GFI Welcomes House Bills to Return Rule of Law to US Financial System, Expose Anonymous Shell Firms

October 23rd, 2013

Holding Individuals Accountable and Deterring Money Laundering Act Would Address Anti-Money Laundering Deficiencies and “Too Big To Jail” Problem at American Banks; Bring U.S. in Line with International Standards

Incorporation Transparency and Law Enforcement Assistance Act Would Tackle Anonymous U.S. “Phantom Firms”

WASHINGTON, DC – Global Financial Integrity (GFI) welcomed the introduction late Wednesday night in the U.S. House of Representatives of two pieces of legislation aimed at stemming the flow of trillions of dollars in dirty money through the U.S. financial system.  The Washington, DC-based research and advocacy organization noted that the two bills would bring the United States in line with certain international anti-money laundering (AML) standards, target individuals responsible for laundering money, and bring an end to the abuse of anonymous U.S. shell companies.

“Wall Street banks and anonymous U.S. shell companies are currently leaving the door wide open for dirty money to flow through the U.S. economy,” said GFI President Raymond Baker.  “It’s about time Congress take action to protect us from terrorists, traffickers, and tax cheats by cleaning up our financial system.”

Curtailing Money Laundering

Introduced by Rep. Maxine Waters, the ranking member of the House Financial Services Committee, the Holding Individuals Accountable and Deterring Money Laundering Act would hold top executives at U.S. financial institutions responsible for oversight of anti-money laundering compliance at their bank while increasing the penalties faced by bankers for violating AML laws—bringing them in line with the penalties faced by drug dealers on the streets.

“For too long—and to little effect—U.S. policy and law enforcement have focused on drug busts and placing drug dealers behind bars,” said Heather Lowe, GFI’s legal counsel and director of government affairs.   “The United Nations estimates that worldwide over forty percent of cocaine is seized somewhere between production and consumption. Meanwhile, it also estimates that less than one half of one percent of laundered criminal money is interdicted globally.  Drug trafficking is a profitable business.  If we want to curtail drug trafficking and other serious crimes, then the U.S. must place the emphasis on following the money and cracking down on those whose job it is to make sure crime does pay.”

“Last year, HSBC admitted that it failed to apply legally mandated money laundering controls to more than $200 trillion in wire transfers alone, over just a three year period.  $200 trillion is roughly three times the size of global GDP.  At least $881 million of that $200 trillion was the proceeds of Mexican and Colombian drug cartels.  Nevertheless, neither HSBC nor a single employee of the bank was prosecuted,” continued Ms. Lowe.

“From Wachovia to Standard Chartered to ING, these sorts of cases—where the bank pays a relatively small fine and avoids prosecution for money laundering violations—have happened time and time again.  Without any accountability for the banks and the bankers who knowingly break the law and assist violent criminals, we’re never going to curtail drug trafficking, sex slavery, and other heinous crimes,” added Ms. Lowe.

“By increasing the penalties for anti-money laundering violations, and holding executives responsible for illegal activity they either sanctioned or ignored, the Holding Individuals Accountable and Deterring Money Laundering Act goes a long way toward rebalancing our criminal justice system.”

International Standards

GFI also praised provisions of the Holding Individuals Accountable and Deterring Money Laundering Act  that would make all felonies underlying crimes for money laundering, a provision that would bring the United States in line with the highest standards of the Financial Action Task Force—the international anti-money laundering standard setting body.

“In order for money to be laundered, an underlying crime—known as a predicate offense—such as drug dealing or arms-trafficking, must first be committed to generate the money.  The U.S. currently only lists certain crimes as predicate offenses.  This creates loopholes in our legal system that criminals know how to exploit to launder money in the U.S.  The Holding Individuals Accountable and Deterring Money Laundering Act will remedy this situation by making all felonies predicate offenses for money laundering.”

Phantom Firms Haunting the U.S. Economy

The U.S. Department of Justice has warned that anonymous shell companies are the most widely used method for laundering criminal proceeds, and an anonymous shell company can currently be incorporated in nearly every U.S. state.  The Incorporation Transparency and Law Enforcement Assistance Act, introduced by Rep. Carolyn Maloney (D-NY), proposes to fix this problem by requiring that firms incorporated in the U.S. disclose their true, human, “beneficial owners” in a central registry that is accessible by law enforcement.

“Anonymous shell companies are the most-widely used method for laundering the proceeds of crime, corruption, and tax evasion,” noted GFI’s Heather Lowe. “These phantom firms facilitate sex slavery, terrorism, corruption, and tax evasion.  It’s simply absurd that law enforcement doesn’t have access to this information.  Ending the anonymity behind these shell companies is long overdue.”

The incorporation transparency legislation has widespread support from law enforcement, including the Fraternal Order of Police, the Federal Law Enforcement Officers Association, and the Society of Former Special Agents of the F.B.I.  It likewise garners support from a wide array of civil society organizations, transparency advocates, financial watchdogs, labor unionsinvestors, and small businesses.

The Obama administration has also pledged through its G8 and Open Government Partnership commitments to advocate for legislation to address anonymous U.S. shell companies.

“This legislation is financially supported by the Treasury Department, which is providing $40 million in forfeiture funds to help states update their incorporation systems to allow for this information to be collected,” noted Ms. Lowe.

The measure holds bipartisan support in the U.S. Senate.  The incorporation transparency bill was originally introduced in the Senate in August by Senators Carl Levin (D-MI), Chuck Grassley (R-IA), Dianne Feinstein (D-CA), and Tom Harkin (D-IA).

To schedule an interview with Mr. Baker, Ms. Lowe or other GFI spokespersons, contact Clark Gascoigne at +1 202 293 0740 x222 (Office) / +1 202-815-4029 (Mobile) / On-camera spokespersons are available in Washington, DC.


Notes to Editors:

  • Click here to read an HTML version of this release on our website.
  • In addition to Rep. Maxine Waters, the bill sponsor, the original co-sponsors of the Holding Individuals Accountable and Deterring Money Laundering Act include Rep. Carolyn Maloney (D-NY), Rep. Al Green (D-TX), Rep. Lacy Clay (D-MO), Rep. Michael Capuano (D-MA), Rep. Gregory Meeks (D-NY), Rep. Gwen Moore (D-WI), and Rep. Steven Lynch (D-MA).
  • Click here to read a letter of endorsement sent to the House of Representatives from civil society organizations in favor of theHolding Individuals Accountable and Deterring Money Laundering Act and the Incorporation Transparency and Law Enforcement Assistance Act.
  • Click here to read a letter of endorsement sent to the House of Representatives from concerned investors in favor of the Holding Individuals Accountable and Deterring Money Laundering Act and the Incorporation Transparency and Law Enforcement Assistance Act.
  • Click here to read a letter of endorsement sent to the House of Representatives from concerned small business groups in favor of the Incorporation Transparency and Law Enforcement Assistance Act.
  • Click here to read an op-ed from GFI’s Heather Lowe, titled “Money Laundering and HSBC – How it affects you,” published January 10, 2013 by the Thomson Reuters Foundation.
  • Click here to read the White House’s G8 Action Plan for Transparency of Company Ownership and Control, published June 18, 2013.
  • Click here to read the White House’s National Action Plan under the Open Government Partnership endorsing the need to require the disclosure of meaningful beneficial ownership information, published September 2011.
  • Click here to read an op-ed, titled “It’s time to pry criminals out of their shell (companies),” by Dennis Lormel, the former Chief of the FBI’s terrorist financing office, published in August in The Plain Dealer.
  • Click here to read a 2011 Reuters investigation, which found that anonymous shell companies defrauded Medicare of billions of dollars between 2007 and 2011.


Clark Gascoigne
+1 202-293-0740 ext.222 (Office)
+1 202-815-4029 (Mobile)

Written by Global Financial Integrity

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