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Panama Papers and the United States

TI-USA Press Release: Transparency International-USA calls for greater transparency of anonymous companies in the US following the massive Panama Papers leak.

Our Press Release calls for greater transparency of anonymous companies in the US following the massive Panama Papers leak.

The Coalition for Integrity is advocating for an end to anonymous companies because they allow corruption to flourish. Help by writing to members of Congress urging them to pass legislation that could help end abuse by anonymous companies. We’ve drafted a template for you below. Here’s why we are asking you to act NOW. It affects everyone.

The massive leak of 11.5 million files dubbed the “Panama Papers” highlights how easy it is for public officials and high net worth individuals to hide their wealth.  More than 100 politicians and public officials were shown to use anonymous companies that mask their identities, often aided by a network of lawyers, bankers and company formation agents.

The list includes current and former world leaders. The offshore entities are connected to people in more than 200 countries and territories.

Secrecy opens the door to corruption, to money laundering and to tax evasion. And it’s not just in Panama.

In every state in the United States, it’s possible to incorporate a legal entity without having to disclose who controls the entity or derives economic benefits from it. 

What Are Anonymous Companies?

Anonymous companies are entities whose ultimate ownership is hidden or disguised so that the real person who benefits from the assets, owns the assets or has control over the assets is not disclosed. A company may list a nominee shareholder or a dummy director as its owner. Anyone will do. Sometimes, it’s the receptionist at the law firm that sets up these companies.

Every year, over two million corporations and other business entities are formed in the U.S.  States collect very little information from the individuals forming these entities; sometimes less than is required to get a driver’s license or renew a public library card.

And the process is very simple. This is a video of how a journalist set up a company in Delaware for her cat.

Once created, an anonymous company can open bank accounts, wire money, and buy property like any other company. It can engage in activities that may launder tainted funds without disclosing the name of the natural person benefiting from its activities.

How Does This Affect You?

When the proceeds of corruption, such as terrorism, drug trafficking, money laundering, tax evasion, securities fraud and financial fraud are hidden, they can have a corrosive effect on ordinary lives in the US. For example:

  • Inflated House Prices: In the U.S., anonymous companies have been used by hidden buyers to heat up the real estate markets in Manhattan and Miami, pushing up price. The New York Times reported “nearly half of the most expensive residential properties in the United States are now purchased anonymously through shell companies.” In Miami-Dade county in Florida, foreign buyers make up a quarter of all the real estate purchased in 2015.  According to the Miami Herald ordinary citizens like teachers and nurses cannot afford homes in Miami today.
  • Election Financing: The 2016 campaign is  the most expensive on record and there are reports that anonymous companies are funneling money into independent groups. This makes it difficult to discern the identities of the players seeking to influence the elections.  In previous elections, anonymous companies have been used to disguise campaign contributions.
  • Domestic Corruption: Former congressman William Jefferson (D-LA), who famously got caught with $90,000 of bribe money in his freezer, used anonymous companies incorporated in Louisiana and Delaware, to take in almost $500,000 in bribes.
  • Fraud and Abuse: Anonymous companies have been used to steal money from the elderly and other citizens in the U.S.  Companies contracting with the federal government have also used anonymous companies to defraud the government.  In 2014, for example, a federal defense contractor, Supreme Foodservice, pleaded guilty to defrauding the government by creating a fake company to act as a middle man and mark up the price of food and drinks sold to the military.
  • National Security Risks: The U.S. Department of Justice, U.S. Immigration and Customs Enforcement, the former District Attorney of New York and the Federal Law Enforcement Officers Association have all testified at congressional hearings that the ability of criminals to use anonymous U.S. corporations significantly hampers their efforts to fight terrorism and other serious crimes.
  • Destroying Development: Kleptocrats and corrupt high level officials use anonymous companies to funnel the funds they have stolen out of their countries. This type of foreign corruption in other countries leads to loss of trust in government, political instability, and a breeding ground for extremists and hence present a national security problem.

The amount of money involved is staggering. The one law firm named in the Panama Papers handled billions of dollars.

Those funds which are stolen, hidden or laundered through anonymous companies could be used to build schools, hospitals, roads and promote development such as the growth of small businesses that benefit communities in the United States and around the world.

What Can You Do?

Tweet at and write to your representatives calling for them to pass key legislation.

Sample Tweet:

@RepHensarling pass incorporation transparency legislation to end secret companies #Panamapapers on our doorstep US should act NOW.

Please write to your congressman/woman (Find your Senators and Representatives), Congressman Jeb Hensarling, Chairman, House Committee on Financial Services, and/or members of the Task Force to Investigate Terrorism Financing of the House Committee on Financial Services, to urge passage of bipartisan legislation recently reintroduced to address the problem of corporate anonymity.

Copy and paste the message below and email it to your representative or to the key individuals named above.

 We are shocked by the recent disclosures in the Panama Papers leak that expose how many rich, famous and politically connected people, from heads of state to crime bosses and business owners, hide their wealth behind the façade of secret companies.

This should be stopped. It is now time for Congress to act and pass bills to require the collection, maintenance and updating of beneficial ownership information on legal entities for law enforcement purposes.

Anonymous companies are used for dirty money transactions and schemes that support drug traffickers and terrorists, defraud government agencies and cheat US citizens, and undermine U.S, institutions. Congress should put a stop to them now.

Coalition for Integrity’s Shruti Shah on CNN explaining if the Panama Papers will aid the global fight against Corruption.

PBS Newshour with Gwen Ifill: Coalition for Integrity’s Shruti Shah discusses the implications of the Panama Papers scandal and calls for reforms in the U.S.