GFI Welcomes Global Witness Report on “The Great Rip Off” from Anonymous Companies in America

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September 30, 2014

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GFI Welcomes Global Witness Report on “The Great Rip Off” from Anonymous Companies in America
Global Financial Integrity (Press Release), September 25, 2014

Study Reveals the Astonishing Breadth of U.S. Phantom Firms’ Threat to Americans’ Livelihoods and Cost to U.S. Economy and Government

Report Demonstrates the Clear Need for National Legislation to End Anonymous Incorporation in the U.S.

Global Witness, an international investigative and advocacy organization, today released a report, entitled “The Great Rip Off,” studying the use of anonymous U.S. companies for a wide range of illegal and otherwise fraudulent activities in the United States, and outlining the policy steps needed to curb this massive abuse of the incorporation system. Global Financial Integrity (GFI), a Washington DC-based research and advocacy organization that has worked closely with Global Witness over the years, recommends the report as a welcome new resource on an important but often misunderstood issue.

“Anonymous companies are by far criminals’ most preferred method of laundering their money, and they facilitate the flow of trillions of dollars of dirty money through the U.S. economy,” said GFI President Raymond Baker, a longtime authority on financial crime. “The U.S. government and individual states have done little to limit criminals’ access to the corporate form, and it’s time for them to step up and take action.”

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The Great Rip Off: New Report Shows How Anonymous American Shell Companies Are Used to Swindle Americans
FACT Coalition (Press Release), September 25, 2014

More Info Required to Drive, Borrow a Book Than Set Up a Phony Corp

To that end, the report recommends immediate action on bipartisan legislation currently pending in Congress that would require American companies to reveal their beneficial owners when they incorporate and to keep that information up to date.

“The Great Rip-Off shows that Americans need to wake up to the problem of anonymous U.S. companies and demand that Congress and their Secretary of State take meaningful action to shut the practice down,” commented Heather Lowe, Global Financial Integrity Director of Government Affairs and FACT Steering Committee member.  “Meaningful action means taking measures that collect information about all of a company’s beneficial owners, ensuring that beneficial owners are human beings and not other companies, and looking at whether someone is controlling the company behind the scenes by considering trust arrangements or if someone is acting through an agent.  Ideally, that information should be available to the public.  Everyone should be able to know who they are doing business with.”

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Xi Jinping Has Ambition to Push through Sweeping Changes in China
South China Morning Post, October 1, 2014

Xi Jinping will use a top party meeting to outline how to deepen reforms, and the Apec summit to show the progress he’s made, writes Cary Huang

By Cary Huang

The 2013 Apec summit in Bali, Indonesia, saw the creation of a regional anti-corruption network, which will meet for the first time on the sidelines of the Beijing summit. The plan is to share information to prevent corrupt officials taking assets out of one economy and into another.

China is more eager than any other nation to develop such a network given the huge flight of corrupt officials and their ill-gotten gains from the country. Between 2002 and 2011, US$1.08 trillion of illicit funds were spirited out of China, according to estimates by the US-based Global Financial Integrity.

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The Flip Side of FDI
The Statesman (India), September 30, 2014

By Bharat Jhunjhunwala

A study by Harvard University showed that FDI exerts an ambiguous effect on growth. FDI in the primary sector has a negative impact on growth, while FDI in manufacturing has a positive impact. I must confess that certain studies commissioned by the world bank and the International Monetary Fund pointed to a positive impact of FDI. However, I have deliberately chosen to ignore them for being motivated. The almost inevitable conclusion is that FDI is not  beneficial. At best, it has no impact. This is the context in which the policy of attracting FDI has to be reviewed. It seems to be beneficial when matched with  frontier technologies. Such FDI is welcome. The problem lies with FDI that brings capital in the main. For example, Hindustan Lever had bought the Indian company, TOMCO. Such FDI brought only capital and no technology. Such capital-led FDI calls for reflection. Actually, the developing countries have become exporters of capital. All the developing countries taken together received $ 506 billion worth of FDI in 2006, according to data provided by the world bank. Against this, an amount of $ 858 billion has been remitted illegally from developing countries, according to the international watchdog, Global Financial Integrity.  The developing countries are receiving less money from FDI than they are losing through illegal remittances.

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Greece: Billionaires and Tax Evaders Both on the Rise
ANSA (Italy), September 24, 2014

The number of Greeks entering billionaire-status is on the climb, a study finds, despite the growing impoverishment of the country’s masses, as GreekReporter website writes citing an annual report published by the Wealth-X Agency and compiled with the assistance of UBS Swiss Bank. According to the survey, there are currently 11 Greek billionaires in the world, two more than in 2013. The total value of their property amounts to 14 billion euros, up from 12.4 billion euros in 2013. At the same time, several international organizations have found conclusive evidence of unreported wealth and tax evasions among this world billionaire class. Estimates of Global Financial Integrity are difficult to verify, but remain shocking nonetheless. In 2003-2011, an estimated 203 billion euros was withdrawn from Greece, much of it connected to corruption, criminal activity and tax evasion.

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India To Share Black Money Details With 45 Countries
Businessworld (India), September 23, 2014

India has been at the forefront in raising the issues of tax evasion and black money hidden in tax havens

Indians had moved $644 billion to tax havens as of 2011, according to Global Financial Integrity data.

Indian officials complain that the government does not receive enough details from Switzerland about black money suspected to be stashed in Swiss banks, which are known for their secrecy.

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Nigeria Loses Over $140bn to Illegal Cash Flows –Oteh
The Sun (Nigeria), September 29, 2014

By Chinenye Anuforo

The Director General, Securities and Ex­change Commission (SEC), Ms. Arunma Oteh has disclosed that Nigeria had lost over $140 billion to illicit financial flows within a 9-year period even as it is estimated to need about $50 billion investment to ensure stable electricity.

According to Oteh the fund are not lost only by embezzled public funds but a lot of it was lost through the illicit commer­cial activities of multinational companies.

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Money Laundering

Money Laundering Case Hangs Over Commerzbank
The Wall Street Journal, September 27, 2014

New Matter Could Upset Plans for Settlement of Sanctions Issue

By Christopher M. Matthews

The Manhattan U.S. attorney is investigating Commerzbank AG for alleged violations of money-laundering laws, potentially throwing a wrench in efforts by Germany’s second-largest bank to settle separate allegations that it violated sanctions by doing business with Iran and Sudan.

The sanctions probe is more advanced, and Commerzbank had been closing in on a deal with U.S. and state officials that could have required the bank to pay more than $600 million, according to people briefed on the investigation. The pact was on track to be finalized by the end of September, the people said.

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Exclusive: NY Targets Commerzbank Employees in Sanctions Accord – Sources
Reuters, September 30, 2014

By Karen Freifeld

New York’s financial regulator wants Commerzbank (CBKG.DE) to fire some of its employees as part of a settlement to resolve investigations into its dealings with Iran and other countries under U.S. sanctions, sources familiar with the matter said.

Germany’s second-biggest lender has been close to agreeing to pay $650 million to U.S. authorities over sanctions-related violations, with almost half going to the regulator, New York’s Department of Financial Services, Reuters has reported.

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More Businesses on Guard Against Money Laundering
The Wall Street Journal, September 28, 2014

Compliance Now Concerns Non-Bank Businesses Like Retailers, Marijuana Sellers

By Rachel Louise Ensign

More than 2,000 anti-money-laundering professionals will gather in Las Vegas starting Monday for one of the top conferences on the topic. Joining the banker-heavy event this year will be staffers from MGM Resorts International, supermarket Meijer Inc. and online retailer Inc.

It is the latest sign that businesses other than banks are concerned about staying away from dirty money. Banks have paid huge fines in recent years over having inadequate controls to prevent money laundering, and now authorities have signaled that they are focusing on nonbank businesses, too.

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Tax Evasion and Avoidance

Global Crackdown on Tax Havens Fails to Sway Australian Companies
The Age (Australia), September 29, 2014

By Georgia Wilkins and Heath Aston

Australia’s top companies have been unswayed by a global crackdown on corporate tax avoidance, with almost 60 per cent of the top 200 listed companies holding subsidiaries in tax havens or low-tax jurisdictions.

Data also shows some companies that promised to get out of tax havens have actually added to their offshore subsidiaries.

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Ireland’s Tax Deals for Apple Prompt Warning From European Commission
The New York Times, September 30, 2014

By James Kanter and Mark Scott

The European Commission on Tuesday warned that tax advantages ireland has granted to Apple for more than two decades might amount to illegal state aid that could require the company to pay huge amounts in back taxes.

Tax experts said the financial impact — if any — on the company and ireland was difficult to predict, as the case could take years to play out.

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New U.S. Tax Rules Will Slow, Not Halt, Inversion Deals
The Wall Street Journal, September 24, 2014

Experts Question How Long Any Chilling Effect Will Last

By John D. McKinnon, Liz Hoffman, and Hester Plumridge

The Obama administration’s move to tighten rules on corporate inversions should discourage new deals, at least for a while, by making them harder and less profitable, tax experts said. On Tuesday it already was roiling some pending transactions.

In an inversion, an American company moves its tax home to a country such as the U.K. or Ireland, where corporate taxes are lower. Its administrative headquarters and most business operations typically remain in the U.S. American companies have pulled off most of their recent inversions by merging with smaller foreign companies.

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