FACT Coalition to U.S. Government: Time to End Phantom Firms UK Announces Public Registry of Corporate Ownership

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FOR IMMEDIATE RELEASE
October 31, 2013

njacobs@nullthefactcoalition.org
+1 (202) 841-1466
Contact: Nick Jacobs

Today’s commitment from the Prime Minister of the United Kingdom to make a registry of the actual owners of corporations publicly available represents significant progress toward cracking down on anonymous companies polluting the globe. Because the United States is a prime destination for setting up anonymous companies that are used to facilitate crime and move dirty money, members of the FACT (Financial Accountability and Corporate Transparency) Coalition urge the U.S. to follow through on its G8 commitment to collect information about the ultimate owners of companies. The coalition encourages the U.S. to join the UK by pledging to make this information available to the public.

More companies are formed in the U.S. each year than in the rest of the world combined, and many states allow the creation of anonymous companies or “phantom firms.” Typically, less information is provided to incorporate these entities than to obtain a driver’s license. In fact, many U.S. states rank among the easiest jurisdictions in the world to form a company without revealing the identity of who ultimately owns or controls it.

Nicole Tichon, Director of the FACT coalition, stated, “Our government is allowing corrupt officials and tax evaders to hide their ill-gotten gains and to remain in the shadows. We hope that the UK commitment will help build momentum and the political will to shine a light on anonymous shell companies. The U.S. made a commitment to the G8 to work on resolving this issue – but now it’s time to put words into action. I challenge anyone to defend the purpose of secret corporations and what they facilitate.”

Phantom firms are a great way to hide money and other assets. Criminals have disguised their identities behind anonymous American companies to evade taxes, facilitate massive fraud, traffic arms and humans, and launder the proceeds of corruption. A registry of the true owners and controllers of companies would make it much harder for criminals to hide behind American shell companies to perpetrate schemes to defraud investors and other innocent Americans or to steal millions of dollars from Medicare. It would also provide important benefits to small businesses.

Eric LeCompte, Executive Director of Jubilee USA Network, a faith-based antipoverty organization, stated: “We applaud the UK government for setting up a plan to promote corporate transparency. As billions of dollars are lost for social services in developed and developing nations, ending this opaque behavior is a critical step. Building off of momentum from the G8 declaration, we hope the Administration will implement similar plans to address these issues.”

For years, Congress has had the chance to pass bipartisan legislation to put an end to the secrecy of phantom firms. This year legislation has been introduced in the Senate, S.1465, and a companion bill newly introduced in the House, H.R. 3331. While these pieces of legislation do not call for public registries, FACT members see these efforts as a critical first step for the U.S. to finally begin collecting information about people who ultimately own or control companies and making it available to law enforcement. And should corporate transparency legislation become law, FACT seeks to continue to strengthen them and push for their availability to the public.

Read letters of support for corporate transparency and for U.S. legislation from law enforcement, small businesses, investors and civil society here.

“It is simply not fair for these bad actors to hide their identities while other legitimate business owners proudly place their names in the papers establishing their companies, and stand squarely behind who they are and what they do,” said David Levine, CEO for the American Sustainable Business Council.

“Phantom firms have become the favorite tool for big election spenders wanting to hide their identity. In 2012, 17% of business contributions to Super PACs came from phony shell companies set up to flood the election with secret campaign cash,” added Jaimie Woo, U.S. Public Interest Research Group tax and budget associate. “Shell companies have also been used to scam consumers with fake credit cards, and bilk Medicare for millions. The U.S. should follow the UK’s lead so that the public and law enforcement isn’t left in the dark.”

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Founded in 2011, the Financial Accountability and Corporate Transparency (FACT) Coalition unites civil society representatives from small business, labor, government watchdog, faith-based, human rights, anti-corruption, public-interest, and international development organizations. We seek an honest and fair corporate tax code, greater transparency in corporate ownership and operations, and commonsense policies to combat the facilitation of money laundering and other criminal activity by the legitimate financial system.