Incorporation Transparency

Priced Out: How Anonymous Companies Contribute to the Rising Cost of Housing

By Claire Coleman

Home ownership is a quintessential part of the American dream. Now, nearly a decade after the housing market crash this dream for many Americans is still just that: a dream. Housing costs are rising far faster than wages—burdening renters.   Residential properties are becoming prohibitively expensive—forcing out residents who may have called them home for decades.

To add insult to injury, the loss of affordable housing has been spurred by the use of anonymous shell companies. Bad actors or rich speculators use these companies to bid up prices on properties and then use them as a “bank” rather than a home—all without identifying who they are or where the money came from to purchase the property.

Read More...

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

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.

After doing a bit more digging, and talking to several knowledgeable people, I have a tentative answer: The ABA’s opposition to the currently-pending anonymous company bills is based on an aggressive over-reading of a 15-year-old policy — a policy that many ABA members and ABA committees oppose but have not yet been able to change, due to the ABA’s cumbersome procedures and the resistance of a few influential factions within the organization.

Read More...

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

By Matthew Stephenson

Compared to the more aggressive beneficial ownership transparency reforms touted by anticorruption/AML advocates, and adopted in some other countries, the proposed U.S. legislation is fairly mild—but it is still, as prior commentators on this blog have emphasized (here and here), a welcome step in the right direction. After all, while the U.S. record on fighting global corruption and international money laundering is good in some respects (Foreign Corrupt Practices Act enforcement and the Kleptocracy Asset Recovery Initiative come to mind), when it comes to addressing the facilitators of corruption, such as corporate secrecy, the U.S. is a laggard (as illustrated by poor U.S. score on the Tax Justice Network’s 2018 “Financial Secrecy Index,” released last month). So it’s indeed encouraging that the TITLE Act, and its counterpart in the U.S House of Representatives (the less-cleverly-named “Counter Terrorism and Illicit Finance Act”) have received both bipartisan support and the endorsement of a wide range of interest groups—including not just anti-corruption, AML, and tax justice advocacy groups, but also representatives of law enforcement, the finance industry and other business interests (here and here). Many are cautiously optimistic that some version of these bills might actually become law this year.

But some opposition remains. The sources of that opposition are, in some cases, predictable: the Chamber of Commerce, for example, opposes these reforms, as does FreedomWorks, the lobbying group sponsored by the libertarian billionaire Koch brothers. One of the major opponents of the legislation, though, was more surprising, at least to me: the American Bar Association (ABA), which represents the U.S. legal profession. The ABA has come out strongly against this legislation, sending letters to the responsible committees in both the House and Senate expressing strong opposition to even these relatively mild reforms.

Read More...

U.S. Senate Hearing Cues Another Shift Towards Ending Corporate Anonymity

By Alexandria Robins

In just the first two months of this year, we have seen anonymous shell companies become a major priority for Washington lawmakers.

Last week, the U.S. Senate Judiciary Committee convened to discuss legislation that would put a stop to the creation of these faceless companies. The hearing, Beneficial Ownership: Fighting Illicit International Financial Networks Through Transparency, marks the third Congressional hearing on this topic in 2018 alone. And, it is the first time that the Senate Judiciary Committee has heard such legislation. This occasion, along with other recent developments, suggests that momentum towards tackling the problems posed by anonymous companies continues to grow.

Read More...

How the U.S. Became a Top Secrecy Jurisdiction

By Richard Phillips

Sometimes, ranking near No. 1 in the world is not a badge of pride. According to the Financial Secrecy Index released by the Tax Justice Network (TJN), the United States is the second largest contributor to financial secrecy in the world, placing it in the company of infamous tax havens such as Switzerland (ranked No. 1) and the Cayman Islands (ranked No. 3). Financial secrecy is enabling people to hide income from the authorities to evade taxes or financial regulation, launder profits from crime, finance terrorism, or otherwise break the law.

As the new TJN report explains, the United States contributes more to financial secrecy in the world than any country other than Switzerland for two reasons. First, this country has the largest share (22.3 percent) of the global market for offshore financial services. Second, several U.S. states promote financial secrecy by allowing individuals to form corporations without providing any real identifying information. In some states, people who want a library card must provide more identifying information than those who want to incorporate. The result is a huge amount of money held in shell companies in the United States that cannot be traced to any individual anywhere in the world.

Read More...

Testimony to Senate Judiciary Committee on TITLE Act S. 1454

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. The full testimony can be read below or downloaded here.

Read More...

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

America Surpasses Cayman Islands, Second Only to Switzerland in Tax Justice Network’s Rankings of the World’s Largest Secrecy Jurisdictions

WASHINGTON, D.C. – 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.

Read More...

2018: The Year Anonymous Companies End

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.

Read More...