If you’ve committed a crime and want to launder the proceeds, the easiest way is the legal way. You go online, find a site that sets up companies, and incorporate in minutes (tax-free Delaware is a good place). You don’t need to give your name. And best of all, you can assign ownership to another “shell” company somewhere else (like the Cayman Islands). So, you can keep setting up companies linked to other companies, so nobody ever knows who the “ultimate beneficiary” is, at least not without a lot of investigation. Easy!
Aside from the initial crime, all of this is perfectly legal because anonymity is legal. You need prove your identity to open a bank account. But starting a company in many jurisdictions requires little information at all. As anti-corruption campaigner Charmian Gooch said in a recent TED talk: “In some states in America, you need less identification to open a company than you do to get a library card.”
This might sound like a dry, technical topic. But as you can see from this map from Global Witness–the London group Gooch leads–it has real human consequences. The anonymous company system enables drug-running, people trafficking, and sanction-busting. For example, it was revealed last year that the Iranian government owned a prominent skyscraper in Manhattan through a front company, despite comprehensive U.S. sanctions.
The map contains links to more than 50 cases. In the “companies” view, you can click on a country and see how it relates to victims in other nations. In a “victims” view, you can see the same stories from the other direction. (Check out this fantastical story of a race horse owner in Oklahoma acting as a front for a drug cartel in Mexico, for instance).
For years, governments have effectively turned a blind eye to shell companies, claiming that the right to privacy trumps every other consideration. But things might finally be changing. The issue is on the agenda at next month’s meeting of G20 leaders in Australia, and Global Witness is hoping leaders will agree to set up company registries where ownership is more transparent to the public. It would be a start.
Any move to full disclosure is likely to annoy a large industry of lawyers and service providers who keep company ownership secret. But it might make laundering more difficult. It really is ridiculously easy at the moment.