Financial secrecy in America, abetting war criminals

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US Senators Carl Levin and Barack Obama (Democrats) and Senator Norm Coleman (Republican) have introduced a bill, with the unwieldy title of "Incorporation Transparency and Law Enforcement Assistance Act" (summary here.) Its declared intention is "to protect the United States from U.S. corporations being misused to commit terrorism, money laundering, tax evasion, or other misconduct." As Levin (pictured) said:

"The problem is straightforward. Each year, the States allow persons to form nearly 2 million corporations and limited liability companies in this country without knowing – or even asking -- who the beneficial owners are behind those corporations. Right now, a person forming a U.S. corporation or limited liability company (LLC) provides less information to the State than is required to open a bank account or obtain a driver’s license. Instead, States routinely permit persons to form corporations and LLCs under State laws without disclosing the names of any of the people who will control or benefit from them."

He goes on:

"Criminals are exploiting this weakness in our State incorporation practices. They are forming new U.S. corporations and LLCs, and using these entities to commit crimes ranging from terrorism to drug trafficking, money laundering, tax evasion, financial fraud, and corruption. . . . our law enforcement officials have too often had to stand silent when asked by their counterparts in other countries for information about who owns a U.S. corporation committing crimes in their jurisdictions. The reality is that the United States is as bad as any offshore jurisdiction when it comes to responding to those requests."

The United States is a tax haven, for these reasons alone. By opening its doors to some of the world's dirtiest money, the U.S. encourages foreigners to channel money into the U.S. - helping, among other things, to finance the yawning U.S. current-account deficit.

Who has the U.S., through its secrecy and other tax haven activities, been inviting to bank in the U.S.? Here's a new one: Charles Taylor, the former president of Liberia. Taylor, who is being tried for war crimes by a U.N. tribunal, oversaw and supported forces that routinely chopped off the hands and tongues of their victims, used rape as a weapon of war, and, a war crimes trial heard, "ordered militias to eat the flesh of their enemies." According to testimony, he "instructed his fighters in Liberia to even eat UN peacekeepers to set an example for the people to be afraid." The BBC on May 2 quoted the UN chief prosecutor for the case:

"We have evidence of two accounts that were maintained in his name in the United States during his presidency," he said, adding that they had had almost $5bn at one time."

Barack Obama's website lists a litany of crimes that U.S. financial secrecy and regulatory laxity have permitted: up to $36 billion laundered from the former Soviet Union; the use of shell companies in Pennsylvania and Delaware to divert international aid intended to upgrade the safety of former Soviet nuclear power plants; the use of U.S. shell companies to rig markets - and much more.

The different states in the United States compete against each other on tax and transparency - and it is a race to the bottom. This is an internal U.S. equivalent of the competition between nation states on tax and regulation, which is arguably the biggest force boosting crime, poverty and corruption in the world. (In the U.S., the state of Delaware seems to head the pack on dirtiness. Richard Murphy explains more here.)

What is astonishing, once again, is that this kind of thing - attracting money from these kinds of rogues on purpose, has been allowed to go on for so long, with so little attention from international civil society. It is this kind of thing - not widely noticed but with colossal implications for the world - that we aim to bring to people's attention. As Obama said:

"It's time for the United States to meet its international anti-money laundering commitments, and that means getting beneficial ownership information for U.S. corporations."

*** TJN OFFER: WE WILL OFFER A CASE OF CHAMPAGNE TO ANYONE WHO CAN PROVIDE DETAILED EVIDENCE THAT SUBSTANTIATES WHERE ZIMBABWEAN LEADER ROBERT MUGABE HOLDS OFFSHORE ACCOUNTS OF WHICH HE, HIS FAMILY OR HIS CLOSEST CRONIES ARE BENEFICIAL OWNERS ***