Steve Greenwood, Deseret News archives
PROVO — A new study from Brigham Young University investigating the ease of establishing shell companies found that Utah follows the law but states like Montana, Nevada and Wyoming are among the most likely to turn a blind eye to laws requiring identification of corporate owners.
The study entitled, “Global Shell Games: Testing Money Launderers’ and Terrorist Financiers’ Access to Shell Companies” found that nearly half of corporate service providers around the world do not collect legally required identification from customers seeking to form a shell company.
Tax havens like the Cayman Islands complied with international laws far better than many wealthy nations, the study found.
Shell companies have no assts or employees and are established to conduct transactions and have other legitimate uses. However, when when company owners are anonymous and untraceable to law enforcement they become potential vehicles for bribes, money laundering and financing of terrorism.
“In some ways it’s discouraging that identification of corporate owners is widely disregarded, but we can’t fix these global problems unless we know what they are and where they are,” said Daniel Nielson, a lead author of the study and BYU political science professor.
Nielson and colleagues from BYU, the University of Texas at Austin and Australia’s Griffith University carried out an experiment to see how well the laws were followed. Using 21 different email aliases, they contacted representatives of 3,700 corporate service providers in 182 countries around the world.
The study purports that for criminals moving large sums of illegal money internationally, there is no better device than an untraceable shell company.
“If you are doing something illicit and you want to go over national boundaries, the easiest and best way to do is with an anonymous shell company,” he said.
For the study, researchers impersonated a variety of low-and high-risk customers, including would-be money launderers, corrupt officials and terrorist financiers when requesting to create the anonymous companies.
Shell companies that cannot be traced back to their real owners are one of the most common means for laundering money, giving and receiving bribes, busting sanctions, evading taxes, illegal gambling and financing terrorism, Nielson said.
Such shell companies can be set up online in dozens of countries in days or even hours for as little as a few hundred dollars, he said. The companies that cannot be linked back to the real individuals in control can create near impossible obstacles for regulators and law enforcement officials to overcome, the report stated.
He said he biggest problem was in wealthy nations, including Canada, England and especially the United States. In the U.S., corporate law is handled by the states, he said.
Utah faired well in the study and is more diligent in preventing potential abuses.
“It’s hard to get an anonymous shell company in Utah,” he said. “From our study, we found that it would be very difficult to impossible to get an anonymous shell company in Utah.”
Conversely, he said it would be very easy to get an untraceable shell company in Montana, Nevada, South Dakota and Wyoming.
“Easier than almost anywhere in the world,” Nielson said. The places that rivaled those states where the nations of Kenya and our neighbor to the “Great White North”, he said.
“Canada is very bad,” he said. “It’s easy to get an anonymous shell company in Canada.”
Nielson said having such lax laws makes those places much more susceptible to potential criminal activity.
“It makes them havens,” he said. “(Those states) make it easy to incorporate anonymously and therefore facilitate illicit movement of money.”
He noted that New York was “not much better.”
The Deseret News contacted officials with the states of Montana, Nevada, and Wyoming. All three states declined to comment on the findings in the study.
Representatives from South Dakota did not respond to attempts made via telephone and email.
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