Those who loot state funds through corruption or deprive their state of revenues through tax evasion need more than a bank: they need to hide their identity behind a corporate front.  It is so easy to set up such a company that criminals, terrorists and corrupt politicians can easily move money around the world with impunity.  Hidden company ownership facilitates state looting, denying the citizens of poor countries the chance to lift themselves out of poverty and leaving them dependent on aid. 

Countries such as the UK might have a company registry and consider themselves ‘onshore’, but as long as they do not publish the names of the ultimate ‘beneficial’ owners of companies, they are effectively permitting companies to hide their true owners, making them as offshore as any palm-fringed island. 

The original purpose of a limited liability company is in its name – to limit the personal liability of individuals going into business in order to promote enterprise and entrepreneurship.  The mechanism by which companies do this – the creation of a ‘legal person’ separate from a ‘natural person’ – has a side effect: the ability to hide the real person behind the company.  Hidden ownership of assets has now become the main aim of vast numbers of companies in every corporate registry in the world. This means that limited liability companies are being abused for secrecy purposes on an industrial scale – not just by the corrupt, but by tax evaders, fraudsters, human traffickers, drug traffickers and terrorists.

By setting up a limited liability company, the state confers on you certain privileges, notably that the profits you can get from the company are unlimited whereas the losses you personally will have to bear if the company goes bust are limited to the size of your investment.  This privilege is granted by the state and so it is reasonable for the state to ask something in return: the publication of the names of the legal and beneficial owners of the company.   

Read more:

• Read the Global Witness Briefing on the problem of anonymous shell companies and why beneficial ownership registries are needed - May 2013
• Global Witness’ report, Grave Secrecy, uses a case study from Kyrgyzstan to show how companies can be used as cover to launder the proceeds of corruption, tax evasion and other crimes.  June 2012
• A short policy document to accompany the report detailing the current problems with hidden company ownership. June 2012
• The Idiot's Guide to Money Laundering is a brief introduction to how companies can be used to hide identity. June 2012
• Letter sent to the European Commission, signed by organisations representing over 1,000 civil society groups, calling for a new standard on company ownership transparency.  June 2012
• Letters sent to the US House of Representatives and Senate, signed by 41 civil society organisations, calling for support of a US bill that would require companies to disclose information about the real people who own or control them.  May 2012