Incorporation Transparency

On First Anniversary of Panama Papers Release, What Have We Learned?

By Gary Kalman

This week marks the anniversary of the Panama Papers, a leak of more than 11 million documents exposing widespread corruption and illicit financing involving 140 public officials in more than 50 countries around the globe.  The leak, large as it was, included documents from just one law firm and had reverberations worldwide.  The impact was profound, but was it enough?  And what did we learn?

For those not steeped in money laundering practices and illicit financial flows, the Panama Papers showed the world how it all works.  If you want to finance terror; steal from taxpayers; traffic in humans, weapons, or drugs; or evade taxes, anonymous shell companies are the vehicle of choice.  The Panamanian law firm Mossack Fonseca showed that these entities were easy to set up, inexpensive to maintain, and able to provide legal secrecy even if covering up underlying illegal activity.

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Comments to GSA Urging Non-Proprietary, Open Identifier System in Procurement

The Financial Accountability and Corporate Transparency Coalition (FACT Coalition) submitted the below comments to the General Services Administration (GSA), in response to RFI #ID15170001, urging the agency to adopt a non-proprietary, open identifier system for use in federal procurement that includes the collection of information on the real people who own and control bidders of federal contracts and grants (also known as ‘beneficial owners’).

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The US Government Has No Way of Telling Who is Behind the Companies it Does Business With, or What Risk They Pose to Our Security

By Eryn Schornick

The U.S. government goes to great lengths to protect our national security.  And yet, our failure to manage company ownership in this country leaves us exposed to all sorts of risk. Put simply, it is way too easy for the criminal or corrupt to hide their ownership of U.S. property behind a fake company, or a series of companies in order to stash or move their dirty money without detection.

Let me give you an example. In 2013, a Global Witness undercover investigation exposed how the former Chief Minister of Sarawak in Malaysia, Abdul Taib Mahmud, and his family used their political status to buy land and forest concessions for way less than their commercial value. Swathes of the Sarawak rainforest were destroyed as a result of these schemes, as well as various abuses committed against the rightful land owners. The Chief Minister’s brother used his secretly owned Singaporean company to hide profits from those corrupt forest and land deals and so that he could avoid paying around $10 million in taxes.

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Video: Financial Services Markup of Oversight Plan

Representative Carolyn Maloney (D-NY) introduces an amendment to add the issue of anonymous companies to the docket of the Terrorism and Illicit Finance Subcommittee of the Financial Services Committee.  Representative Jeb Hensarling (R-TX), Chair of the House Financial Services Committee, and Representative Stevan Pearce (R-NM), Chair of the Terrorism and Illicit Finance Subcommittee, endorse the amendment and call for action on anonymous companies.  The committee approves the amendment.

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End the Travel Ban: An Alternative Proposal to Combating Terror

By Gary Kalman

Ending Anonymously-Owned Companies Would Be Widely Seen as an Effective Strategy in Crippling Those Who Pose a Real Danger to the U.S.

The President’s executive order banning refugees and legal immigrants from seven Muslim-majority nations has led to large protests in the U.S. In a conversation yesterday with anti-corruption advocates based in Canada and Belgium, I listened as they discussed the outrage this order has generated around the globe.  The action, it appears, only reinforces the worst fears they held about the new administration.

The order is unconscionable, likely unlawful and—according to a growing list of security experts— unhelpful in protecting the nation against acts of terror. Just a few days in and the stories of harm and disruption are piling up.

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Global Task Force Slams U.S. on Anonymous Shell Companies

By Clark Gascoigne

FATF Evaluation Notes the U.S. Anti-Money Laundering “System Has Serious Gaps that Impede Timely Access to Beneficial Ownership Information”

Last week, the Financial Action Task Force (FATF)—the international body that sets anti-money laundering and counter-terror financing (AML/CFT) standards—released its first review of the United States’ efforts to combat dirty money since 2006.  While the FATF report finds that the U.S. generally has a decent AML/CFT framework, it notes that there remains a gaping hole in the regime: the problem of anonymous shell companies.

The FATF release states:

“The United States has a well-developed and robust anti-money laundering and counter-terrorist financing (AML/CFT) regime through which it is effectively investigating and prosecuting money laundering and terrorist financing. However, the system has serious gaps that impede timely access to beneficial ownership information.”

Indeed, the U.S. remains one of the easiest places in the world for criminals, terrorists, and kleptocrats to open anonymous shell companies to launder illicit money with impunity, according to leading academics.  That is because no U.S. state requires that information on the true, human owner (known as the “beneficial owner”) of an entity be disclosed to authorities at the time of incorporation.

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