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Terrorists, drug cartels, human traffickers, corrupt foreign officials, tax evaders, and other criminals easily and regularly set up U.S. shell companies, without providing any information about who owns or controls such companies, to launder their criminal money in the United States or use that money to further their criminal activities. A 2012 academic study revealed that the United States is the second easiest place in the world — after Kenya — for a criminal or terrorist to open an anonymous shell company to launder their money.
Anonymous corporations are great ways to hide money and other assets. An anonymous company can hold a bank account or buy a yacht. Typically, less information is provided to incorporate a company than is required to obtain a driver’s license or open a bank account. In many states, it’s easier than obtaining a library card.
Criminals often layer anonymous corporations, with one owning another and so on, making it harder for law enforcement to “trace the money” and figure out who is directing the company’s activity — i.e. the identity of the real criminal. The World Bank reviewed 150 big cases of corruption between 1980 and 2010 and identified the anonymous companies that were used to hide peoples’ identities. U.S. registered companies topped the list.
Requiring that ownership information of all types of business entities, foundations, and trustees of trusts — information that indicates who actually owns or controls these entities — be made available to law enforcement, financial institutions, and the public.