Time Magazine – Lax US Laws Enable International Crime
February 3rd, 2010
February 3rd, 2010
Time magazine recently published an article on how the US legal system often helps to enable international crime. Its definitely worth a read. Time’s point is very interesting: the race to the bottom among 50 states competing for businesses to call their state home has created a system where corporations can easily serve as masks for nefarious activities. Furthermore, the process is allowing domestic and foreign shell corporations to own other shell corporations creates an impossible situations for law enforcement who hope to crack down on all sorts of illicit financial flaws.
Who knew that Iran owned a prestigious building in the heart of Manhattan? I sure didn’t. It took years of investigation and hard work for law enforcement to figure that out. And that is only one case proper beneficial ownership rules could open the information floodgates for law enforcement to investigate. We might be surprised what other buildings, enterprises, and individuals are involved with people doing very bad things.
Law enforcement has the tools to act decisively once this information is acquired, as they proved in the 650 Fifth Avenue case. But without the ability to access that information, they are paralyzed.
But what about the race to the bottom? Will the United States get left behind as every country strives to become the global version of Delaware? Time has an answer, from Global Financial Integrity’s own Raymond Baker,
But, says Raymond Baker, executive director of Global Financial Integrity, the capital-flight argument is similar to the businesses’ objection to the 1977 Foreign Corrupt Practices Act, which outlawed overseas bribery. U.S. businesses would be at a competitive disadvantage, it was warned. Over time, though, America’s example set a new global standard. Argues Baker: “There would be no net loss to the U.S. economy by eliminating secrecy. On the contrary, the more we can do to make the U.S. economy transparent, the more we can strengthen [it], and the more we will attract money from overseas.”
The US can set the global standard. An opaque economy carries its own weaknesses, and this case demonstrates one of them. Hopefully this issue continues to garner attention from mainstream media sources such as Time magazine, and more people will become aware of the harms of the state’s race to the bottom.