Yet while the United States demands that financial institutions in other countries share information about Americans with accounts abroad, its reciprocation efforts fall short, critics say.
“You see a ton of wealth in tax havens in Switzerland and the Cayman Islands that is owned by shell companies that are incorporated in Panama or in Delaware,” he said. “The bulk of this wealth does not seem to be duly declared on tax returns.”
A recent report by the Institute on Taxation and Economic Policy called “Delaware: An Onshore Tax Haven” noted that the state’s lack of transparency combined with an enticing loophole in its tax code “makes it a magnet for people looking to create anonymous shell companies, which individuals and corporations can use to evade an inestimable amount in federal and foreign taxes.”
Heather A. Lowe, the legal counsel and director of government affairs for Global Financial Integrity, a research and advocacy group in Washington, warned that the problem was much more widespread than just a handful of states.
“You can create anonymous companies anywhere in the United States,” Ms. Lowe said. “The reason people know about Delaware, Nevada and Wyoming is because these states market themselves internationally.”
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Although there are legitimate reasons that individuals and businesses want to screen their holdings — for privacy or to prevent competitors from discovering investment plans — several experts said cloaking wrongdoing was a more common purpose.
Aside from avoiding taxes, shell companies are routinely used by terrorist organizations to hide assets, by political donors to sidestep campaign finance laws and by criminals to launder money, Mr. Gardner said.
The Treasury Department indicated this week that it planned to require financial institutions to verify the identities of customers who set up accounts in the names of shell companies, thus closing a loophole in the American banking system that thwarts transparency efforts.
The Treasury also recently began a program that tracks people who use shell companies to purchase expensive real estate in New York and Miami.
But the new rules would not affect state law.
John A. Cassara, a former special agent for the Treasury Department, said that American and foreign law enforcement officials conducting investigations were regularly stymied by state secrecy laws surrounding shell corporations.
“If somebody is conducting an investigation and it comes back to a Delaware company and you want to find who or what is behind that company, you basically strike out,” he said. “It doesn’t matter if it’s the F.B.I., at the federal level, state or local. Even the Department of Justice can’t get the information. There is nothing you can do.”JAT Note: Although it is true that the new Treasury Department rules requiring banks to dig into the ownership of companies do not affect state laws, they will affect the ability of those entities to maintain their secrecy and access the financial system.
One other thing, as this type of news hits the front page of prominent publications such as the NYT, I would expect that Congress will be forced to enact U.S. laws for more transparency.