Harry Cassin Publisher and Editor

Andy Spalding Senior Editor

Jessica Tillipman Senior Editor

Richard L. Cassin Editor at Large

Elizabeth K. Spahn Editor Emeritus 

Cody Worthington Contributing Editor

Julie DiMauro Contributing Editor

Thomas Fox Contributing Editor

Marc Alain Bohn Contributing Editor

Bill Waite Contributing Editor

Shruti J. Shah Contributing Editor

Russell A. Stamets Contributing Editor

Richard Bistrong Contributing Editor 

Eric Carlson Contributing Editor

Bill Steinman Contributing Editor

Aarti Maharaj Contributing Editor

FCPA Blog Daily News

« Gemma Aiolfi: How companies can use e-government as a compliance tool | Main | Is the SEC targeting foreign companies? »

Shruti Shah: Paradise Papers show need to close beneficial owner loopholes

Image courtesy of the ICIJThe massive leak of 13.4 million files, dubbed the “Paradise Papers,” highlights loopholes that exist in the global financial system. The documents also show how easy it is for tax evaders, money launderers, and senior public officials to utilize anonymous companies to hide their identities, their potential conflicts of interest, and their business deals.

The documents were leaked from offshore law firm Appleby, from corporate services provider Asiaciti Trust, and from company registries in 19 secrecy jurisdictions.

The Paradise Papers were revealed on Sunday (November 5) by the International Consortium of Investigative Journalists (ICIJ).

While shell companies have legitimate uses, their opacity makes them a favorite tool for tax evaders, money launderers, corrupt public officials and other criminals. The leaks also shine a light on the role of offshore tax havens.

The United Kingdom has led the way by publishing the world’s first fully open register of beneficial ownership, but it needs to do more to tackle abuses by its Overseas Territories and Crown Dependencies, many of which are well known tax havens.

Unfortunately, it is not just Bermuda, Panama, and other known tax havens that provide vehicles for tax evaders and criminals to launder their illicit wealth. In every state in the United States, one can incorporate a legal entity without having to disclose who controls the entity or derives economic benefits from it. 

It's imperative that company service providers are required to conduct due diligence and screenings of their clients so that they are not unwittingly opening shell companies for tax evaders or corrupt public officials.

Claudia J. Dumas, the head of the Coalition for Integrity said, “The Paradise Papers leaks show how important it is for all jurisdictions, including the U.S., to collect beneficial ownership information upon company formation.”


Shruti Shah is a contributing editor of the FCPA Blog. She's the Vice President of Programs and Operations at Coalition for Integrity (formerly Transparency International-USA). She can be contacted here.

Reader Comments (1)

You are so right Shruti!

In addition, I wish to highlight the complicity of lawyers and accountants who either knowingly or blindly enable this dark secretive money making world to exist. As you know, we are not just talking about the serious crime of hiding and money laundering dirty money. That's bad enough. But we are also talking about the many defenseless real people and real businesses, particularly those in developing countries, that bear the disproportionate cost of crime and tax evasion because law firms conveniently pretend they know and see nothing suspicious by their high-paying clients. This is not right.

I believe until we change the mindset, ethics rules and laws for lawyers and accountants, and begin to hold them accountable for their conspiratorial actions, that many more Paradise and Panama Papers scandals are just around the global corner -- even if the black letter beneficial ownership law is changed.

There are questions galore for Appleby, the ABA, the legal profession and policymakers. Shouldn't lawyers and the U.S. be setting the example? What did Appleby know and when and just what due diligence did they do? And what are they going to do to make sure they won't be a willing or unknowing partner in crime or tax evasion yet again?

At a minimum, it is certainly time for the legal profession to help not hinder the law enforcement communities efforts. The safety and economic future for many in many countries demands concrete action and reform now.
November 7, 2017 | Unregistered Commenterkeith henderson
Comments for this entry have been disabled. Additional comments may not be added to this entry at this time.