partnership who has a list of the entity’s legal owners. Legal owners may be other companies with hidden ownership or nominees, which are essentially front people for the real owner. The bills will now proceed to the State Senate for consideration.

“These bills are little more than window-dressing,” stated Stefanie Ostfeld, Senior Policy Advisor at Global Witness. “Anonymous companies lie at the heart of many of the world’s worst problems, and this legislation will do nothing to pull back the curtain on who owns and controls Delaware companies.”

“Anonymous shell companies are the number one tool for laundering the proceeds of crime, corruption, and tax evasion.” said Heather Lowe, GFI’s legal counsel and director of government affairs. “Delaware is one of the easiest places in the world for terrorists and other criminals to establish an anonymous company. As one of the largest incorporators in the U.S., it’s high time that Delaware take steps to remedy this serious problem.”

Towards Serious Solutions

Both GFI and Global Witness urge state legislators to create a public registry of beneficial ownership information for each company formed in Delaware, as a pragmatic approach to curbing financial crime and the tremendous flow of illegal money worldwide.

“Drug dealers, corrupt American politicians and illegal arms smugglers have all used anonymous Delaware companies in order to profit from their crimes and the only way we are going to get the drugs and guns off the streets and corruption out of politics is to fix the problem of anonymous companies in America,” added Ms. Lowe. “Public registries of beneficial ownership information are the best approach to ending the use of anonymous companies.”

Short of creating a public registry of beneficial ownership information, Global Witness and GFI urge Delaware State Legislators to introduce legislation that would:

1. Require all legal entities formed in the state—including LLCs, partnerships, corporations, trusts, and foundations—to file meaningful beneficial ownership information with an official state registry upon formation and update that information whenever there are changes in ownership, and
2. Grant federal, state, and local law enforcement officers unfettered access to the beneficial ownership registry.

Momentum is building globally to take action to curtail the abuse of anonymous companies. The United Kingdom is moving forward with the world’s first public registry of beneficial ownership information, the European Parliament voted overwhelmingly in favor of creating public registries in March, and this issue is on the table at the G20 and G7.

“Legislators in Delaware should seize the opportunity and demonstrate that they too are serious about curtailing the corporate secrecy used by drug dealers, human traffickers, terrorists, and kleptocrats to launder their ill-gotten-gains with impunity,” noted Ms. Ostfeld.

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Notes to Editors:

• Click here to read an HTML version of this press release on our website.
• Click here for more information on Delaware House Bill 327 (Limited Liability Companies).
• Click here for more information on Delaware House Bill 328 (Limited Partnerships).

Journalist Contacts:

Clark Gascoigne
Global Financial Integrity
cgascoigne@gfintegrity.org
+1 202 293 0740 x222 (Office)
+1 202 815 4029 (Mobile)

Stefanie Ostfeld
Global Witness
sostfeld@globalwitness.org
+1 202 621 6674 (Office)
+1 202 577 5858 (Mobile)