By: Amber Przybysz, Jubilee USA Network

You might have heard of shell companies located in exotic locations like the Cayman Islands, but one of the largest playgrounds for such untraceable companies is actually the United States.  In fact, Delaware is a well known place for giant companies such as American Airlines, Apple, Bank of America, Berkshire Hathaway, Cargill, Coca-Cola, Ford, General Electric, Google, JPMorgan Chase and Wal-Mart to find lax regulations and minimize taxes. And creating these shell companies in the U.S. takes little time and effort – it is actually easier to set up an anonymous shell corporation than it is to obtain a driver’s license.

A recent study that scrutinizes the level of compliance worldwide with international standards governing shell companies – as set by the inter-governmental Financial Action Task Force – shows that typical tax havens like the Cayman Islands and Jersey are actually more likely to comply with the standards than rich countries are. The authors of the study asked 3,700 incorporation agents in 182 countries to form companies for them; of the 1,722 incorporation agents asked in the U.S., only ten required notarized documents in line with the international standard. In fact, when the authors tested the waters by posing as a potential terrorist-financing risk, one of the American providers actually said, “Your stated purpose could well be a front for funding terrorism,” but indicated that it would still be possible to form a company if the authors paid $5,000 a month.

Since there is typically no requirement to disclose who owns or controls the shell corporation, it has opened a windowwhich “enables terrorist cells, drug traffickers and corrupt government leaders to launder money through the U.S. to finance illicit activities.” One example is Viktor Bout, a Russian arms smuggler who was recently sentenced to 25 years in U.S. prison for “using a dozen American shell companies to siphon money he received from arms trafficking that killed U.S. nationals.”

There has been movement in Congress, though, to shine light on these anonymous corporations. Congress is currently considering the bipartisan Incorporation Transparency and Law Enforcement Assistance Act (H.R. 3416, S. 1483), which would require companies to disclose information about the real people who own or control these anonymous companies at the time they are created. Without the ability to hide their names, corporate criminals and kelptocrats will not be able to use anonymous corporations and shell companies to assist in illicitly moving money around the globe. By naming a real person as the owner – rather than another company – law enforcement will be able to easily track money trials when pursuing tax evaders, consumer scammers or terrorists, rather than hitting the dead ends they usually currently face. Requiring disclosure of beneficial owners would be a win for transparency and accountability in both the U.S. and the international financial system.

Jubilee USA Network, as a member of the Financial Accountability and Corporate Transparency (FACT) Coalition, has worked hard to close down the American trade in anonymous corporations, which negatively impacts human rights, small businesses, jobs and national security.

“Jubilee USA is thrilled to see the Incorporation Transparency and Law Enforcement Assistance Act moving forward in the House and applauds Representatives Maloney, Frank and Lynch for introduction,” said Eric LeCompte, Executive Director of Jubilee USA Network.  “This Act takes important steps in halting the flow of illicit streams of revenue out of developing nations and away from those who need it the most – the world’s poorest. Morality must be brought back into the global financial system, and the Incorporation Transparency and Law Enforcement Act is one important measure in that goal.

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