Stop Corruption: End Anonymous Companies

On the eve of International Anti-Corruption Day, the U.S. House of Representatives passed an historic measure to end anonymous companies by a veto-proof margin. The Corporate Transparency Act, included in the annual “must-pass” defense bill known as the National Defense Authorization Act, is expected to become law before the end of the year.  As we mark International Anti-Corruption Day, this significant step forward for the U.S., which has historically lagged behind other nationshopefully ushers in a new era of U.S. leadership on transparency and anti-corruption.

In the decades since the last major update to the U.S. anti-money laundering regime, rogue nations, criminals, and kleptocrats have developed ever more sophisticated strategies to outmaneuver the outdated tools to combat them.  Just this year, a report from Tax Justice Network ranked the U.S. second only to the Cayman Islands in providing financial secrecy. This secrecy has created immense vulnerability in the global fight against corruption by offering anonymity to kleptocrats and criminals. 

Now, as financial crimes accelerate globally due to the COVID-19 pandemic, this achievement to address the critical vulnerability of anonymous companies is all the more timely.  With the passage of a bill to end these financial get-away vehicles, the U.S. will greatly reduce this vulnerability and help fight corruption globally. 

Internationally, advocates are calling for Recovery with Integrity in reference to the global response to Covid-19. There is no doubt that the devastating consequences of this pandemic have required fast-acting government response; however, our global partners warn about the risks of sacrificing important oversight in order to dole out large sums quickly. 

We have shared those concerns and outlined them in our recent comments to Congress on key transparency and accountability guidelines for COVID-19 response. These concerns are echoed by numerous examples of fraud already uncovered from earlier relief packages.  These include three men who used anonymous companies to steal close to $2 million in relief funds, a shell company that was used to steal $3 million, a banker who used shell companies to fraudulently receive $1.4 million, and another man who stole $860,000 and fled the country before authorities could catch him.  Anyone who has investigated anonymous companies knows that catching people is the exception, not the rule.  There could be thousands more cases like this that will never be uncovered without the disclosure of who owns these companies.

Eliminating the secrecy of anonymous companies in the U.S. is an essential and significant first step toward curbing corruption globally. But there is still much to be done. With governments working to respond quickly to the pandemic and the vast sum this requires, the risk of government pillaging has never been higher.  While more oversight and safeguards are needed, eliminating anonymous companies would prevent bad actors from setting up fake companies to claim relief funds and would empower law enforcement to track down those who try.  We call on Senators to also support these critical transparency reforms when they come up for a vote in the coming days.