Opaque Ownership Structures Obstruct Enforcement of a Growing Global Illegal Economy Valued at $500 Billion to $3 Trillion

WASHINGTON, D.C. – The formation and use of anonymous companies undermine the economic and financial interests of U.S. companies and markets according to a new report published Monday by the Financial Accountability and Corporate Transparency (FACT) Coalition.  The author, former Chair of the OECD Task Force on Countering Illicit Trade David M. Luna, found that criminals and counterfeiters are expanding their market share with fake products in storefront and on-line markets, contributing to a growing global illegal economy valued at between $500 billion and $3 trillion.  Criminally-derived profits (or dirty money) related to corruption and money laundering constitute several trillion dollars more that further finances insecurity and instability around the world.

Titled “Anonymous Companies Help Finance Illicit Commerce and Harm American Businesses and Citizens: A Need for Incorporation Transparency,” the report explains that the trafficking and smuggling of counterfeit and pirated goods is a very profitable illegal activity for many of today’s criminals and illicit networks and that these networks rely on the secrecy provided by anonymous entities to launder their ill-gotten-gains and escape detection.

In the United States, counterfeits and internet pirates pose enormous security threats — impacting legitimate commerce and financial systems, including critical national industries and local economies, and harming the reputations of American brands and companies.

“There has been a sea change in the way anonymous companies are viewed by legitimate businesses, and this is one major reason why,” said FACT Executive Director Gary Kalman. “The revenue lost to counterfeit goods and costs of reputational damage has led to a growing list of businesses calling for reform.”

To remedy the situation, the report recommends that policymakers enact legislation to end the incorporation of anonymous shell companies by requiring the collection of “beneficial ownership” information — the natural person who controls the entity and has an entitlement to the funds — at the point of corporate formation.

“Incorporation transparency is critical to effectively fight illicit trade, organized crime, and terrorism in the United States. Recent evidence-based research by the OECD on counterfeit and pirated goods clearly demonstrates how illicit commerce is seriously harming the U.S. economy, impacting critical American industries and brands, and posing a grave threat to the health and safety of our citizens and communities,” said David M. Luna, CEO of Luna Global Networks, former chairman of the OECD Task Force on Countering Illicit Trade, and author of the report. “Congress must act decisively and quickly to pass effective legislation enabling greater transparency on beneficial ownership related to anonymous shell companies, thereby empowering our law enforcement agencies to investigate illicit traffickers who imperil our vital economic and national security interests, and corrupt our institutions with their dirty money. We must end the abuse of anonymous shell companies by today’s bad actors and illicit networks.”

Case Studies

Below are a few summaries of the cases outlined in the report:

• Anonymous companies have helped criminals across the United States sell in recent years several billion dollars of fake and counterfeited luxury handbags and apparel accessories branded as Burberry, Louis Vuitton, Gucci, Fendi, Coach, and Chanel, as well as sportswear and gear from the NFL, NBA, and MLB including Nike, Adidas, and Under Armour, among many others.
• Anonymous companies were used to import and sell to American consumers through internet pharmacies, counterfeit medicines from India and China worth hundreds of millions of dollars. These counterfeits included fake versions of Arimidex, a breast cancer treatment, Lipitor, the cholesterol drug, Diovan, for high blood pressure, and other medications such as illicit OxyContin, Percocet, Ritalin, Xanax, Valium, and NS Ambien.
• Anonymous companies assisted in selling knock-off parts to the Pentagon that have cost the U.S. military tens of millions of dollars and put our soldiers’ lives at greater risk and danger.
• Anonymous companies helped an organized criminal network sell counterfeit cellphones and cellphone accessories on Amazon.com and eBay.com. They also misrepresented goods worth millions of dollars as new and genuine Apple and Samsung products.
• Anonymous companies were leveraged to help criminals sell millions of dollars’ worth of counterfeit computer anti-virus software over the internet.
• Anonymous companies assisted in selling Venezuelan oil, false securities, and fraudulent contractual relationships in the United States that have cost American businesses millions of dollars.

More information about these examples and additional case studies are available in Section V (pages 17–20) of the report.

###

Notes to Editors:

• Click here to read an online version of this press release on our website.
• Click here to read more about the report.
• Click here to download a PDF of the report.

Journalist Contact:

Clark Gascoigne
Deputy Director, The FACT Coalition
+1 202 810-1334
cgascoigne@thefactcoalition.org