For years, the United States has been a global leader in providing anonymous shell companies, allowing arms dealers and autocrats to move their money with minimal oversight.
Now, though, that may be changing.
First, the Delaware secretary of state came forward in June to announce his office’s support for ending anonymity in the world of company formation, and demanding information about the beneficial owners setting up companies from coast to coast.
And on Thursday, in a move that transparency watchdog Global Witness has called “unprecedented,” some two dozen attorneys general from across the country have signed a joint, bipartisan letter calling for the end of anonymous shell companies in the U.S.
Led by Washington State Attorney General Bob Ferguson (D) and Colorado Attorney General Cynthia Coffman (R), the letter is addressed to the chairman and ranking member of the House Financial Services Committee. One of the signatories of the letter, in a welcome move, was also Delaware Attorney General Matthew Denn (D). (The attorneys general from Nevada and Wyoming, the U.S.’s two other primary hubs for anonymous shell company formation, did not sign the letter.)
As the attorneys general write:
Thank you for your diligent work crafting legislation to improve corporate transparency by requiring companies to disclose the identities of individuals who control and profit from the company at the time of its incorporation. We write to express our support for this change, which would prevent these individuals from using anonymous shell companies to evade accountability, and to convey the importance of making this information available to state and local law enforcement…
The use of anonymous shell companies by those engaged in human trafficking, drug dealing, and other crimes, allows criminals to launder and spend money attained through criminal activity without accountability. Unfortunately, our investigations can stall when these companies are used to hide the identity of the individual or individuals who control or profit from the company.
American shell companies have played outsized roles in the spread of kleptocratic tools and forces over the past few years, allowing companies to be formed on the cheap without identifying who the ultimate, or beneficial, owners were. Not only have such companies been used and abused by dictatorships and thuggish rulers in places like Equatorial Guinea and Ukraine, but they’ve also been utilized to allegedly move millions by those close to U.S. President Donald Trump, as the ongoing trial of Trump’s former campaign manager, Paul Manafort, illustrates. (Trump, at last check, himself owns nearly 400 business entities in Delaware.)
It’s unclear whether Congress will advance legislation this year pertaining to transparency in shell company formation. However, even if the U.S. waits until next year to pass legislation forcing the identification of beneficial owners behind companies set up in the U.S., Thursday’s letter has already received praise from pro-transparency advocates.
“These attorneys general have had enough… The vast majority of law enforcement investigations are conducted at the state and local level, and until we give law enforcement the tools they need to keep up with criminals, the U.S. will continue to be a top choice for the world’s criminals and corrupt to hide,” said Global Witness assistant policy adviser Alexandria Robins.
As it is, the letter isn’t the only bit of good news on the anti-kleptocracy front this week. After new research showed how effective the Treasury Department’s Geographic Targeting Orders (GTOs) — which force transparency on luxury real estate purchases in certain jurisdictions — had been over the past two years, Sen. Marco Rubio (R-FL) this week proposed a study about rolling out the transparency regime nationwide. Sen. Ron Wyden (D-OR) and Sen. Sheldon Whitehouse (D-RI) joined Rubio in supporting a nationwide expansion of the policy, which would extend to any real estate purchase over $300,000.
This post has been updated.