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Civil Society, Business Groups Call on Congress to Support Incorporation Transparency, Ban Anonymous U.S. Shell Companies

May 16, 2012

FACT Coalition

Legislation Enjoys Support of Law Enforcement, Obama Administration; Would Clean-Up American Financial System

WASHINGTON, DC – Today, 41 business and civil society groups sent a letter to every member of the U.S. House of Representatives and U.S. Senate urging them to co-sponsor the Incorporation Transparency and Law Enforcement Assistance Act (S. 1483/ H.R. 3416). This bipartisan bill, which is endorsed by the Obama Administration, would require companies to disclose their ultimate owners at the time of incorporation, making it much harder for corrupt politicians, tax dodgers, terrorists and other criminals to form and hide behind anonymous U.S. shell companies.

The signatories1, who include, among others, American Sustainable Business Council, Calvert Investments, Citizens for Responsibility and Ethics in Washington, Citizens for Tax Justice, Financial Accountability and Corporate Transparency Coalition, CtW Investment Group, Domini Social Investments LLC, Friends of the Earth – US, Global Financial Integrity, Global Witness, Human Rights Watch, Jubilee USA Network, Main Street Alliance, Oxfam America, Project On Government Oversight, Revenue Watch Institute, Sunlight Foundation and U.S. Public Interest Research Group, are concerned that it is legal to form companies in the United States with hidden ownership.

The letter states:

Increased corporate transparency would curb corruption and tax evasion, promote an equitable market economy, reduce the opacity of corporate campaign contributions, help ensure a fair and level playing field for small- and medium-sized businesses, foster global development and enhance national security…

Investigations continue to reveal that American and foreign terrorists, narco-traffickers, arms dealers, corrupt foreign officials, tax evaders, individuals targeted for financial sanctions and other criminals easily and regularly set up U.S. shell companies, without providing any information about who owns or controls such companies…This enables criminals to disguise their identities behind the anonymity provided to U.S. corporations and launder dirty money through the U.S. financial system.

The full letter can be read here.

Corporate secrecy fundamentally undermines U.S. laws to combat money laundering and tax evasion, as well as U.S. efforts to tackle global corruption. A recent World Bank report found that the U.S. was a favorite destination of corrupt politicians trying to set up shell companies to access the financial system. Once corrupt and other illicit funds have been moved through an anonymous corporate vehicle into the financial system, it is much harder to track them down. Shining a light on the ultimate owners of companies, would make it easier for law enforcement to do its job. To date, eight law enforcement organizations, including the Fraternal Order of Police and Federal Law Enforcement Officers Association, have endorsed the legislation.

The Obama Administration also views corporate secrecy as a threat to national security. Through the U.S. Open Government Partnership Action Plan and the Strategy to Combat Transnational Organized Crime, the Administration has committed to work with Congress and advocate for legislation that would require meaningful disclosure of the ultimate (beneficial) ownership information of companies at the time they are set up.

“The President’s commitment to transparency must extend to working with Congress to prioritize ending hidden company ownership in the U.S.,” said Stefanie Ostfeld, Global Witness policy advisor. “The U.S. can no longer allow foreign corrupt dictators and other criminals to disguise their identities behind American shell companies in order to launder dirty money through the U.S. financial system.”

“Anonymous shell companies make the U.S. financial system a playground for both foreign and domestic corrupt, criminal, and tax evading money,” added Tom Cardamone, managing director at Global Financial Integrity.  “It is absolutely critical from a law enforcement, national security and governance perspective that we enact this piece of legislation.”

“It’s important that the U.S. government demonstrate leadership when it comes to dealing with financial secrecy,” commented Nicole Tichon, founding member of the Financial Accountability and Corporate Transparency (FACT) Coalition.  “As we seek cooperation from foreign jurisdictions in cracking down on terrorist financing, money laundering and tax evasion, we must ensure that the U.S. is not facilitating financial crime in our own backyard.”



Stefanie Ostfeld
+1 202-621-6674

Clark Gascoigne
+1 202-293-0740 ext.222

Nicole Tichon
+1 202-758-9552

Notes to Editors:

  1. Accountability Counsel, ActionAid USA, American Sustainable Business Council, Asia Initiatives, Business for Shared Prosperity, Calvert Investments, Campaign for America’s Future, Citizens for Responsibility and Ethics in Washington (CREW), Citizens for Tax Justice, CtW Investment Group, Domini Social Investments LLC, EarthRights International , EG Justice, Financial Accountability and Corporate Transparency (FACT) Coalition, Foreign Policy in Focus, Friends of the Earth – US, Fund for Constitutional Government, Global Financial Integrity, Global Witness, Government Accountability Project, Human Rights Watch, International Corporate Accountability Roundtable, Jubilee USA Network, Just Foreign Policy, Main Street Alliance, Maryknoll Office for Global Concerns, Mine Safety and Health News, New Rules for Global Finance Coalition, OMB Watch, OpenCorporates, Open Society Policy Center, Oxfam America, p.h. balanced films, Project On Government Oversight, Revenue Watch Institute, Sunlight Foundation, Tax Justice Network-USA, Union of Concerned Scientists, United to End Genocide, U.S. PIRG and Wealth for the Common Good
  2. On August 2, 2011, Senators Carl Levin (D-MI) and Charles Grassley (R-IA) introduced the bipartisan Incorporation Transparency and Law Enforcement Assistance Act (S. 1483). Representatives Carolyn B. Maloney (D-NY), Stephen F. Lynch (D-MA) and Barney Frank (D-MA) introduced a companion bill (H.R. 3416) on November 14, 2011. These bills would require companies to disclose information about the real people who own or control them (often called the “beneficial owners”) at the time they are created.
  3. The U.S. Department of Justice, the Department of the Treasury and the Department of Homeland Security have all endorsed the legislation.  The Department of Justice and the Department of Treasury have offered $30 million in forfeiture funds to offset the cost of implementing the law in the states.
  4. Multiple law enforcement organizations, including the Fraternal Order of Police, Federal Law Enforcement Officers Association and Society of Former Special Agents of the Federal Bureau of Investigation, Inc., have endorsed the bill.
  5. The Obama Administration, through the U.S. Open Government Partnership Action Plan and its Strategy to Combat Transnational Organized Crime, also supports legislation to stop states from allowing secretive shell companies to be set up.
  6. CNBC Documentary “Filthy Rich” (Watch Here)
  7. Reuters series: “Shell Games: Articles in this series explore the extent and impact of corporate secrecy in the United States,” Jun – Dec 2011.
  8. World Bank / UNODC report, “Puppet Masters: How the Corrupt Use Legal Structures to Hide Stolen Assets and What to Do About It,” Oct 24, 2011
  9. The Economist endorses banning anonymous shell companies: “Corporate Anonymity: Light and Wrong,” Jan 21, 2012
  10. The FACT campaign published this exampleof an American anonymous shell company facilitating the evasion of U.S. sanctions: Iranian ownership of a skyscraper in the middle of Manhattan was hidden by the use of anonymous companies and partnerships, in violation of U.S. economic sanctions. The building was owned by a partnership, the 650 Fifth Avenue Company, formed between the Alavi Foundation and Assa Corporation.  Assa Corporation is an anonymous company that was incorporated in New York, but wholly owned by another anonymous company, Assa Company Limited, which is an entity incorporated in Jersey, an offshore secrecy jurisdiction.  After a lengthy and expensive investigation, it was uncovered that Assa Company Limited is owned by Iranian citizens that represent the interests of Bank Melli, which is a bank wholly owned and controlled by the Government of Iran. Anonymous companies enabled Iranian ownership of a building in New York and through that ownership, the use of the U.S. financial system to illegally funnel U.S. dollars to Iran, evading U.S. sanctions.
  11. CNN Op-Ed by Stefanie Ostfeld of Global Witness: “Shell game: Hidden owners and motives,” Oct 26, 2011


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