Global Witness applauds Representatives Waters (D-CA) and Maloney (D-NY), who later today will introduce two pieces of legislation that would make it much harder for the corrupt and other criminals to misuse American companies and launder dirty money into American banks. It would enable the Obama Administration to implement its G8 commitment to enhance transparency of the real people who own and control companies.
“Corrupt politicians, rogue regimes, tax dodgers and other money launderers need two things to move their illicitly-acquired funds: a bank willing to take their money and secretive shell companies to hide their identity,” said Stefanie Ostfeld, Senior Policy Advisor at Global Witness. “If passed, the bills introduced today would go a long way to solving these two problems,” she added.
The Holding Individuals Accountable and Deterring Money Laundering Act would strengthen U.S. anti-money laundering laws and provide regulators with better enforcement tools, including by making it easier for prosecutors to target individual bankers.
“Recent high profile banking scandals, including those involving HSBC, Wachovia and Standard Chartered demonstrate that the U.S. anti-money laundering framework isn’t working,” said Ostfeld. “If we are serious about stopping banks from prioritizing profit by accepting suspect funds, we need to change the incentives. Senior bankers need to face personal consequences for getting it wrong, and banks should risk substantial fines for breaking the law. The bill is a great first step.”
Passage of the Incorporation Transparency and Law Enforcement Assistance Act would require companies to disclose their ultimate owners when the company is set up, and keep this information up to date. This would make it much harder for money launderers to hide their identity behind webs of shadowy companies to stash their ill-gotten gains in banks.
“Shining a light on the ultimate owners of companies would stop the U.S. from being a haven for dirty money from around the world. This would be transformative for millions of people living in resource rich developing countries, where government revenues are all too often siphoned offshore by corruption and tax evasion facilitated by phantom firms,” said Ostfeld.
Notes to editors
- Global Witness investigations have consistently highlighted the reluctance of major banks to turn away suspect funds and have detailed how weaknesses in the global anti-money laundering system have allowed corrupt politicians to move their illicitly-acquired loot with a high degree of impunity.
- In December 2012, HSBC Bank USA and HSBC Holdings signed a deferred prosecution agreement with the Department of Justice and agreed to pay $1.9 billion in its settlement with U.S. authorities. According to legal documents for the case, HSBC admitted that it failed to apply legally required money laundering controls to $200 trillion in wire transfers alone, in a three year period, and that at least $881 million in drug trafficking proceeds, including proceeds of drug trafficking by the Sinaloa Cartel in Mexico and the Norte del Valle Cartel in Colombia, were laundered through HSBC Bank USA. Despite HSBC’s massive failures in anti-money laundering compliance, to date, there have been no criminal prosecutions.
- The Obama Administration committed to create registries of the ultimate owners of companies at the G8 in June. The Obama Administration also committed to advocate for legislation that would require meaningful disclosure of beneficial ownership information in the U.S. Open Government Partnership National Action Plan and the Strategy to Combat Transnational Organized Crime.
- Global Witness has documented how corporate secrecy in the U.S. and around the world fundamentally undermines global anti-money laundering laws. Global Witness’ research has revealed that corrupt foreign politicians and pariah regimes exploit the secrecy provided by anonymous American shell companies to access the U.S. financial system. The Senate Permanent Subcommittee on Investigations has also exposed how easy it is for foreign officials to mask their identity behind U.S. shell companies so they can stash their ill-gotten gains in American banks. A World Bank report found that the U.S. was the favorite destination of corrupt politicians trying to set up shell companies and a Griffith University study ranked many U.S. states among the easiest jurisdictions in the world to form a company without revealing the identity of who ultimately owns and controls it.