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Ownership Transparency

The U.S. is the easiest place in the world for a criminal, terrorist, tax cheat, or kleptocrat to open an anonymous shell company to launder their money with impunity. Anonymous corporations are great ways to hide money and other assets — they can hold a bank account or buy a yacht. Criminals often layer anonymous corporations, with one owning another and so on, making it even harder for law enforcement to “trace the money” and figure out who is directing the company’s activity. It’s time to ending the use of anonymous shell companies as vehicles for illicit activity by requiring that the true owners of U.S. companies be disclosed at the time of formation and updated upon any change.

Will They Listen to What They Hear?

This Wednesday, March 13th, the House Financial Services Committee’s subcommittee that covers national security issues will hold a hearing on corporate transparency and efforts to fight money laundering.  They will once again discuss a proposal to collect the ownership information (a.k.a. beneficial ownership) of companies when they are formed in the United States.  Currently, no state collects this information, and the anonymity has opened the door to a vast array of bad actors that endanger our communities and threaten our national security.  More on that later.

The Committee is to be applauded for raising these important issues.  Let’s only hope that, this time, they listen to what they hear.

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Putin and other authoritarians’ corruption is a weapon — and a weakness

Thirty years after the end of the Cold War, the world is once again polarized between two competing visions for how to organize society. On one side are countries such as the United States, which are founded on respect for the inviolable rights of the individual and governed by rule of law. On the other side are countries where state power is concentrated in the hands of a single person or clique, accountable only to itself and oiled by corruption.
Alarmingly, while Washington has grown ambivalent in recent years about the extent to which America should encourage the spread of democracy and human rights abroad, authoritarian regimes have become increasingly aggressive and creative in attempting to export their own values against the United States and its allies. Russian President Vladimir Putin and other authoritarian rulers have worked assiduously to weaponize corruption as an instrument of foreign policy, using money in opaque and illicit ways to gain influence over other countries, subvert the rule of law and otherwise remake foreign governments in their own kleptocratic image.
In this respect, the fight against corruption is more than a legal and moral issue; it has become a strategic one — and a battleground in a great power competition.
Yet corruption is not only one of the most potent weapons wielded by America’s authoritarian rivals, it is also, in many cases, what sustains these regimes in power and is their Achilles’ heel.

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FACT Sheet: Business Case for Ending Anonymous Companies (February 2019)

Anonymous companies are behind just about every financial crime.  They are the vehicle of choice for laundering money obtained through illicit activity.  Schemes involving terror financing and the trafficking of drugs, illegal weapons, and humans all use anonymous companies to move money, fund operations, and allow bad actors to escape with the proceeds of their crimes and impunity.

The pervasive use of secret shell and front companies also impacts the broader economy.  As such, more and more businesses are speaking out.

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