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Monday
Nov042013

Despite tough talk, anonymous shell companies live on

Last month, UK Prime Minister David Cameron talked about plans to create a publicly accessible registry of information on the beneficial ownership of companies. This registry will be open to everyone, not just law enforcement authorities, he said. It will "shine a spotlight on who owns what and where money is really flowing," Cameron said.

In August 2013, Senator Carl Levin (D-MI) introduced a measure to eradicate the use of shell corporations with hidden owners, and G-8 leaders recently agreed to tackle the issue of shell companies by requiring owners to identify the beneficial owners who ultimately control and profit from these businesses.

On October 24, the House's Financial Services Committee announced that Rep. Maxine Waters (D-CA) and  Rep. Carolyn Maloney (D-NY) had introduced bills that, taken together, would strengthen U.S. anti-money laundering laws, tackle the use of shell companies and require the identification of beneficial ownership. They would also give financial regulators enhanced powers to hold executives civilly liable for misconduct perpetrated while serving at the helm.

Levin's bill, however, is the same as Maloney's (same name, same purpose) and first died in committee in August 2011. It was reintroduced in the Senate in August 2013, where it languished. Maloney attempted to revive it in 2011, but it failed to pass in the House. Now it's part of Waters' anti-money laundering bill.

A recent study found that rules for forming companies around the globe are often ineffective. The authors from Brigham Young University, University of Texas and Griffith University (Australia) said the U.S. was the second easiest country after Kenya in which to incorporate a shell company. Nearly half the jurisdictions surveyed (48 percent) didn't ask for proper identification and 22 percent did not ask for any identity documents at all to create a shell company. 

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Julie DiMauro is the executive editor of FCPA Blog. She can be reached here.