DCWATCH
tic companies. Jennifer Shasky, senior
counsel to the deputy attorney general,
told a Senate committee in November
that Viktor Bout, an arms merchant and
war profiteer, used U.S. shell companies
to further his illegal arms-trafficking
activities. And Semion Mogilevich, on
the Federal Bureau of Investigation’s ten
most wanted fugitives list, is charged with
using U.S. shell companies to hide investment activities and to launder money.
Those are the “relatively rare”
instances, Shasky says, in which law
would also be required to establish anti–
money laundering programs.
“States that offer corporations to individuals without insisting on information on ownership
UNDERMINE THE EFFORTS OF LAW ENFORCEMENT to prevent crime,” says Jack Blum.
enforcement was able to identify the perpetrator misusing U.S. shell companies.
“Far too often we are unable to do so,”
she adds.
Another aspect of the problem, she
says, is that the U.S. government is fre-
quently unable to respond to informa-
tion requests from foreign governments
pursuing their own investigations. And
the availability of shell companies for
sale on the Internet is, accord-
ing to Levin, a “disaster wait-
ing to happen.”
ity report requirements on lawyers, he
adds, which the ABA has long opposed
because it would create inherent con-
flicts between lawyers and their clients.
“The ABA and other specialty bar asso-
ciations have been developing voluntary
good-practice guidance for U.S. lawyers
to identify and detect money laundering
and terrorist activities,” Shepherd says.
“We don’t need federal legislation in
this area.”
Under the legislation, states
would be required to add a
question to their incorporation
forms asking for the names and
addresses of those who would
own or control the corporation
or LLC. (Justice and Treasury
are urging the committee to
require a government-issued
photo identification of all, not
just foreign, beneficial own-
ers.) They would update the
information annually and provide it to
law enforcement when subpoenaed.
The bill would impose penalties on per-
sons who submit false information, and
foreign owners would have to supply
a passport photograph to a corporate
“formation agent”—defined as a person
“who, for compensation, acts on behalf of
another person to assist in the formation
of a corporation or limited liability com-
pany.” Those agents would be required
to know their customers and refrain from
doing business with suspect clients. They
The ABA has joined the
National Association of
Secretaries of State, the Uni-
form Law Commissioners,
the National Conference
of State Legislatures, and
business groups in voicing
other concerns. North Caro-
lina secretary of state Elaine
Marshall, representing the
national association, says the
legislation would federalize
a traditional state function,
change the ministerial role
of state agencies to one of collecting and
processing ownership information, and
impose an extremely costly implementation regimen to design new databases
and educate the public.
Fugitive Semion
Mogilevich
Marshall’s association has recom-
mended instead that states ensure that
their laws prohibit so-called bearer
shares (stock certificates with no record
of ownership) and require that entities
file a periodic report including the name
and address of someone in the United
States who has responsibility for provid-
Justice Network–USA and Global Finan-
cial Integrity, is satisfied with the states’
alternatives. Blum, who represents Tax
Justice Network, says, “We’re dealing
with states’ race to the bottom in an effort
to get more and more corporate business.
Delaware takes in $700 million–plus. You
can understand why they don’t want to
give it up.” What Blum says he cannot
understand is why the British island of
Jersey, “a pretty notorious tax haven,”
can collect information on beneficial
ownership with just two simple ques-
tions and Delaware cannot.
