Financial Transparency Coalition

WASHINGTON, DC – Two recent articles published in The New York Timesexpose how criminals, terrorists, corrupt foreign politicians, and tax evaders abuse anonymous U.S. shell companies to launder their profits and impede law enforcement investigators, highlighting the need—says Global Financial Integrity (GFI)—for Congress to enact legislation requiring disclosure of the true (human) beneficial owners of corporations, trusts and foundations.

An article published over the weekend on the front-page of The New York Times Sunday Business section, titled “How Delaware Thrives as a Corporate Tax Haven” detailed how the oldest state in the union enables some of the most heinous crimes by allowing arms traffickers, corrupt Washington lobbyists, and drug smugglers, among others, to anonymously shield their activities from law enforcement under the guise of a legitimate U.S. corporation.  While Delaware may be the biggest example, it is not alone.  Nevada, Wyoming and most other states allow varying degrees of anonymity while incorporating.

“Almost two million corporations are formed in the U.S. each year, and the vast majority of those corporations are not required to provide any information—neither names nor addresses—about the true human (beneficial) owners of the firms,” explained Tom Cardamone, managing director of GFI.

“Shells are the No. 1 vehicle for laundering illicit money and criminal proceeds,” Assistant U.S. Attorney General Lanny A. Breuer is quoted as saying in the article.  “It’s an enormous criminal justice problem. It’s ridiculously easy for a criminal to set up a shell corporation and use the banking system, and we have to stop it.”

“Anonymous shell companies are a nightmare for law enforcement and a serious U.S. national security risk,” added Cardamone.  “Viktor Bout, the infamous criminal known as ‘The Merchant of Death,’ who provided arms to the Taliban, the FARC, and child soldiers in Sierra Leone, controlled at least a dozen anonymous U.S. shell companies, which were registered in Florida, Texas, and—of course—Delaware.”

An op-ed by Ken Silverstein published this morning in The New York Times further illustrates the point, explaining how corrupt foreign dictators, such as Equatorial Guinea’s Obiang family, have used anonymous U.S. corporations to steal from their people.   Indeed, a recent World Bank report revealed that the United States was the top destination for corrupt foreign officials establishing offshore shell companies to launder their money and gain access to the global financial system.

Titled “Keep the Dictators Out of Malibu,” Silverstein’s column makes the case for the Incorporation Transparency and Law Enforcement Assistance Act—bi-partisan Congressional legislation which would ban anonymous shell companies from the U.S. financial system.

Endorsed by the Justice, Treasury, and Homeland Security Departments, in addition to numerous law enforcement organizations—including the Federal Law Enforcement Officers Association, the Fraternal Order of Police, and the Society of Former Special Agents of the F.B.I.—the legislation would create registries of the true beneficial owners of U.S. companies, easily providing law enforcement and tax authorities with this valuable information.

Supported by the White House, the Justice and Treasury Departments have additionally offered to provide $30 million in forfeiture funds to assist state governments in the costs of implementing the law.

“Adopting the Incorporation Transparency Act and Law Enforcement Assistance Act would send a strong message to the rest of the world—signaling the U.S. will no longer serve as a playground for the dirty money of criminals, kleptocrats, and tax evaders,” noted Cardamone.

To talk to Global Financial Integrity spokespeople about the issue, please contact Clark Gascoigne at +1 202 293 0740 ext 222 or at cgascoigne@gfintegrity.org.

Click here to read further analysis of the topic on the Task Force on Financial Integrity & Economic Development’s blog.

###

Contact:

Clark Gascoigne
cgascoigne@gfintegrity.org
+1 202-293-0740 ext.222

Notes to Editors:

1. Further analysis of this topic on the Task Force on Financial Integrity & Economic Development’s blog: “The New York Times Begins To Connect The Shadow Financial System Dots,” July 3, 2012.
2. Click here to read the Sunday Business section article, “How Delaware Thrives as a Corporate Tax Haven,” in the July 1, 2012 edition of The New York Times.
3. Click here to read Ken Silverstein’s op-ed, “Keep the Dictators Out of Malibu,” in the July 3, 2012 edition of The New York Times.
4. On Thursday, May 24, 2012, GFI Managing Director Tom Cardamone testified before the U.S. Senate Foreign Relations Committee regarding the dangers posed by anonymous U.S. shell companies in the context of transnational organized crime—particularly illicit wildlife traffickers.  Click here for more information on his testimony.
5. Click here to read the World Bank / UNODC report, “Puppet Masters: How the Corrupt Use Legal Structures to Hide Stolen Assets and What to Do About It.”
6. On August 2, 2011, Senators Carl Levin (D-MI) and Charles Grassley (R-IA) introduced the bipartisan Incorporation Transparency and Law Enforcement Assistance Act (S. 1483). Representatives Carolyn B. Maloney (D-NY), Stephen F. Lynch (D-MA) and Barney Frank (D-MA) 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.
7. Global Financial Integrity, Global Witness, and FACT Coalition, “CSOs, Business Groups Call on Congress to Support Incorporation Transparency, Ban US Shell Companies,” May 16, 2012, http://www.gfintegrity.org/content/view/509/70/.
8. The Economist endorses banning anonymous shell companies: “Corporate Anonymity: Light and Wrong,” Jan 21, 2012
9. Reuters series: “Shell Games: Articles in this series explore the extent and impact of corporate secrecy in the United States,” Jun – Dec 2011.
10. FACT Coalition, “Anonymous U.S. ‘Shell’ Corporations: A National Security Code Red,”http://www.gfintegrity.org/storage/gfip/documents/FACT/fact_sheet_beneficial_ownership.pdf.

_______________________________

Global Financial Integrity (GFI) is a Washington, DC-based research and advocacy organization which promotes transparency in the international financial system.

For additional information please visit www.gfintegrity.org.

Follow us on: Twitter | Facebook | YouTube