A Need for Incorporation Transparency
Titled “Anonymous Companies Help Finance Illicit Commerce and Harm American Businesses and Citizens: A Need for Incorporation Transparency,” this May 2019 report from the Financial Accountability and Corporate Transparency Coalition (FACT Coalition) 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.
Illicit commerce remains the lifeblood of today’s bad actors, criminal organizations, and terrorist groups. A very profitable illicit activity for many of today’s criminals and illicit networks is their involvement in the trafficking and smuggling of counterfeit and pirated goods.
In the United States, there are enormous threats posed by counterfeits and internet pirates — impacting legitimate commerce, markets, and financial systems, including critical national industries and local economies, placing consumers at risk, and harming the market reputational value of American brands and companies.
- The OECD and European Union Intellectual Property Office (EU IPO) estimated the value of imported fakes worldwide at US$509 billion in 2016, or up to 3.3 percent of world trade.
- In a 2017 report by the International Chamber of Commerce’s Business Action to Stop Counterfeiting and Piracy (BASCAP) and the International Trademark Association (INTA), it is projected that the global economic value of counterfeit and pirated goods alone will reach close to US$3 trillion by 2022. It is expected that the total employment losses globally due to counterfeiting and piracy will rise from 2 to 2.6 million jobs lost in 2013 to 4.2 to 5.4 million jobs lost in 2022.
- A recent report by Cybersecurity Ventures estimates that the financial costs from cybercrime will double from US$3 trillion in 2015 to US$6 trillion by 2021.
From recent scandals to successful criminal prosecutions, we have gleaned sharper insights into how criminal networks evade detection and how dirty money is hidden — through the use of anonymous shell and front companies. A few summaries of the cases outlined in this Report’s Section V include the following:
- Anonymous companies have helped criminals across the United States sell in recent years several billion dollars in 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 US military tens of millions of dollars.
- 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.
As a direct consequence, the use of such anonymous companies impacts the economic and financial interests of US companies and markets, as criminals and counterfeiters expand their market share of fake products across American cities and on-line markets.
Anonymous companies created by criminals help to finance the distribution of harmful counterfeits across the US economy that seriously harm and even kill Americans — from illicit opioids and fake medicines, food, and alcohol to fake parts in cars and airplanes to counterfeited apparel and toys that are sometimes made with deadly chemicals and toxic materials.
There is a global trend toward transparency.
- The United Kingdom now has a public registry that includes the names of the beneficial owners of companies formed in the country. They have recently passed a law to require its overseas territories (i.e. Anguilla, Bermuda, British Virgin Islands, Cayman Islands, Gibraltar, Montserrat, and Turks and Caicos Islands) to create public registers as well.
- The European Union has adopted new rules to require all member nations to establish public registers of beneficial owners by 2020. In addition to the 28 members of the EU, this also effectively extends to members of the European Economic Area (Norway, Iceland, and Liechtenstein).
- Additional nations and jurisdictions that have enacted or are pursuing enactment of beneficial ownership registration laws include: Afghanistan, Brazil, Costa Rica, Curacao, Dominican Republic, Ghana, Guernsey, Isle of Man, Jersey, Nigeria, South Africa, Ukraine, and Uruguay.