[News] Forget Panama: it's easier to hide your money in the US than almost anywhere

Anti-Imperialist News news at freedomarchives.org
Wed Apr 6 16:03:15 EDT 2016


**Forget Panama: it's easier to hide your money in the US than almost 

Jana Kasperkevic - April 6, 2016

One of the surprises about the Panama Papers – the largest leak from an 
offshore tax adviser in history – is how few Americans have so far been 
exposed. The reason? It may be because creating a shell company in the 
US is easier than obtaining a library card.

What is Mossack Fonseca, how big is it, and who uses offshore firms? Key 
questions about one of the biggest ever data leaks

About 200 people with US addresses have so far been revealed as clients 
of Mossack Fonseca, the firm at the center of the Panama Papers leak. 
Compared with countries such as China, Switzerland, Russia and the 
United Kingdom, the number is small.

The anomaly may be because it’s so easy to create a vehicle to hide your 
money and your identity in the US that there’s no need to mess with 
Panama, according to Shruti Shah, vice-president of programs and 
operations at Transparency International, an anti-corruption organization.

“You don’t really have to go to Panama or other tax havens. They are not 
the only ones making it possible for corrupt officials and other 
criminals to launder their money. You can do it in every state in the 
US,” explained Shah.

Delaware is so synonymous with anonymous companies that it was named as 
one of the most symbolic cases of corruption

“In every state in the US, you can incorporate an LLC – [a limited 
liability company] – or another legal entity and you don’t have to 
disclose who the beneficiary on it is. In fact, Delaware is so 
synonymous with anonymous companies and ghost corporations that it was 
named in Transparency International’s Unmask the Corrupt campaign as one 
of the most symbolic cases of corruption.”

The term tax haven usually evokes an image of some faraway place like 
Belize or the Cayman Islands. Yet in 2015, in a ranking of tax havens 
most attractive for those looking to hide assets, the US came in third – 
surpassing Cayman and Singapore. The two places that were even better 
suited as tax havens for the rich were Switzerland and Hong Kong, 
according to the Tax Justice Network that published the ranking.

What was Panama’s ranking? It was 10 spots behind the US, at 13.
hidden owners panama papers

A while back, Shah sent her husband to return an overdue book she had 
borrowed from the library. When he returned, he told her her library 
card was expired and that to renew it she would have to bring her 
driver’s license showing her current address or a utility bill with her 

“If I were to open a shell company, I wouldn’t require any of those 
things. I would actually need less information to open a shell company 
in the US than I would need to get a driver’s license or a library 
card,” pointed out Shah.

But financial secrecy index report notes if UK and affiliated tax havens 
such as Jersey were treated as one, it would top the list

Is this in every state or just some like Delaware where the majority of 
US companies are incorporated ? “No state in the US requires beneficial 
ownership information. So it’s practically everywhere,” explained Shah, 
who lives in Virginia. “Some states are easier than others. In some 
states it’s more money than others, because they also have tax-friendly 
laws. Delaware and Nevada and Wyoming are infamous – or famous, however 
you look at it – [for their tax laws]. Texas and Florida are equally easy.”

There is nothing illegal about setting up a shell company. US states are 
proud of their business-friendly policies. Delaware, for example, prides 
itself on being the incorporation capital of the US. “More than 
1,000,000 business entities have made Delaware their legal home,” 
claimed the state’s Division of Corporations website. “More than 50% of 
all publicly-traded companies in the US including 64% of the Fortune 500 
have chosen Delaware as their legal home.”

In the wake of the Panama Papers, the number of shell companies 
incorporated in the US could grow. Instead of stashing their cash in 
Belize, Panama or the Cayman Islands, the companies and individuals 
could turn to the US.

“They certainly could,” said Heather Lowe, director of government 
affairs at Global Financial Integrity. “Given the lack of action in the 
US to address this issue compared to, say, the European Union, it may 
seem like a safe bet right now.”

I need less information to open a shell company in the US than I would 
need to get a driver’s license or a library card

Shell companies have their uses; they can be used to buy land 
anonymously, for example, without tipping off the competition. To create 
an entity to protect future business rights, or a holding company for 
various businesses. They can also be used to, legally, make political 
contributions anonymously.

Just because some people or companies have chosen the state to form 
shell companies and hide assets does not mean the entire system should 
be to blame, argued Charles Elson, director of the John L Weinberg 
Center for Corporate Governance at the University of Delaware.

“Delaware really is not a tax haven. Delaware is a place where most US 
companies are incorporated, because of a very intelligent corporate law 
regime,” he said. “Obviously, some companies that are problematic come 
here, too, but that’s not the design of the system. That’s a collateral 
effect … If someone uses the corporation for nefarious purposes, I don’t 
think that’s the fault of the corporate statute, but of the individual.”

Shell companies, whether created abroad or at home, make it easy for 
people to hide assets and commit crimes, said Shah. For example, in the 
mid-2000s, former Louisiana congressman William Jefferson had created 
eight different shell companies to hide hundreds of thousands of dollars 
of bribes. Viktor Bout, an infamous arms trafficker known as the 
Merchant of Death, had at least a dozen shell companies incorporated in 
Delaware, Texas and Florida to cover up his weapons trafficking operation.

There is no reason, said Shah, why creating such shell companies should 
be easier than obtaining a library card. Her group Transparency 
International has called on the US Congress to pass the Incorporation 
Transparency and Law Enforcement Assistance Act introduced by 
congresswoman Carolyn Maloney and Senator Sheldon Whitehouse. If 
enacted, the bill would require states to collect, maintain and update 
information about beneficial ownership of all companies created in the US.

“Bipartisan legislation has been introduced in the House since 2008, but 
it has never seen the light of day. It’s never been enacted into law. 
Maybe now is the time,” said Shah.

Elson remains skeptical as to whether such a law would actually work.

“I don’t know how fixing the beneficial ownership rule would fix this. 
If someone is devious enough to game the system in this way, they would 
work their way around any single regulatory change. These are very 
clever people,” he said.

In order for any legislation to pass, the US business community would 
have to come out in support of it, pointed out Lowe.

“The US Chamber of Commerce has long opposed legislation to end 
anonymous companies, and they must reverse that position and begin to 
support honest and open business practices,” she said.

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