In the third season of Showtime’s drama Homeland, the CIA is working to track the finances of a terrorist group through a maze of shell corporations and offshore accounts from Iran to Venezuela.
This isn’t just a Hollywood plotline. It is, unfortunately, all too real.
Terrorists, drug traffickers, corrupt politicians, and criminals easily move money around the globe every single day. They use shell corporations, which have no assets or operations and exist simply to conduct business transactions.
Shell corporations serve no legitimate business purpose other than to hide their true owners and officers. They enable brutal dictators in Equatorial Guinea and Uzbekistan; terrorist groups, such as Hezbollah; and drug lords to hide their profits from crime and corruption.
The Open Society Foundations have joined the effort to curb the potential abuse of shell corporations and to stop illicit financial flows. The first step is to see who is really behind these corporations.
Information about who owns and profits from companies, which is known as “beneficial ownership information,” is secret in most places. But the European Union, the United Kingdom, and the United States have taken action to require more disclosure:
- The EU is considering amending its Anti-Money Laundering Directive to tighten loopholes and demand that natural beneficial owners of corporations be named in a public registry.
- The UK recently held a public consultation on the question of whether to make beneficial ownership registries public. France is considering similar measures.
- The Obama administration has promised to take action on beneficial ownership as part of its commitment under the transparency initiative Open Government Partnership. Congress is considering legislation to create private corporate registries at the state level.
Just knowing who owns what corporations would help everyone from law enforcement officers to journalists and interested citizens prevent and detect crime and bring perpetrators to justice.
Nevertheless, there are challenges to exposing the owners of anonymous shell companies. Multinational corporations, the financial sector, bar associations, and the countries that profit from corporate secrecy continue to out-lobby and out-spend activists to keep secrecy loopholes in place.
The Open Society Foundations have had a long-standing commitment to ensuring that money flowing to, from, and within societies is governed in the best interests of all citizens—rather than simply the powerful.
Toward that end, the Foundations have commissioned a paper on the problem of shell corporations and the current efforts to get beneficial ownership information into the public domain.