World Bank Publishes Its Grand Corruption Database, Reveals New Data on Shell Corporations
June 11th, 2012
June 11th, 2012
Recognizing the relationship between anonymous shell corporations and stolen assets, the World Bank released a collection of case studies entitled “The Grand Corruption Cases Database Project” last week. Part of a larger anti-corruption report The Puppet Masters: How the Corrupt Use Legal Structures to Hide Stolen Assets and What to Do About It, the global collection has made 150 beneficial ownership case studies available online. Thus, users can compare instances of shell corporations between countries and see the state of individual cases and appeals.
Though the collection, which includes cases from 1980 to 2011, is far from complete, the publication indicates progress toward a goal of financial transparency, a particular concern when transnational legal structures allow large capital outflows from developing countries. According to World Bank Senior Financial Sector Specialist Emile van der Does de Willebois,
“we need to put corporate transparency back on the national and international agenda. It is important for governments to increase the transparency of their legal entities and arrangements and at the same time improve the capacity of law enforcement.”
Indeed, over a thousand groups composed a letter to the European Union this week asking for stricter and more transparent control of shell corporations, and a similar letter was sent on May 16th letter from forty-one American advocacy organizations to the United States Congress. Though the danger of terrorist financing through disguised or anonymous shell corporations may seem distant, some reports indicate a more immediate threat to the United States. For example, the database reveals the true owner of a Fifth Avenue office tower and its associated shell corporation to have been the Iranian government itself:
“In 2008, the US Government filed a civil asset forfeiture complaint, seeking to forfeit the interests allegedly held by the Assa Corporation, Alavi Foundation, the Assa Company Limited, Bank Melli Iran and others in the 650 Fifth Avenue Company and other properties and bank accounts in the U.S. The US Government alleged that in violation of the US’ International Emergency Economic Powers Act and money laundering statutes, the Alavi Foundation acted on behalf of Bank Melli, which is wholly-owned by the Iranian government . . . In 2009, Farshid Jahedi, the former president of the Alavi Foundation, pleaded guilty in the Southern District of New York to two counts of obstruction of justice. The charges arose from his destruction of documents in response to a grand jury subpoena in the investigation into the relationship of the Alavi Foundation (a New York nonprofit) and Bank Melli Iran and the ownership of the office tower at 650 Fifth Avenue in Manhattan.”
The database provides tangible evidence for the transparency recommendations of the Task Force, namely to record the beneficial ownership information of all corporations.
Making instances of beneficial ownership public is only one step toward stopping shell corporations. Requiring identifying tax information from all “corporations” and their owners will determine from the start those that are fake and those that are engaged in laundering.