Hollowing Out US Shell Companies

A major leap forward for corporate accountability

As part of the Financial Accountability and Corporate Transparency (FACT) Coalition, Public Citizen has been working on ending anonymous corporations for almost a decade. This week, we’re poised to have a major victory, with the inclusion of the Corporate Transparency Act in the National Defense Authorization Act (NDAA). The NDAA has now passed Congress with veto proof majorities, so it is on course to become law regardless of whether President Donald Trump follows through with his threats to veto it. Trump has threatened to veto the bill because it doesn’t contain an unrelated measure related to social media companies and takes steps toward ending the glorification of the Confederacy.

Shockingly, less information is routinely needed to incorporate a company than to get a library card. This has major implications when it comes to crime, taxes, and corruption. The book Global Shell Games documented how these shell companies were critical in laundering drug cartel money and the fruits of arms deals with Iran and North Korea. Another book on the topic, Secrecy World, estimates that shell companies and tax havens cost the United States $70 billion a year in desperately needed tax revenue.

The Republican National Committee recently served up a great example of how shell companies can impact Americans. Earlier this year a company called Digital Consulting Group was created, with no website, office address, or ownership information made public. It became the RNC’s top vendor of the election, racking up three of the top ten largest payments the RNC had ever made.

It’s ironic that while 2016 Trump campaign advisors Cambridge Analytica boasted that they had “up to 5,000 points of data on every US voter,” a company getting paid $5 million a month to help with his 2020 campaign would have so few data points on it. Other than records of the RNC’s payments, the only other information Salon was able to find on the company was its incorporation date and its incorporation address. There’s an important distinction between its incorporation address and where it conducts business. Thanks to the state’s terrible record enabling anonymous companies, a single building in Wilmington, Delaware, is the address of record to over 285,000 companies, including those owned by both Donald Trump and Hillary Clinton. Without transparency about a company’s owners available to law enforcement, if a secretive outfit like Digital Consulting Group were ever to be accused of wrongdoing, there would be no mechanism for the government to hold it accountable.

But, thankfully, in a rare act of bipartisanship, both the U.S. House and Senate have stepped up to the challenge of ending secret companies. By requiring companies to list their beneficial owners (real people, not corporate formation agents) on file with the Treasury Department’s Financial Crimes Enforcement Network, when the NDAA becomes law, it will finally at least give law enforcement the ability to know who is behind companies caught breaking the rules.

Thanks to the thousands of Public Citizen members that contacted their members of Congress on this issue; your voice made a difference!