News & Events

Just the FACTs: February 23, 2018

Welcome to our “Just the FACTs” newsletter, which aims to highlight pertinent news stories and information related to our goals of curtailing offshore tax haven abuses, increasing the transparency of company ownership, and curbing the laundering of illicit money through the financial system.

Send feedback or items for future newsletters to Jacob Wills at

State of Play

Movements to end anonymous shell companies exploded in 2017, already this year the momentum has ballooned.  With several committees in the House and Senate taking up the issue and a broad-based, bipartisan coalition calling for action, the previously elusive transparency measure is no longer a long-shot.

Two recently released reports exemplify why the momentum needs to continue.  The 2018 Financial Secrecy Index provides insight into secrecy jurisdictions globally and the Polaris Project’s report, Human Trafficking in Illicit Massage Businesses, reveals (among other things) how the abhorrent industry of sex trafficking is shielded behind anonymously registered businesses.

At the U.S. launch of the 2018 Financial Secrecy Index, TJN’s Andres Knobel explained why the U.S. rose for the 3rd straight index to become the second largest secrecy jurisdiction —  just behind Switzerland.  Reasons for the climb include the anonymous companies conveniently provided in all 50 states.  Switzerland has said that they have plans to tackle bank secrecy.  Meaning that, without action, we could see the U.S. become the illicit financial capital of the world.

Yet, action could be on the horizon.  The U.S. may soon close one of the major loopholes that allowed them to leapfrog well-known tax havens like the Cayman Islands.  2018, as FACT’s Jacob Wills argues, could finally be the year that anonymous companies end. With the support of small and large business associations, law enforcement, investors, and at least 44 NGO’s as well as several committees in the House and Senate taking up the issue, a solution could finally be near.

Earlier this month, FACT’s executive director, Gary Kalman testified in front of the Senate Judiciary Committee on the TITLE Act, which would require states to collect beneficial ownership information at the point of corporate formation.  In his testimony, he outlined the massive scale of anonymous companies around the world and the damage they cause. Kalman asked the committee to consider the bill as a way to streamline law enforcement’s effectiveness against criminal activity whose perpetrators are currently shielded by anonymous companies.

Just before the Hearing commenced, the National Association of Realtors sent a letter to Congress indicating their support for legislation requiring the disclosure of beneficial ownership information at the time of incorporation.  The Realtors join a growing number of other business groups, including the Financial Services Roundtable, the American Bankers Association, both major credit union associations, small business organizations, and the CEOs of several multinational corporations in calling on Congress to end the abuse of anonymous companies.

At a separate hearing in the Senate Banking Committee last month, Global Financial Integrity’s Heather Lowe, expressed the importance of beneficial ownership disclosure in tackling money laundering.  She was joined by a panel of witnesses including Dennis Lormel, the former Chief of the FBI Financial Crimes Program, and Greg Baer, the President of The Clearing House Association.  Both agreed that collecting this information would make AML more effective.

The motivation for most criminal behavior is money.  So being able to effectively target the money and prevent it from being filtered through our financial system is key to stopping some of the most egregious crimes. The Polaris Project noted this in a recent report detailing the use of illicit massage parlors as profit centers for human trafficking. Often registered anonymously,  illicit massage parlors can make it harder to track down those actually responsible. Yet another example of how loopholes in corporate formation laws are being utilized by dangerous criminals to launder proceeds with impunity.

From the FACT Coalition and Its Partners

Incorporation Transparency

Aircraft registration system said to pose security risks

The Boston Globe, January 15, 2018

By Jaimi Dowdell

Members of a pro-transparency coalition applauded Lynch’s bill, noting that all the secrecy surrounding plane ownership opens the door to criminal activity, including money laundering and human trafficking.

“Narrowly, the FAA not collecting ownership information poses a national security risk, but it goes to the bigger question of not knowing who forms” corporations generally, said Clark Gascoigne, deputy director of the Financial Accountability & Corporate Transparency Coalition.

Read the full article

Banks Seek Government Help to Track Money Laundering

The Wall Street Journal, January 9, 2018

By Lalita Clozel

“[We are] concerned that state and local law enforcement don’t currently have access to information in the bill,” Mr. Gascoigne said.

“There’s also a growing concern around the use of those shell companies for human-trafficking networks,” he said. “It’s like playing whack-a-mole and they can’t actually follow the money trail.”

Meanwhile, some members of law enforcement balk at a measure that would increase the threshold at which banks must report transactions with FinCEN to $30,000 from $10,000.

Read the full article

How J.D. Power Was Acquired by a Chinese Company Shrouded in Mystery

The Wall Street Journal, January 31, 2018

By Simon Clark

Because of the risk that acquisitive companies with unclear ownership could be conduits for money laundering and tax evasion, the U.K. in 2016 published an open register of companies’ beneficial ownership. European Union countries agreed in December to create public registries listing such information. Three bills in the U.S. Congress would require companies to disclose their beneficial owners.

Nine of 10 senior executives said it was important to know the ultimate owner of companies they do business with, in a 2016 survey of 2,800 executives in 62 countries by EY (formerly Ernst & Young).

“If legitimate companies like J.D. Power are being bought up or interacting with anonymous companies, it opens the door to increased liabilities about which we have no idea,” said Gary Kalman, executive director of the Financial Accountability & Corporate Transparency Coalition, a Washington-based nonprofit that campaigns against corruption.

Read the full article

Testimony to Senate Judiciary Committee on TITLE Act S. 1454

FACT Coalition, February 6, 2018

The Financial Accountability and Corporate Transparency Coalition (FACT Coalition) testified in front of the Senate Judiciary Committee at a hearing on True Incorporation Transparency for Law Enforcement Act or TITLE Act, S. 1454 which would end the abuse of anonymous shell companies by simply requiring companies to list the beneficial owner at the time of corporate formation.

Read the full testimony
Watch the full testimony

2018: The Year Anonymous Companies End

FACT Coalition, January 26, 2018

By Jacob Wills

2018 is shaping up to be the year that the abuse of Anonymous shell companies is finally put to an end in the United States.  Last week, the Senate Banking Committee held their second hearing of the month, and, just like the first hearing, the witnesses urged members to take action on anonymous companies.  One of the witnesses, Acting Deputy Assistant Attorney General M. Kendall Day, repeatedly called on lawmakers to tackle beneficial ownership requirements, adding that it would allow them to “bring more cases, more quickly, with more impact if we had a better system in place to make that information available to law enforcement.” Pressed by Sen. John Kennedy (R-LA) the second witness, Treasury Under Secretary for Terrorism and Financial Crimes Sigal Mandelker, responded that they were studying the issue carefully and hoped to have recommendations within 6-months.

Both hearings focused on the Bank Secrecy Act, the 1970 law that established much of the nation’s anti-money laundering (AML) framework, and ways to make the U.S. AML regime more efficient and effective. Though witnesses shared differing views on many of the topics discussed, on anonymous companies there was unanimous support for action.  Many of the issues raised (such as cryptocurrencies, for example) will take months of debate to find the best solution, but beneficial ownership was certainly not one of them.  In the first hearing earlier this month, when each of the three witnesses were asked if they supported beneficial ownership disclosure, they responded in succession: “yes”, “yes”, “yes”.

Read the full blog

Human Trafficking in Illicit Massage Businesses

Polaris Project, January 2018

In the case of IMB ownership, shell companies allow traffickers to skirt regulation. For example, if a city regulates massage businesses, the trafficker will register a similar, unregulated business type such as bodywork, reiki, or a modeling studio. In Houston, many illicit massage businesses were registered as modeling studios until the city re-wrote its local ordinance to close this loophole. In particularly egregious cases of illegal behavior, traffickers register under unrelated industries such as religious organizations or educational institutions, making them eligible for tax breaks. In addition to relying on the anonymity of shell companies, traffickers often use registered agents (third party representatives who manage correspondence and official corporate business on behalf of true owners) to register the corporations, obscuring the actual network operatives.

The abundant use by traffickers of shell companies and registered agents makes it difficult for law enforcement to identify the true perpetrators. An article in the Houston Chronicle exposed a number of illicit massage parlors in Houston and how they serve as a front for sophisticated, multinational human trafficking rings. Assistant County Attorney Celena Vinson has led 24 civil lawsuits to try to shut down and evict these massage businesses.

Read full report
Executive Summary
HuffPost article
Read Newsweek article
Read NJ article
Read NBC 10 article
The Inquirer article
Daily Mail article
PRI article

Could Money Laundering Reforms Help End Human Trafficking?

Fair Share via Knoxville News Sentinel (TN), January 29, 2018

By Nathan Proctor

As Tennessee Sen. Bob Corker considers how to use his remaining time in office to address human trafficking, there is a simple, bipartisan step he can take.

Go after the money.

Read the full op-ed

Op-ed: Faith leaders against anonymous shell companies

Deseret News, January 4, 2018

By Anita Miner and David Nichols

We write today to express our strong support for the Corporate Transparency Act (CTA), S. 1717/H.R. 3089, which requires American companies to disclose basic information about the real people who own or control them in a private database only available to law enforcement with a warrant and banks with customer consent. The law is narrowly tailored to target shell companies used by criminals to launder money and commit crime. We ask our elected officials to co-sponsor this important legislation and work for its passage.

As faith leaders, we assess any legislation by its impact on the most vulnerable. Anonymous shell companies facilitate crimes that violate our most sacred obligations to each other, targeting the elderly, children, the sick, ordinary taxpayers and some of the world’s most vulnerable people. It is our duty as people of faith to call on our representatives and work for change to a system that allows the guilty to hide while they oppress the widow and the orphan.

Read the full op-ed


New Report: U.S. the 2nd Biggest Tax Haven in the World

FACT Coalition, January 30, 2018

The United States has become the second largest tax haven in the world, according to a new report published Tuesday by the Tax Justice Network.  Updated for the first time since November 2015, TJN’s 2018 Financial Secrecy Index (FSI) finds that the U.S. has surpassed the Cayman Islands as the second largest secrecy jurisdiction and now trails only Switzerland.  

Read the full press release
Tax Justice Network’s page on Financial Secrecy Index
ITEP blog
The Wall Street Journal blog

Apple Gambled on Congressional Spinelessness on Tax Policy— and Won

ITEP, January 18, 2018

By Matthew Gardner

In the wake of the biggest corporate tax cut in a generation, there has been no shortage of public relations spin from the Fortune 500 corporations that stand to reap the biggest benefits from the new tax law.

From aerospace giant Boeing to retail behemoth Walmart, companies have made prominent pledges to give employees one-time bonuses or even wage boosts, and have attributed them to the tax cuts’ liberating effects. They continue to make these claims even as more sober analyses have indicated these companies are likely to use the lion’s share of these cuts to reward wealthy shareholders.

Read the full blog

The Walmart Smiley Face Is Lying: Corporate Tax Cuts Are Not Causing Pay Raises and Bonuses

ITEP, January 12, 2018

By Steve Wamhoff

Last night, Yahoo reported that 81 corporations had announced pay raises and bonuses that they claim result from the Trump-GOP tax law’s reduction in the official corporate tax rate from 35 percent to 21 percent.

Of these 81 corporations, 13 were included in ITEP’s most recent corporate tax study, which focuses on the Fortune 500 companies that were profitable every year from 2008 through 2015. These 13 companies had a combined effective tax rate of just 19.1 percent, which undermines the idea that the federal corporate tax rate was holding back their ability to pay workers.

Read the full blog

Issues in the News

Incorporation Transparency

Why Does the American Bar Association Oppose Beneficial Ownership Transparency Reform?

The Global Anticorruption Blog, February 6, 2018

By Matthew Stephenson

Right around the same time that this post appears on the blog, the U.S. Senate Judiciary Committee will be holding a hearing on “Beneficial Ownership: Fighting Illicit International Financial Networks Through Transparency.” The main focus of the hearing will be on a pending bill, the True Incorporation for Transparency for Law Enforcement Act (TITLE Act). That bill’s major provisions do two main things:

First, subject to certain limited exceptions, the Act would require that every applicant wishing to form a corporation or limited liability company (LLC) in a U.S. State must provide that State with information on the true or “beneficial” owners of the company—that is, the live human beings who actually exercise control over, and/or receive substantial economic benefits from, these entities—and to keep this information updated. This information could then be requested by a law enforcement or other government agency, or by a financial institution conducting due diligence on a customer. Those applicants who don’t have a U.S. passport or driver’s license who want to form a corporation or LLC would have to apply through a U.S.-based “formation agent”; this agent would be responsible for verifying, maintaining, and updating information on the identity of the legal entity’s beneficial owners.

Read the full blog

The Flawed and Flimsy Basis for the American Bar Association’s Opposition to Anonymous Company Reform

The Global Anticorruption Blog, February 13, 2018

By Matthew Stephenson

In last week’s post, I raised the question of why the American Bar Association (ABA), which represents the U.S. legal profession, so strenuously opposes even relatively modest measures to crack down on the use of anonymous companies for money laundering and other illicit purposes. In particular, the ABA has staked out a strong, uncompromising opposition to the bills on this topic currently under consideration in the U.S. House (the Counter Terrorism and Illicit Finance Act) and in the Senate (the TITLE Act). As I noted in my last post, the substance of the ABA’s objections (summarized in its letters here and here) appear, at least on their surface, unpersuasive as a matter of logic, unsupported by evidence, or both. This, coupled with the fact that many ABA members strongly disagree with the ABA’s official position on this issue, made me wonder how the ABA’s President and Government Affairs Office had come to take the position that they had.

Read the full blog

Firms on Caribbean island chain own 23,000 UK properties

BBC, February 13, 2018

By Andy Verity and Nassos Stylianou

A quarter of property in England and Wales owned by overseas firms is held by entities registered in the British Virgin Islands, BBC analysis has found.

The Caribbean archipelago is the official home of companies that own 23,000 properties – more than any other country.

Read the full article

How to Tackle the Shell Companies That Fund Corruption and Terrorism

Newsweek, February 12, 2018

By Jodi Vittori

Anonymous shell companies are entities that usually employ few or no workers, do not conduct any substantive business, and allow their owners to store or route money while hiding their identities.

Because of the secrecy they can provide, anonymous companies represent an important nexus of corruption, money laundering, transnational organized crime, and terrorism, which directly harm U.S. interests.

As one of the main facilitators of anonymous companies, the United States should pass legislation to disclose ownership information for all companies, increase federal contract transparency, and boost other business and government transparency mechanisms at home and abroad.

Read the full article

US warns Hong Kong to take action against shell companies

Financial Times, January 24, 2018

By Don Weinland

Sigal Mandelker, under secretary of the US Treasury for terrorism and financial intelligence, warned on Wednesday that Hong Kong’s rules should be tightened to minimise the number of front companies in the Chinese territory.

Following a day of meetings with Hong Kong officials, Mr Mandelker said: “Hong Kong, of course, is an international financial hub and at the same time it has company formation and registration rules that we think need to be stronger.”

Read the full article


Very few US adults report receiving bonuses or raises from the Republican tax law

CNBC, January 29, 2018

By Reuters

About 58 percent of U.S. adults surveyed said that large U.S. corporations or wealthy Americans stand to benefit most from the tax legislation. Just 13 percent said the middle class will benefit the most, the poll showed.

Trump and House Speaker Paul Ryan pledged the tax bill’s benefits would become evident in February. At that time, they said, employees paychecks would grow after IRS tax withholding tables were updated for new tax rates.

But views of the law’s impact were decidedly mixed: 24 percent of respondents in the poll said they expected to pay less tax under the new law; 27 percent said they expected to pay more; 23 percent said they expected no change.

Read the full article

Employee bonuses are a tax reform ‘gimmick,’ ex-Treasury chief Summers says

CNBC, January 26, 2018

By Jeff Cox

“I think it’s a gimmick,” Summers told CNBC’s “Squawk Alley.” “I think in many cases the firms have to raise wages because labor markets are tight, and so why not curry some favor with the White House by linking it to the tax cuts.”

Read the full article

Corporate America’s tax cut celebrations, explained

VOX, January 25, 2018

By Matthew Yglesias

And corporate America is happy to play its appointed role in this partisan dance because rich business executives love GOP tax cuts and business-friendly regulation.

More broadly, the CEO class in America has decided that a steady dose of flattery is the best way to keep Trump focused on his current embrace of hard-right economic policy rather than following through on the populist impulses he voiced on the campaign trail. The result is that fairly banal aspects of the business world have gotten enmeshed in the political process.

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Google’s ‘Dutch Sandwich’ Shielded 16 Billion Euros From Tax

Bloomberg, January 2, 2018

By Jeremy Kahn

Alphabet Inc.’s Google moved 15.9 billion euros ($19.2 billion) to a Bermuda shell company in 2016, regulatory filings in the Netherlands show — saving the company billions of dollars in taxes that year.

Google uses two structures, known as a “Double Irish” and a “Dutch Sandwich,” to shield the majority of its international profits from taxation. The setup involves shifting revenue from one Irish subsidiary to a Dutch company with no employees, and then on to a Bermuda mailbox owned by another Ireland-registered company.

Read the full article