Blog / Oct. 1, 2012

Mystery shopping exercise shows how easy it is to set up anonymous companies in the U.S. and UK

Originally posted on the Taskforce on Financial Integrity’s website here.

By Rosie Sharp

Rosie Sharp is a Senior Campaigner for Global Witness, a member of the Task Force Coordinating Committee.

You’re a criminal and you’ve got loads of cash.  You really want that mansion in London. But how are you going to get it?  You need a company service provider to set up an anonymous shell company to disguise who’s behind the money and a bank willing to do business with your shell.

But how simple is this process given international law, and in virtually every country[1], national law too, insists companies should not be anonymous?

A new study out last week shows it is disturbingly easy for criminals to hide their identity behind companies.  Academics Michael Findlay, Daniel Nielson and Jason Sharman proved this in their revealing study which tested the effectiveness of this key area of law in the fight against dirty money.

Posing as consultants, they asked more than 3,700 company service providers in 182 countries to each set up a shell company for them.  Then they recorded how many of them abided by the law by recording who owned and controlled that company. 

The results make happy reading for the world’s corrupt politicians, mafia bosses, tax evaders and criminals.  The academics’ shopping exercise found that 48% of company service providers who replied to the survey were prepared to set up an anonymous shell company in that they did not require the researchers to provide an authenticated copy of their passport.

And, contrary to expectations, the company service providers in the places that you’d imagine might help out the wannabe kleptocrat – the small, sunny Caribbean island tax havens – were far more law-abiding than company service providers in rich, OECD countries.  Not a single example could be found of a service provider in the Cayman Islands willing to set up an anonymous company. Yet it was really quite easy to find a service provider in the UK who would flout the law for you. Of all OECD nations, American company service providers were the worst offenders. In fact,  only Kenyan service providers exceeded their U.S. counterparts in their willingness to establish anonymous companies,

Criminals can rest easy.  It’s really not that difficult to get yourself an anonymous company – and one registered in a pretty legit-sounding place too.

Those interested in the fight against dirty money take note: the world’s anti-money laundering laws are regularly flouted.  The solution is for public registries of the real, ‘beneficial’, owners of companies to be made public. This is what the Task Force is advocating for.  It needs to be possible to find out who owns and controls companies.  Without this ability, it will remain all too easy for terrorism to be funded, arms to be smuggled, taxes to be evaded and poor countries’ wealth to be stolen by corrupt politicians who often as not invest their ill-gotten gains in a London mansion.

[1] The United States is the main exception to this.  Company service providers in the US aren’t regulated under the country’s anti-money laundering laws, contrary to the international standards that the US itself helped to set.