[Congressional Record Volume 162, Number 65 (Wednesday, April 27, 2016)]
[Senate]
[Pages S2483-S2484]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]
INCORPORATION TRANSPARENCY AND LAW ENFORCEMENT ASSISTANCE ACT
Mr. WHITEHOUSE. Mr. President, I am here today to highlight law
enforcement legislation that would help crack down on human
trafficking, terrorism financing, money laundering, Medicare fraud, the
narcotics trade, tax evasion, public corruption, and a litany of other
crimes in the United States and around the world. These crimes all
involve money, and the United States has become a favorite destination
for criminals looking to hide it.
Earlier this month, the International Consortium of Investigative
Journalists published the first of the so-called Panama papers, a leak
of 11.5 million confidential documents from a Panama-based law firm
that sets up shell corporations and tax shelters for wealthy clients.
The documents we have seen so far show that, along with the Caribbean
islands you might expect, several American States are popular places to
form shell corporations.
Our friend Senator Kent Conrad, who used to be chairman of the Budget
Committee, was fond of using this floor chart showing what is called
the Ugland House building in the Cayman Islands. This little building
claims to be the place from which an astonishing 18,000 companies do
business. As unimaginable as it may be to have 18,000 companies
claiming to be doing business out of that one little building, I am
sorry to say that there is a building just a 2-hour drive from the U.S.
Capitol Building that serves as the official address for a quarter of a
million companies, many of them shell corporations.
A shell corporation is a company that serves no economic purpose and
doesn't conduct any real business. Shell corporations exist primarily
to hold legal title to bank accounts, real estate, or other assets,
often obscuring the true human owners. While people can form shell
corporations in just about any country, many American States make it
especially easy to do so, perhaps even easier than getting a library
card. You may actually need to go down to a library to sign up for a
library card, but you can form a shell corporation with a few clicks of
a mouse and payment of a small fee.
There is another reason that the United States has become so popular
for shell corporations. Currently, none--zero--of the 50 American
States require the disclosure of the beneficial owners--the real human
beings who own the companies. Instead, corporate records can identify
the owner as just another faceless shell corporation, or the owner
could be identified as a professional agent paid to sign the needed
forms and never speak of them again or a lawyer who refuses to disclose
who his client is under attorney-client privilege. Behind this easy-to-
establish veil of secrecy, criminals can and do use these shell
corporations to open bank accounts, transfer funds, and even to hide
the ownership of expensive assets.
This building shown here is at 650 Fifth Avenue in New York City. The
Iranian Government used a string of generic businesses to obscure its
ownership of this Fifth Avenue skyscraper. Profits from this enterprise
helped fund Iran-backed terrorism for decades, until a U.S. Government
investigation finally uncovered the scheme in 2008.
How could a state sponsor of terrorism own a piece of the New York
City skyline and profit from owning that piece of the New York City
skyline for so long without anyone knowing? Let's look at how Iran used
anonymous shell corporations to hide its involvement.
On paper, 650 Fifth Avenue was owned by a partnership of the Alavi
Foundation, a New York-based charity, and the Assa Corporation, a New
York shell company. Assa Corporation was, in turn, owned by yet another
shell company, Assa Company, Limited, and formed in the Isle of Jersey,
a notorious banking center and tax shelter. The Isle of Jersey company
was in turn owned by individuals representing Bank Melli, the Iranian
Government's financial arm, and there is the connection to Iran.
So to the public, that building--worth about half a billion dollars--
was
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owned by a charity and a faceless shell company. Because there is no
requirement in the United States that States keep track of the real
owners of a company formed under State law, New York State only knew
that the Assa Corporation was owned by another shell corporation.
Ultimately, investigators were able to connect those dots and tie Iran
to the structure from a clue in the corporate records kept on the Isle
of Jersey.
How is that for irony? A notorious tax shelter actually had better
ownership records than we have in the United States. Once Iran's
investment and involvement was uncovered, the Department of Justice
moved to seize and sell the building and to distribute the proceeds of
that sale to American victims of Iranian-backed terror. After years of
legal appeals, the victims look close to receiving this compensation.
Of course, Iran isn't the only criminal enterprise hiding behind
American shell companies. Other recently uncovered examples of
enterprises hiding behind American shell companies include a Mexican
drug cartel using an Oklahoma corporation to launder money through a
horse farm, a crime syndicate setting up a web of corporations in eight
States as part of a $100 million Medicare fraud scheme, and a human
trafficking ring based in Moldova that hides their crimes behind
anonymous corporations in Kansas, Missouri, and Ohio.
According to the Rhode Island State Police, corporate secrecy in my
own State has complicated their investigations into real estate fraud,
illegal prescription drug distribution, and sales tax evasion.
In January, just months before the Panama Papers hit the headlines,
``60 Minutes'' aired a segment showing just how easy it can be for
criminals to hide money in the United States. The program featured an
investigator with the anticorruption organization Global Witness. That
investigator pretended to represent a corrupt African leader, and ``60
Minutes'' brought a hidden camera along into his meetings with lawyers
in New York.
The investigator, presenting himself as representing the corrupt
African leader, made clear that his client wanted help using suspicious
funds to buy a mansion, a jet, and a yacht in the United States and to
hide his ownership of these assets. Of the 16 lawyers who met with the
undercover investigator, only 1 turned him away. It seems the others
were comfortable helping a corrupt foreign official hide money in
opaque American shell corporations.
While the underlying criminal schemes may be colorful and complex,
the answer to this shell corporation problem is simple and
straightforward. The Incorporation Transparency and Law Enforcement
Assistance Act would direct States to require applicants forming
corporations and limited liability companies to include basic
information about the actual human beings who own the company.
The States would maintain and periodically update this information,
and it would be available to law enforcement officers who present valid
court-ordered subpoenas or search warrants. It is simple. Have each
State keep track of who actually owns companies they charter and ensure
that information is available for Federal, State, and local law
enforcement agencies through proper processes.
Transparency in business ownership is not a novel idea. Every member
of the European Union will be transparent by 2017. The United Kingdom
and the Netherlands have even announced plans to make their corporate
ownership registries available to the public. With the light of
corporate transparency about to shine on criminal assets hidden in
Europe, their shell corporations will not be effective for these
purposes. So that money will be looking for new dark homes.
America should take swift action to make sure these assets don't find
new hidden homes in opaque American shell corporations. We are supposed
to be an example to the world, not the place where the world's corrupt
and the world's criminals hide their cash and their assets.
The Incorporation Transparency and Law Enforcement Assistance Act
enjoys broad support from the national law enforcement community,
including the Federal Law Enforcement Officers Association, the
Fraternal Order of Police, the Society of Former Special Agents of the
FBI, and the U.S. Marshals Service Association, as well as the Rhode
Island State Police.
Mr. President, I ask unanimous consent to be able to finish my
statement.
The PRESIDING OFFICER. Without objection, it is so ordered.
Mr. WHITEHOUSE. Chuck Canterbury, president of the National Fraternal
Order of Police, explains it this way: ``When we are able to expose the
link between shell companies and drug trafficking, corruption,
organized crime, and terrorist finance, the law enforcement community
is better able to keep America safe from these illegal activities and
keep the proceeds of these crimes out of the U.S. financial system.''
Of all places, the United States should not be a safe haven for
criminals, foreign or domestic, to hide their illegal assets. We could
take a simple major step in fighting money laundering, financial fraud,
and terrorist financing by passing this bill. I urge my colleagues on
both sides of the aisle to cosponsor it and to help us get it passed.
I thank the Chair. I appreciate the extra time.
I yield the floor.
The PRESIDING OFFICER. The Senator from Arizona.
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