Laundering Queries Focus on Corporate Secrecy Haven

Forget about Panama for dirty money. Delaware has appeared as a new haven for Eastern Europeans ...

Laundering Queries Focus on Delaware
By GLENN R. SIMPSON Staff Reporter of THE WALL STREET JOURNAL
September 30, 2004; Page A4

WILMINGTON, Del. -- Delaware's corporate-secrecy laws may be making it a haven for foreign criminal groups, prompting prosecutors in Eastern Europe and Russia to flood the Justice Department with requests for help in probes of Delaware shell companies.

In the past four years, law-enforcement agencies in Russia, Hungary and a dozen other nations have made more than 100 formal requests to the Justice Department to go before the U.S. District Court in Delaware to obtain subpoenas to learn more about the companies. In many cases, foreign prosecutors say in their requests that they believe the companies are controlled by or connected to Eastern European criminals who use them to move money into and out of the U.S.

The cases also have connections to U.S. and foreign banks, and are generating concern among top U.S. regulators and law-enforcement officials that crime groups were able to penetrate the U.S. economy despite warning signs such as a $7-billion money-laundering probe at the Bank of New York in 1999.

The Delaware cases involve a handful of banks that have catered to the region including the Bank of New York, ABN Amro Holding NV, and Bankers Trust, all of which kept correspondent accounts in New York for small Eastern European banks. Correspondent accounts allow foreign banks to conduct dollar-denominated transactions and move funds into the U.S. without setting up a U.S. branch, simply by paying fees to a host bank that has a U.S. banking license. These accounts allow banks to move money around the world without having branches everywhere.

Both the Bank of New York and ABN Amro, of the Netherlands, are the subjects of law-enforcement inquiries related to their ties to companies suspected of fraud and money-laundering in Eastern Europe.

In addition, ABN Amro is the subject of a previously undisclosed fraud suit in New York State Supreme Court over its ties to a bank in Cyprus that the Treasury Department has blacklisted for money-laundering.

That case appears to have played a role in generating a Justice Department money-laundering investigation concerning ABN Amro, documents related to the case show. In February of this year, one letter states, a lawyer with the influential Washington firm Patton Boggs met with the deputy chief of the Justice Department's money-laundering section on behalf of a group of Hong Kong investors claiming they had been defrauded by ABN Amro and provided the prosecutor with numerous documents. A Justice Department spokesman couldn't be reached last night."We are aware of a legal matter to which you refer...and we have filed a motion to dismiss the matter," an ABN Amro spokesman said.

A spokeswoman for the Bank of New York couldn't be reached.

Delaware law allows for creation of limited-liability corporations and other entities without identifying beneficial owners or directors -- one of many company-friendly laws that make the state a favored corporate-headquarters venue. These laws have led to a thriving industry that helps fuel Delaware's economy by bringing business to the state, even though the process now often is done over the Internet.

When the Soviet Union collapsed, officials say organized-crime groups that emerged gravitated to Delaware, prompting warnings from watchdogs such as the U.S. Government Accountability Office that Russian firms could use the state for money-laundering. A vast archive of correspondence from prosecutors in Eastern Europe in U.S. District Court here now indicates criminal groups, corrupt politicians and money-laundering banks in newly liberated Eastern Europe in fact may have become some of the state's best customers.

The GAO, the investigative arm of Congress and then called the General Accounting Office, warned of potential problems in Delaware in an October 2000 report, "Suspicious Banking Activities: Possible Money Laundering by U.S. Corporations Formed by Russian Entities," which found that thousands of companies had been set up in Delaware on behalf of company brokers in Russia. "It is relatively easy for foreign individuals or entities to hide their identities while forming shell corporations that can be used for the purpose of laundering money," the report warned.

Delaware officials say the problem isn't their fault and there is little they can do about it. "The reality is they are using U.S. entities for this purpose, [but] there's nothing particularly unique about Delaware as related to these small privately held shell companies," said Delaware Assistant Secretary of State Rick Geisenberger. Many other states have the same laws, he said. "They're choosing to incorporate in Delaware for the cachet of the fact that Coca-Cola and McDonalds and lots of large multinationals incorporate here. So in many ways, we are sort of victims of our own renown."

The emergence of Delaware as a nexus for money-laundering, tax evasion and financial fraud is a potentially huge embarrassment to the U.S. in the war against transnational financial crime. While launching stinging rhetorical and legal attacks on foreign jurisdictions, U.S. officials long have overlooked Delaware, which also caters to American companies that use the state to reduce state taxes.

Four of the Delaware fraud cases involve Bankers Trust, a unit of Deutsche Bank since June 1999. Last month, a federal judge in Wilmington approved a request by the Justice Department to issue subpoenas to Bankers Trust on behalf of Ukrainian prosecutors seeking to investigate a tax-fraud case. In a nine-page letter, the Ukrainian tax police in Kiev described a complex mechanism to evade value-added taxes on aluminum exports. The deal involved a firm in Rehoboth Beach, Del., called Primeway LLC, which allegedly was a client of Bankers Trust, and a Latvian institution called Parex Bank that is the target of numerous fraud probes in Eastern Europe.

A spokeswoman for Deutsche Bank declined to comment.

Delaware corporate records show Primeway was registered as a Delaware business called Consumer Corporate Agents Corp. Primeway never disclosed any of its officers and directors in state filings, and no longer is registered after failing to pay incorporation taxes for three years. Prosecutors say that shortly before it went out of business, Primeway signed millions of dollars in fictitious contracts with a firm in Ukraine, allowing that company to claim millions of dollars in tax rebates from the Ukrainian government, in a classic organized-crime operation.

ABN Amro is the subject of a lawsuit in New York state court filed June 7 claiming it abetted a $16-million fraud against a group of Hong Kong investors called International Strategies Group Ltd. The architect of the fraud was allegedly First Merchant Bank OSH, based in the rump Turkish Republic of Northern Cyprus, a lawless region that lacks diplomatic relations with the U.S. and almost the rest of the world. The suit contends ABN Amro's office in New York was warned in writing by various banks, regulatory authorities and its own head office in Amsterdam about possible money-laundering by First Merchant in 1999 but failed to cut its ties to the bank immediately.

Write to Glenn R. Simpson at glenn.simpson @wsj.com

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To form your own Delaware company click here

Still waiting for #DelawarePapers and #Nevadapapers

For just $309, you too can hide your assets — in the U.S.

The website for Corporation Makers promises that owning a business can remain “your deep dark secret.”

“Do you wish to own land or other assets without anyone becoming aware of it?” it advertises.

Not a problem. All for as little as $309.

The pitch doesn’t rely on the loose rules of well-known offshore havens such as the Cayman Islands. It’s about Nevada.

Nevada is among a handful of U.S. states with liberal incorporation laws that offer many of the same benefits that have drawn business tycoons, politicians and money launderers from around the world to hide their wealth in exotic locales — a secret economy revealed this week in a series of reports based on leaked documents from a Panamanian law firm.

The so-called Panama Papers show how the firm Mossack Fonseca set up shell companies for the rich to shield their millions from the prying eyes of tax authorities and the public.

The firm’s most common destination was the British Virgin Islands, where it worked with more than 100,000 entities. But its seventh-most popular place to set up corporations — after island nations such as Seychelles — was Nevada, with more than 1,000 companies.

In pursuit of fees and other revenue, several U.S. states have competed with each other in recent decades to attract people from around the world starting businesses. The states promise minimal taxation and maximum legal protection and privacy, much like offshore tax havens.

“The mechanisms are pretty much the same here,” said Matthew Gardner, executive director of the Institute on Taxation and Economic Policy, a nonprofit in Washington. “There’s nothing special happening in Panama. Panama is pretty much a microcosm of what the U.S. is a willing partner in.”

Financial watchdog groups have dubbed the competition among states a “race to the bottom” that places the U.S. among the worst places in the world for corporate transparency.

“From the states' perspective, the end game is to raise revenue for the state by creaming off fees from large numbers of companies incorporating there — and the consequences be damned,” one such group, the Tax Justice Network, based in the United Kingdom, wrote in a 2015 report.

When John Cassara, a former special agent with the U.S. Department of the Treasury who investigated money laundering and fraud, was training foreign investigators, they would often ask about “this thing called Delaware.”

“You’ve heard the expression ‘follow the money’?” Cassara said. “Well, when the money trail leads to a Delaware corporation, it is almost a dead end for law enforcement.”

More than a century ago, Delaware sought to attract businesses by allowing companies to write governance rules that shielded management from liability and eliminated standard protections for shareholders.

Today, the state is the legal home to 1.1 million companies, 95% of which have their principal location in another state or country. Tens of thousands of businesses list the same Delaware addresses, home to their incorporating agents.

The businesses registered in Delaware include 65% of Fortune 500 companies.

But many more are limited liability corporations essentially unknown to all but the owners and their agents and lawyers, drawing enough criticism that the state maintains a “facts and myths” Web page.

“Delaware has a comprehensive statutory and regulatory regime to protect the public from improper behavior by business entities, just like other states,” it says.

State officials say that over the last decade or so they have cracked down on a variety of questionable practices, including the use of shelf corporations, or old shell companies that are sold to start-ups trying to pass themselves off as businesses established long ago.

Not in dispute are the benefits to Delaware: corporate franchise taxes — the fees for maintaining a business — provide the state nearly $1 billion a year, or a quarter of its annual revenue.

That success has drawn the attention of other states looking for sources of revenue.

In the 1980s, Nevada began revamping its corporate laws to minimize liability for management.

Among its biggest draws is secrecy.

The state allows “nominees” to file company documents while the identities of the true owners remain hidden.

That is a key selling point for many incorporation companies that specialize in establishing businesses in Nevada.

A common practice is for a nominee to be “appointed in the morning,” file state paperwork by lunch, and then resign by dinner, according to the incorporation site www.Nevada123.com.

“The less the public knows about your affairs, the less engaged they can become,” the site says.

Nevada and other states say their rules are not meant to encourage illegal activity.

But secretive entities have long been used to move and hide money. Hard-to-trace shell companies have served as fronts for controversial foreign buyers of top-end real estate in cities including New York and Miami.

Federal rules have also allowed U.S. political donors to hide campaign contributions by donating to super PACs through limited liability corporations.

One prominent Republican donor, the gambling industry magnate Sheldon Adelson, tried to hide behind secrecy protections when he purchased the Las Vegas Review-Journal last year.

The company’s journalists were informed one day that their new owner was a company called the “News + Media Capital Group,” which had been recently incorporated in Delaware with “undisclosed financial backers with expertise in the media industry.”

Corporate documents listed Michael Schroeder, a Connecticut newspaper publisher, as the company’s manager but did not name the owner, whose identity was only revealed after the newsroom revolted and its reporters launched their own investigation.

Adelson had originally denied buying the paper.

Gardner, of the financial watchdog nonprofit, explained the cost of such secrecy: “There is a basic matter of democratic distrust when you don’t know who’s running things.”

Secrecy has been allowed to flourish in the U.S. even as the government tries to improve corporate transparency abroad in an effort to cut off funding for terrorism, drug trafficking and other illicit activity.

But pressure is building on federal and state officials to address corporate secrecy. This week, U.S. Treasury officials said they could soon issue a rule change that has been in the works to require banks and other financial institutions to obtain information about the owners of companies.

News reports about the Panama Papers this week have already put some state officials on the defensive, with some critics calling for federal requirements that states disclose businesses’ true owners.

Wyoming launched an audit Monday of 24 companies in the state linked to Mossack Fonseca and discovered they had failed to provide “required statutory information for performing the duties of a registered agent under Wyoming law.”

Wyoming Secretary of State Ed Murray promised to fight fraud and possibly seek changes in state law. At the same time, he defended the way Wyoming did business.

“I oppose a one-size-fits-all federal law mandating the dissolving of privacy protections,” he said in a statement. “We are not naive as to the importance of the release of these 'Panama Papers,' but we will not compromise the privacy of our customers.”

See full text and comments in http://www.latimes.com/world/la-fg-panama-papers-americans-20160407-story.html

Trail of Panama companies vanishes in Delaware

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Title: Hearing Of The Senate Committee On Homeland Security And Governmental Affairs - Examining State Business Incorporation Practices: A Discussion Of The Incorporation Transparency And Law Enforcement Assistance Act
Date: 06/18/2009
Location: Washington, DC
Show All StatementsShow Only Senator Joseph I. Lieberman's Statements Hearing Of The Senate Committee On Homeland Security And Governmental Affairs - Examining State Business Incorporation Practices: A Discussion Of The Incorporation Transparency And Law Enforcement Assistance Act
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SEN. LEVIN: U.S. corporations with hidden owners have created a serious law enforcement and a national security problem. For instance, we're going to hear today from witnesses about U.S. corporations that it turns out were established by the military in Iran, a state sponsor of terrorism. We're going to hear about U.S. corporations involved with money laundering, about U.S. corporations that are used to commit tax evasion and more. And they all have one thing in common. The real owners -- the legal term is beneficial owners. Their real owners are hidden from view.

Here's one example of what's going on. In 2004, one of our key law enforcement agencies, the Immigration and Customs Enforcement, or ICE, who's here today, uncovered a collection of U.S. companies that were secretly controlled from entities located in Panama. The investigation began when bank reports showed that a single company formed in Utah was participating in nearly $150 million in suspicious international wire transfers. Further investigation by ICE uncovered a network of nearly 800 U.S. companies dispersed among nearly all 50 states controlled by the same Panamanian entities. These companies were transferring large amounts of money to each other and to high- risk jurisdictions overseas. The companies claim they were paying for the importer-exported goods, but it turned out no such goods were being shipped.

In effect, the money transfers were part of a massive financial shell game in which U.S. companies were being used to disguise the movement of funds and to mask suspicious activity. When ICE obtained the incorporation records for the 800 U.S. companies, not one identified a company's true owner. After analyzing the available information, ICE found that nearly 200 companies had been formed in Utah and used the same company formation agent in a small office in a Salt Lake City suburb. That company formation agent also served as the company's registered agent within the state to accept service of process.

When questioned by ICE, the Utah registered agent indicated that he had formed the companies at the request of another company formation agent located in Delaware, did not have any beneficial ownership information, and believed that all were, quote, "shell companies" with no real business operations in the United States. The Delaware company formation agent was already well-known to law enforcement. No less than eight previous investigations had led to its doors, each of which involved millions of dollars in suspected money laundering by U.S. shell companies associated with the same Panama entities.

When questioned by ICE in the prior cases, the Delaware company formation agent had freely admitted that he knew some of the corporations he formed, or caused to be formed, were intended to move money out of Russia and some former Soviet republics. He also said that he sometimes sold U.S. companies to the same overseas buyer at the rate of 40 companies per month. When asked about the actual owners of the 200 Utah companies, the company formation agent was unable to provide law enforcement with any names, since that information was not required by law.

The end result was that the ICE investigation, like the eight before it, hit a dead end, unable to proceed due to the lack of beneficial ownership information. A hearing exhibit -- and it's in our books -- summarizes the case.

Now, Michael Chertoff, former secretary of U.S. Department of Homeland Security, wrote the following: "In countless investigations where the criminal targets utilize shell corporations, the lack of law enforcement's ability to gain access to true beneficial ownership information slows, confuses, or impedes the efforts by investigators to follow criminal proceeds. This is the case in financial fraud, terrorist financing, and money laundering investigations. It is imperative that states maintain beneficial ownership information while the company is active and to have a set timeframe for preserving those records.

Here's another aspect of the problem. A few weeks ago, members of my staff conducted an Internet search and found numerous company formation agents advertising the sale of U.S. companies and trumpeting the fact that U.S. companies can be formed without disclosing the names of any company owner. One of the most blatant was Corporations Today, Inc., which advertises its ability to form U.S. corporations in nearly every state with minimal cost and effort. A copy of some of its Internet ads is presented in the two hearing exhibits, and the chart which I'm putting up here reproduces one of its advertisements, offering the sale of aged corporations, meaning companies which corporations today formed years earlier. One of the companies on sale for $6,000 is advertised as coming with four years of tax returns and an existing employer identification number, an EIN issued by the IRS.

Why buy an aged corporation? According to Corporations Today, quote, "obtaining bank loans may be easier when you can show you have history," close quote. So is, quote, "obtaining corporate credit cards and leases." The quote goes on. For example, "Dell Computers lease only to corporations six months old or more," close quote. They're selling aged corporations for a price, been in business allegedly for six months or more. So Dell is told, hey, this corporation's been in business for years, so we're now eligible to lease your product.

So the ad invites fraud. It enables hidden owners to pretend that they've had a corporation operating in the United States for years when they haven't. Despite mounting evidence of misconduct by U.S. shell corporations, despite Internet advertisements selling U.S. corporations with promises of anonymity, despite the years of law enforcement complaints, many of our states are reluctant to admit that there's a problem in establishing U.S. corporations with hidden owners. Too many of our states are eager to explain how quick and easy it is to set up corporations within their borders without acknowledging that those same quick and easy procedures enable wrongdoers to utilize U.S. corporations in a variety of ways, both here and abroad.

In 2006, the leading international anti-money laundering body in the world, the Financial Action Task Force on Money Laundering, known as FATF, issued a report criticizing the United States for failing to comply with the FATF standard, which requires countries to obtain beneficial ownership information for the corporations formed under their laws. FATF gave the United States two years until July of 2008 to make progress towards compliance with the FATF standard. Next week, FATF is scheduled to review U.S. actions on this matter. How can we possibly justify our failure to do what we have committed to do; obtain beneficial ownership information to the corporations formed within the United States?

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Full text in http://www.votesmart.org/speech_detail.php?sc_id=473634&keyword=&phrase=&contain=
http://www.gpo.gov/fdsys/browse/collection.action?collectionCode=CHRG&bread=true

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Former FINCEN agent says : US shell companies - It's time to end the hypocrisy

John Cassara is an expert in anti-money laundering and former FINCEN agent. In his blog he points out that finding beneficial owners of U.S. companies can be as difficult as in more famous offshore jurisdictions.

Bill S. 659 Incorporation Transparency and Law Enforcement Assistance Act is meant to improve record keeping of beneficial owners by State Divisions of Corporations, even though forming corporations is a state - not federal - power. Secretaries of State of Wyoming and other states have pointed out that they already complied with federal wishes to eliminate bearer shares and now they and small businesses are being asked to spend even more money in compliance.

US shell companies and beneficial owners: It's time to end the hypocrisy

Thursday, 26 March 2009 00:00 by John Cassara

Over the last few years, I have worked in approximately one dozen developing countries helping police, customs, and security services recognize and investigate money laundering and terror finance. During discussion periods, I am inevitably asked the following question. "Mr. John, my agency has a financial crimes investigation and the money trail leads to the American state of Delaware. We can't get any further information and don't know what to do. Can you help us?" As a former criminal investigator representing the United States, this question is, frankly, embarrassing.

From a money laundering and tax evasion standpoint, Delaware is not the only American state that has troubling incorporation and limited liability company (LLC) structures. In 2006, the US General Accountability Office (GAO) issued a report, "Company Formations: Minimal Ownership Information Is Collected and Available." (pdf) The report reviewed the legal requirements in all 50 states to set up corporations and LLCs, and found that most states failed to request beneficial ownership information. The GAO found that the absence of ownership information impeded law enforcement investigations of suspect corporations.

Some states seemingly compete against each other to see which can offer less accountability, less transparency, the most secrecy and, as a result, attract the most business and fees. Websites that offer incorporation services worldwide are touting US corporate secrecy. In transactions that can be completed over the internet in a few hours and for a few hundred dollars, corporations and LLCs can be formed in the US that provide many of the same secrecy provisions featured in traditional international tax and offshore havens.

US Senator Carl Levin (D-Michigan) has followed the issue closely. According to Senator Levin, "States allow persons to form nearly two million corporations and LLCs each year in this country without knowing – or even asking – who the beneficial owners are behind those corporations. Right now, a person forming a US corporation or LLC provides less information to the state than is required to open a bank account or obtain a driver's license."

The United States routinely points to other countries' anti-money laundering/counter-terrorist finance (AML/CFT) shortcomings. It has played a major role over the years in identifying "uncooperative" countries and jurisdictions and placing these countries on formal and informal "blacklists." Yet the proliferation of defacto shell corporations on American soil spotlights hypocrisy and undermines US policy.

For example, as noted in the recently released 2009 State Department International Narcotics Control Strategy Report (INCSR) Volume II on Money Laundering, the British Virgin Islands and Hong Kong each have nearly 500,000 international business companies (IBCs) registered in their jurisdictions. The INCSR states the Dominican Republic, Grenada, Jamaica, Trinidad and Tobago plan to open "international financial centers," most of which offer the same services as offshore financial centers. In Panama, approximately 46,178 IBCs were registered in Panama in 2007. The INCSR continues that, "Panama has no requirement to disclose the beneficial owners of any corporation or trust; bearer shares are permitted for corporations; and nominee directors and trustees are allowed. The result is that illicit funds can be laundered and taxes evaded with little fear of detection and prosecution."

I am not an attorney skilled in the intricacies of international law, taxes, or finance. I don't understand the differences between LLCs, IBCs, IFCs, off shores, shell companies, and taxhavens. Maybe I am missing something. However, I know as a criminal investigator that following a dirty money trail to Delaware is about as difficult as following it to those jurisdictions criticized above by the US State Department.

When I was assigned to Treasury's Financial Crimes Enforcement Network (FinCEN), I witnessed many requests for assistance from Egmont Group partner international Financial Intelligence Units (FIUs) that had investigations focusing on Delaware. There was not much we could do.

Domestic law enforcement agencies are equally stymied. For example, according to 2006 Congressional testimony, Immigration and Customs Enforcement (ICE) reported that a Nevada-based corporation received more than 3,700 suspicious wire transfers totaling $81m over two years. However, the case was not prosecuted because investigators could not identify the corporation's owners.

In 2008, Department of Homeland Security Secretary Michael Chertoff wrote to a Senate Subcommittee, "In countless investigations, where criminal targets utilize shell corporations, the lack of law enforcement's ability to gain access to true beneficial ownership information, slows, confuses, or impedes the efforts by investigators to follow criminal proceeds."

The Financial Action Task Force (FATF) has repeatedly criticized the United States for failing to comply with a FATF standard requiring beneficial ownership information.

Undoubtedly because company formations can be lucrative, nothing has been done. Perhaps things are about to change.

In March 2009, Sen. Carl Levin, D-Mich., Sen. Chuck Grassley, R.-Iowa, and Sen. Claire McCaskill, D-Mo., introduced the Incorporation Transparency and Law Enforcement Assistance Act to help law enforcement stop the misuse of U.S. corporations. Among its provisions, the bi-partisan Act (S.569) would require states to obtain a list of the beneficial owners of each corporation or LLC formed under their laws, ensure this information is updated annually, and provide the information to civil or criminal law enforcement upon receipt of a subpoena or summons. The Act would also require corporations and LLCs with non-US beneficial owners to provide a certification from an in-state formation agent that the agent has verified the identity of those owners.

As the Group of 20 prepares for a meeting in early April to try to improve global financial rules, there are reports that financial and tax havens of all sorts may receive scrutiny. As part of the process, I hope the United States is called to lift the veil of states' secrecy when it comes to corporate beneficial owners.

The current financial meltdown and a dangerous laxity in financial crimes enforcement should have taught us that we can no longer afford business as usual.

I suggest the American delegation at the Group of 20 headed by President Barack Obama should be guided by the following quote from then Senator Obama; "It's time for the United States to meet its international anti-money laundering commitments, and that means getting beneficial ownership information for US corporations."

Published in Complinet

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S. 569, The Incorporation Transparency and Law Enforcement Assistance Act
S. 569 would ensure that persons who form corporations in the United States disclose the beneficial owners of those corporations, in order to prevent wrongdoers from exploiting United States corporations for criminal gain, to assist law enforcement in detecting, preventing, and punishing terrorism, money laundering, and other misconduct involving United States corporations.
http://www.washingtonwatch.com/bills/show/111_SN_569.html

National Association of Secretaries of State Congressional Activity: News Release: North Carolina Secretary Elaine Marshall Testifies Before U.S. Senate on State Business Incorporation Practices (06/18/09) * Testimony * More Testimony: Kansas Nevada Wyoming * NASS Company Formation Task Force

Concerns About 5.569 by Max Maxfield Wyoming Secretary of State: While we understand the premise of S.569; and while we applaud Senator Levin for his desire to better protect our country, we have serious concerns that the passage of S.569 will set Wyoming back in our efforts to fight fraud. We have the following serious concerns.
1. Our greatest concern is that if the federal law passes, there will be serious attempts to rescind Wyoming's laws. The argument will be that as long as a company meets the federal law that should be enough.
2. IfWyoming's laws were to be rescinded, we would lose the key component of requiring a human being in our State TO BE RESPONSIBLE FOR REPRESENTING THE COMPANIES THEY SERVE. We would be back to registered agents just being there for service of process, taking an otherwise hands off approach to the responsibility which they should shoulder.
3. If Wyoming's laws were to be rescinded, we would also lose the requirement that the registered agent have a contact person for each company they represent. We FIRMLY BELIEVE that a person leading you to another person is infinitely better than having paper on file. Fraudulent people file fraudulent paper; but a person face to face being held responsible generally knows of another person who can be contacted.
4. Whatever information is determined to be kept, it should be kept by the registered agent, not by government. This is a responsibility issue. States should not be taking the responsibility to know the players for each company; states are not forming these companies or using them for potential ill. Formation agents and the registered agents who are forming and making money off these companies (or the individuals themselves if the owner acts as his own registered agent) should be responsible for retaining and providing all required information. Without personal responsibility for the paper, the paper has very little value, except to make it APPEAR AS IF government is trying to locate the bad actors.

See also Levin - Obama Bill seeks to end confidentiality of US corporations

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To form your own Delaware company click here

Tax Havens, Tax Competition and Economic Performance

Tax Havens, Tax Competition and

Economic Performance

Low-tax jurisdictions play a valuable role in the global economy.  Economic research indicates that so-called tax havens provide a tax-efficient platform for cross-border investments, help boost saving and investment, and thus increase global economic growth. Tax havens also encourage good policy in non-haven countries.  In part because of jurisdictional competition, maximum tax rates on personal income have fallen by about 23 percentage points since 1980 and top tax rates on corporate income have fallen by almost 20 percentage points.  These policies have boosted growth and job creation.

The United States is the world's largest beneficiary of tax havens and tax competition, both because the U.S. is a tax haven for foreigners and because tax havens facilitate the flow of capital to the American economy. Foreigners have more than $11 trillion invested in the U.S. economy, including more than $7 trillion invested in America's financial markets. Nearly $1.3 trillion is placed in the U.S. financial system by Caribbean institutions. This money helps finance America's economic growth.

By Yesim Yilmaz

What are tax havens?

Tax havens are countries with very low tax rates set-sometimes as a matter of long-standing policy and sometimes as a recent and deliberate strategy to draw out-of-jurisdiction investment.  This definition is imprecise, but for a good reason:¹ many additional characteristics including the nature of corporate registrations, requirements on beneficial ownership information, rules governing trusts, and the financial privacy companies and individuals enjoy could qualify a jurisdiction as a tax haven. In British Virgin Islands, Delaware, and Panama, one can incorporate a company within a few hours with little information about ownership and nature of work.  Switzerland, Singapore and Cayman Islands are among countries that generally do not disclose information on personal financial transactions.²  

Interestingly, the United States qualifies as a tax haven for both the federal rules that govern foreigners' income, and the state rules on corporate taxation, registration and privacy. Compared to U.S. taxpayers, non-resident aliens pay low or no taxes on investment income-an important characteristic of tax havens according to the Organization for Economic Cooperation and Development, an obdurate opponent of tax competition.  The federal government generally does not tax the investment income of a foreign corporation if the earnings are unconnected with a U.S. trade or business, and foreigners are not required to pay taxes on their investment income from U.S. businesses unless they reside within the United States [Mitchell, 2001].

Furthermore, states offer many additional tax benefits designed to attract out-of-state investments, and the federal government generally does not have the authority to override these decisions. Nevada, Texas, Wyoming, and Washington do not tax corporate income; Alaska, Delaware and Nevada do not collect beneficiary information on registered companies; in Wyoming, corporations can take advantage of nominee bank accounts that protect ownership identity; and trusts in Delaware do not have public filings or recordings, and do not generally require accounting [ITIO and STEP, 2002]. Additionally, tax rules are "negotiable" in many states, and many large out-of-state investors are able to get concessions in return for investing within the state.³

The presence of tax havens has two important implications for the world economy: First, tax havens reduce the effective marginal tax rate on capital and, as a result, create more incentives to save and invest. Because the cost of doing business in (or through) tax havens is lower, businesses operating in or through these countries can undertake investments with lower expected returns or higher risks than those in high-tax jurisdictions. With these new investment opportunities, individuals will most likely consume less (or keep a smaller share of their wealth in non-income generating assets such as homes, artwork, or commodities), and save and invest more.  It is important to note that some portion of increased savings and investment represent funds that would have been paid as taxes in a high-tax jurisdiction, some of the funds are capital people reallocate from other sources in their portfolio to take advantage of investment opportunities that were not previously available, and some of the funds represent a shift from consumption and into new capital.

Second, tax havens curb the size of the public sector, and force governments to cut taxes and improve efficiency in public service delivery.   By providing a "low-tax" alternative for mobile taxable resources, tax havens make it difficult for politicians of the world to divert funds from the private sector to the public sector. In fact, since the 1980s, effective corporate income tax rates across the industrialized world have fallen by nearly fifteen percentage points, and statutory tax rates have dropped by almost 20 percentage points [Hines, 2005]. During the same period, tax haven activities as a share of world economic output have increased eight-fold.  Without tax competition from tax havens, the sweeping reduction in corporate tax rates would not have been possible (see Figure 1). Personal income tax rates also have fallen dramatically, with top rates in industrialized nations dropping by more than twenty percentage points since 1980 (see Figure 2).

To keep their tax bases intact in the presence of competition from low-tax jurisdictions, politicians must reduce public spending, cut taxes on mobile taxable resources, or shift a relatively larger portion of their tax revenues to less destructive forms of taxation imposed on labor and consumption. Needless to say, shifting taxes to immobile bases is a daunting endeavor with high political costs.  Taxing immobile sources would make the tax system more "efficient" (and evasion more difficult), but from the politician's perspective, tax hikes on bread, milk, and payrolls are extremely unpalatable. Not surprisingly, faced with jurisdictional tax competition from tax havens, governments have invariably chosen to reduce tax rates on corporate and personal incomes. For example, the reductions in the effective tax rates since 1980s are almost entirely due to tax rate reductions by governments (and a small percent is due to capital moving out). 

Do international tax rules matter?

Studies that look at the relation between foreign direct investment and after-tax rates of returns on investment consistently find a strong, positive correlation.  Among other things, this relation reflects the extent to which investors respond to tax incentives [Hines, 1999]. U.S. multinational firms invest fewer dollars in countries with high tax rates, whether direct taxes on corporate income, or indirect taxes levied on things other than the corporate income-for example payroll taxes, license fees, etc. [Desai, et al., 2006]. The use of indirect taxes expanded considerably recently, and businesses have become very sensitive to indirect tax rates in making their investment decisions.  One study finds that U.S.-owned affiliates of multinational companies tend to reduce their asset holdings by 7.1 percent in countries with 10-percent higher indirect tax rates (measured across countries).  A 10-percent increase in corporate taxes, on the other hand, results in a 6.6 percent decline in the total assets held [Desai, et al., 2004].⁴

Other evidence on the relation between international tax rules and business investment decisions includes the financing and structuring of companies, particularly since equity and debt are treated equally in low-tax countries⁵ [Desai, et al., 2004], low overall tax liabilities [Harris, et al., 1991] and low tax/sales ratios observed for multinationals with tax haven presence [Desai, et al., 2003].⁶

Because international tax rules matter for business investment decisions, governments cannot ignore the impact of lower taxes in other jurisdictions. Low tax rates elsewhere attract investors and reduce the tax base in the home country, and significant evidence supports the view that countries react to losing "market share" in foreign direct investment by reducing their effective tax rates. For example, the average effective tax rate in manufacturing (measured across 58 countries with significant U.S. multinational presence) has gone down fr

om 33 percent in 1980 to 21 percent in 2000 (Table 1).

Tax cuts instituted in response to tax competition appear to be the biggest factor behind the reductions between 1992 and 1998 [Altshuler and Grubert, 2004]. The evidence shows that countries suffering the greatest loss of capital were most likely to reduce tax rates. Additionally, those nations with high initial average effective tax rates cut tax rates more than the average country.

Effective tax rates in manufacturing exhibited another big dip between 1998 and 2000 and empirical studies suggest that company behavior (and not country behavior) helps explain the decline. In other words, companies took advantage of tax differentials by shifting economic activity among jurisdictions in ways that lowered their overall tax burdens. For this brief period, variables such as initial tax rates, share of foreign direct investment, and country size lose their explanatory power. The prevailing statutory tax rate, however, exhibits strong positive correlation with the declines in the effective tax rates.  High statutory tax rates cause changes in company behavior because of incentives to reorganize in ways that reduce effective tax rates.

To take advantage of low effective tax rates elsewhere, companies more frequently organize as hybrid firms (treated as branches from the U.S. point of view but incorporated as entities in the hosting tax haven country), or create ownership chains (which involve foreign affiliates owning other foreign affiliates in tax haven countries). While hybrids shelter payments of interest and royalties to a tax haven company from U.S. taxation [Altshuler and Grubert, 2004], ownership chains reduce tax obligations by indefinitely deferring the repatriation of retained earnings [Desai, et al., 2006]. Both strategies have become more prominent recently. Setting up of hybrids has been greatly simplified since 1997, and between 1982 and 1998, share of indirectly owned affiliates through ownership chains increased from slightly under twenty percent to almost forty percent of all affiliates [Desai, et al., 2003].

How do tax havens perform?

Between 1980 and 2000, foreign direct investment increased from one-half of one percent of world production to four percent of world production.  This increase in foreign direct investment has disproportionately benefited tax haven countries and helped lower-tax jurisdictions grow much faster than the rest of the world. The per capita real gross domestic product (GDP) in seventeen tax haven countries (places where U.S. multinationals frequently do business) grew by 3.3 percent between 1982 and 1999, while the average growth rate of per capita real GDP elsewhere was 1.4 percent [Hines, 2004].⁷

This calculation could overestimate the growth in tax havens because by definition, GDP is output produced within the borders of a country; in tax havens, this figure possibly includes some reported income (for tax-avoidance purposes) associated with output produced elsewhere. As an alternative, Hines [2004] reports the annual growth in per-capita gross national product (GNP), which measures the value of goods and services produced by a county's nationals.  Measured this way, tax-haven growth is still significantly higher than world averages: Per capita GNP in the world grew by 1.4 percent while in tax-haven countries it grew by an average of 3 percent every year between 1982 and 1999.

Despite their low tax rates (or perhaps because of them), tax-haven governments are not relying on low levels of tax revenue compared to the rest of the world (see table 2).  Governments in tax-haven countries consume a quarter of the total GDP-less than the burden of government in Europe and the United States, but higher than the global average. Empirical analysis of government size and other country variables (such as population, per-capita income) shows that while smaller countries have bigger governments, tax-haven countries have smaller governments controlled for their size and affluence levels. That is, governments of tax havens collect and spend fewer dollars compared to the higher-tax countries of similar size and income level.⁸

  

Are tax havens harmful?

Recent increases in international investment activity and the concomitant shifting of economic activity to tax havens (and other low-tax jurisdictions) have motivated a number of high-tax countries to undertake actions designed to hinder the flow of jobs and capital to jurisdictions with better tax law. For example, the OECD launched a "harmful tax competition" initiative in the 1990s, a scheme designed to penalize so-called tax havens. The OECD justifies its actions by arguing that extensive tax competition "undermines fair competition and public confidence in the tax system" [OECD, 2004].

In this context, the relevant question is not whether "tax havens reduce confidence in the tax system" but whether the economic success of tax havens comes at the expense of growth elsewhere-presumably in higher-tax countries.  There is no doubt that the threat of tax competition compels higher-tax nations to reduce tax rates.  However, this does not mean that tax competition is a zero sum game as the OECD appears to argue, or that the gains in the private sector are offset by the losses in the public sector.  If tax havens help channel funds towards activities that are more productive than the ways in which governments use funds, then the net gain to the world economy will be positive.⁹ In other words, the presence of tax havens could be complementary to economic gains in neighboring high-tax jurisdictions if tax havens force high-tax jurisdictions to organize more efficiently - or, even more importantly, to lower tax rates.

In a recent empirical study, using firm-level data from U.S. multinational firms, Desai et al. discredit the claim that the existence and use of regional tax havens reduces economic activity in high tax locations [Desai, et al., 2006a]. On the contrary, the authors find evidence that tax havens have positive spillover effects for nearby high-tax jurisdictions by providing a tax-efficient platform for investment. More specifically, they find that a one percent greater likelihood of establishing a tax-haven affiliate is associated with a 0.3 percent greater investment and sales in nearby non-haven countries.  Desai et al. point out that:

"From the standpoint of host country governments, the ability of foreign investors to use tax havens in the same region has the beneficial effect of stimulating investment, even as it may erode tax revenue collection from any additional investment.  For governments that, on efficiency grounds or other grounds, would prefer to reduce tax rates on inbound foreign investment but are constrained from doing so by political or other considerations, encouraging the widespread use of regional tax havens offers a convenient alternative. The fear that the existence and use of regional tax havens might encourage firms to substitute economic activity away from nearby high tax locations receives no empirical support in the behavior of American multinational firms."

The finding that tax havens benefit neighboring jurisdictions is a special case of a more general rule: fewer restrictions on capital, through low taxation or removal of other rules, will make existing capital more efficient and facilitate a larger capital stock.  The consequent gains in growth and prosperity will benefit everybody. (It is, however, harder to empirically demonstrate the extent of the gains to the rest of the world, especially the indirect gains.)  Tax havens constitute an important source of such gains in efficiency because they are the only alternatives to the current "highly imperfect international system for the prevention of double taxation." [Teather, 2005, p. 31]  Teather notes that tax havens provide an environment where companies can freely pool international capital, without having to worry about multiple tax rules, and onerous investment regulations. Thus, tax havens increase the efficiency of global capital markets, and the gains in growth benefit not only the tax havens themselves and their neighbors, but also everyone else who eventually receives the fruits of growth through better products, more jobs, or cheaper prices. 

In response to the question, "What should a tax system look like?" tax havens would be a good starting point for investigation. A recent paper by Mitchell [2006] makes the moral case for tax havens, highlighting the relation between oppressive governments and oppressive tax systems. Mitchell notes that tax havens establish environments that are respectful of individual human rights, and offer politically stable environments with strong rule of law, and little corruption. In these ways, tax havens create higher standards of governance to which other countries must eventually adhere to in order to keep their tax bases. This picture is in stark contrast to the frequent description of tax havens as thug-filled countries primarily in the business of money laundering.¹⁰

What do tax havens mean for Americans?

Because the U.S. imposes taxes on foreign-earned income of U.S. based corporations, using tax havens for tax avoidance is relatively costly for American multinationals. Other incentives built into the U.S. tax system discourage tax haven presence for U.S. multinationals:  for example, in calculating their U.S. tax obligations, American multinational companies can deduct foreign taxes from their U.S. obligations and can claim credit, over an extended period, for any tax payments they have made in excess of U.S. obligations. Thus, American firms might be reluctant to take advantage of tax havens especially if the consequence is increased U.S. tax liabilities [Hines, 2004; Hines, 1999].

Traditionally, U.S. direct investments abroad have been structured to take advantage of intangible assets like patents and trademarks (or to defer repatriation of income).  In recent years, however, U.S. manufacturing companies appear to have become more sensitive to differences in taxes across countries [Altshuler and Grubert, 2004]. The location of real manufacturing capital held by U.S. parents appear to correlate more strongly with the local tax rates (of the host country), and the transactions between the U.S. parents and their manufacturing subsidiaries in low-tax jurisdictions have been increasing.  Given globalization in trade, and increased competition from low-cost producers, moving capital (and even production) to low-tax countries might eventually become an unavoidable survival strategy for American companies.

What would the relocation of productive activity and capital to tax havens mean for Americans? On the negative side - assuming politicians do not control government outlays, the U.S. government will borrow more to cover short and medium term costs, putting additional financial constraints on current and future generations.  Competition from tax havens could also reduce the amount of foreign direct investment into the U.S. if foreign multinationals choose to invest in tax havens for reasons similar to those that influence the U.S. companies.

While low-tax jurisdictions put competitive pressure on the United States, the process of tax competition unarguably generates more benefits than costs for America. The United States is the world's largest repository of global capital. The Commerce Department reports that foreigners have invested more than $11 trillion in America's economy, including more than $7 trillion of financial investment [Nguyen, 2005]. Tax havens are a particularly important source of capital for the U.S. economy. The Treasury Department reports that foreigners have more than $3 trillion of capital in U.S. banks and other financial accounts.  As of March 2006, tax havens helped funnel nearly $1.3 trillion to U.S. financial markets [TIC, 2006]¹¹ (see Table 3). Losing some or all of this capital to other tax havens - which would happen if the U.S. ceased its favorable tax treatment of foreign investors - would have significant negative impact on the U.S. growth and employment ¹²

On the plus side, firms are likely to pass on savings from low-cost production to consumers. Additionally, as the U.S. government loses some of its tax base, in the long run, it could become smaller and more efficient, and jurisdictional tax competition might force the federal and state governments to reduce corporate tax rates from their current (combined) 39.9 percent-which is the highest rate corporations face among the developed countries [Atkins and Hodge, 2005]. Such reforms would be especially desirable since lower tax rates would eliminate the incentive to shift activity from the U.S. economy.

Conclusion

This risk of economic failure associated with ineffective competition for funds makes tax havens important sources of economic discipline for the U.S. Tax havens will not be a problem for the U.S. economy, as long as U.S. remains a tax haven itself, with productive and stable investment environment.  In other words, presence of tax havens contributes to the long term success of the U.S. economy by making it harder for the U.S. to reduce the "quality" of the investment climate both for domestic and foreign investors. 

___________________________________

Yesim Yilmaz is a research fellow with the Center for Freedom and Prosperity Foundation.

See full text and footnotes in 

https://archive.freedomandprosperity.org/Papers/taxhavens/taxhavens.pdf

NY Assistant DA: “U.S. financial transparency: trying to catch up to Panama.”

Adam S. Kaufmann, Assistant District Attorney for New York County State of New York, explained at a hearing why a U.S. company is as good as an offshore company for hiding the identity of its non-U.S. owners:

We regularly speak to law enforcement agents and prosecutors around the world. It is difficult to speak with moral authority in criticizing offshore bank secrecy jurisdictions when they can point an accusing finger back at us. The British Virgin Islands is a well-known (in law enforcement circles) bastion for dirty shell companies, but even the British Virgin Islands can level criticism at the lack of transparency in the incorporation processes in our states. That we were deemed “non-compliant” by the Financial Action Task Force is an embarrassment. That we have made no progress in the three years since then is absurd. Our statement of national transparency standards should be something more than: “U.S. financial transparency: Better than Lichtenstein and trying to catch up to Panama.” Simply put, we lag behind many other countries in the world in this regard, and it makes our statements concerning transparency and tax evasion ring hollow and hypocritical.
Foreign law enforcement authorities even refer to certain states as “offshore U.S. jurisdictions.” And when asked, I am hard-pressed to define why these well-known states are any different from Cayman or the British Virgin Islands. The Committee should also know the imprimatur of respectability that a certificate of incorporation from a U.S. state carries with it, and the access it gives a foreign citizen to open bank accounts and engage in all manner of business, both legitimate and otherwise. And, for many foreign persons wishing to hide their income in an “offshore jurisdiction,” there is no need to turn to a Caribbean hide-away. In one case where we rendered assistance to foreign prosecutors, we were able to connect the head of a foreign central bank to an “offshore” Delaware corporation. He used the corporate entity to open a bank account in Florida. He used black market money systems (prosecuted in New York) to move funds to this secret account he held in Florida. By obtaining a corporate entity, this corrupt official could rest assured that his funds would be safe in the United States, and his name would not easily be linked to the corporation. I am hard-pressed to find a difference between his use of a Delaware corporation to open a Florida bank account and the use by a U.S. taxpayer of a Lichtenstein corporation to open a Swiss bank account. At the end of the day, both systems provide a security blanket of anonymity for those who seek it.

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Examining State Business Incorporation Practices: A Discussion of the Incorporation Transparency and Law Enforcement Assistance Act
Thursday, June 18, 2009 02:30 PM Dirksen Senate Office Building, room 342 The hearing will examine the impact of the "Incorporation Transparency and Law Enforcement Assistance Act," S. 569, which would create a minimum standard--and greater transparency--for the ownership information businesses have to provide to states when they form a business.
Member Statements
Senator Joseph I. Lieberman [View PDF]
Witnesses
Panel 1
Janice Ayala [view testimony] Deputy Assistant Director, Office of Investigations, U.S. Immigration and Customs Enforcement U.S. Department of Homeland Security
Jennifer Shasky Calvery [view testimony] Senior Counsel to the Deputy Attorney General U.S. Department of Justice
The Honorable Elaine F. Marshall [view testimony] Secretary of State State of North Carolina
Adam S. Kaufmann [view testimony] Assistant District Attorney for New York County State of New York
Harry J. Haynsworth [view testimony] Chair, Drafting Committee on Uniform Law Enforcement Access to Entity Information Act Uniform Law Commission
http://hsgac.senate.gov/public/index.cfm?FuseAction=Hearings.Hearing&Hearing_ID=ef10e125-2c1d-4344-baf1-07f6061611c1

NPR: Tax havens come clean ahead of G-20

Ahead of the G-20 summit, the British government is trumpeting a crackdown on tax evaders from certain countries. But some of the biggest tax havens may be found in the countries doing the whining. Stephen Beard reports.
Listen to this Story

TEXT OF STORY
Kai Ryssdal: President Obama landed in London this evening. He's there for a big economic summit that starts Thursday. Leaders of the world's top twenty economies are going to try to figure out how to stop the global slowdown. They'll talk about stimulus packages and tighter regulations. It's not clear what actually might come out of it.
But the Brits have already declared one G-20 breakthrough: a crackdown on tax havens. So, what does that have to do with an economic crisis? From London, Marketplace's Stephen Beard explains.
STEPHEN BEARD: Ten tax havens have apparently agreed to come clean. Switzerland, Liechtenstein, Luxembourg, and Monaco among them. They say they will share information about suspected tax evaders. The deal has been more than a decade in the making. But clinching it now could be a godsend for the U.S. and other big governments. Especially now. Tax revenues are shrinking; stimulus spending has taken off. Grace Perez-Navarro of the Organization of Economic Cooperation and Development:
GRACE PEREZ-NAVARRO: In the midst of a crisis it's very difficult to raise tax rates. So what can governments do? All they can try and do is make sure they collect every penny that is legally due. And this is part of that initiative.
But not everyone is impressed by the tax-haven breakthrough. Stephen Platt is a lawyer who prosecutes financial crime in offshore centers. He says the U.S., for one, should take a closer look in its own backyard.
STEPHEN PLATT: There are several states within the United States itself that have very, very lax controls, that attract very shady business.
Nevada, Wyoming and Delaware, he says, allow the kind of secrecy in which tax evasion flourishes. The kind of secrecy the U.S. denounces in the tax havens.
PLATT: This, I think, reveals a hypocrisy.
He says in some respects Britain is just as lax as America. And he claims Britain is bragging about the tax-haven breakthrough to distract attention from the regulatory failures in Britain and the U.S. that really caused the crisis.
In London, this is Stephen Beard for Marketplace.

http://marketplace.publicradio.org//display/web/2009/03/31/pm_g20_taxes/?refid=0##

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To form your own Delaware company click here

Levin - Obama Bill seeks to end confidentiality of US corporations

Panama attorneys are required by Panama "know-your-customer" laws to keep confidential files on who are the beneficiaries of the corporations, private foundations and trusts for which they provide resident agent services. However, the information can only be released to Panama prosecutors when a criminal investigation is conducted by the authorities or when assisting foreign authorities in non-civil cases.

When said KYC laws were enacted back in 1994, Panama attorneys warned the authorities that the bad guys would only head for Delaware, Nevada and Wyoming, where incorporators sell corporations online in 24 hours to anybody with a number from a stolen credit card and a mail drop to receive the corporate papers. In the end it was good for the Panama incorporation business because it served to weed out bad clients and improve the financial center.

13 years later, Senator Levin proved right this prediction by sentencing that "criminals are hiding behind U.S. corporations while committing all sorts of crimes -- from terrorism to money laundering, fraud and tax evasion."

Senators Obama, Levin and others have sponsored the "Incorporation Transparency and Law Enforcement Assistance Act" which is not making Resident Agents in the US very happy. The bill would be the equivalent of submitting shareholder records of privately-held corporations to the Public Registry.

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Transparency bill draws mixed reactions

Group official says measure to have secretaries of state keep records of businessowners' identities impedes business

By JOHN G. EDWARDS
REVIEW-JOURNAL

A spokesman for Nevada registered agents, who make their living filing incorporation papers for businesses, says a bill that would require states to keep corporate ownership records is the worst legislation imaginable.

But other state officials reacted differently to the Incorporation Transparency and Law Enforcement Assistance Act, which Democratic presidential candidate Barack Obama, Sen. Carl Levin, D-Mich., and Sen. Norm Coleman, R-Minn., introduced Thursday.

...

The bill would require secretaries of state to maintain records of the identities of owners of private corporations and limited liability companies. Although states could keep the owners' names confidential from the public, state officials would be required to provide the records in response to a law enforcement agency's subpoena or summons.

"Criminals are hiding behind U.S. corporations while committing all sorts of crimes -- from terrorism to money laundering, fraud and tax evasion," Levin said. "The bill we are introducing today will strike a blow against corporate secrecy, strengthen law enforcement, and curb the misuse of U.S. corporations."

Levin is chairman of the Senate Permanent Subcommittee for Investigations, which in November 2006 challenged officials of Nevada and Delaware about laws that allow corporate owners to hide their identities.

Critics of the bill call the measure unnecessary government intrusion into the investments of businesspeople who are legitimate.

"This is a huge impediment to new business," Derek Rowley, president of the Nevada Registered Agent Association, said in an e-mail. "In our current economic times, I can't imagine a worse idea."

....

Rowley lambasted the bill.

"It surprises me that Senator Levin is introducing this bill at this time, given the fact that the National Association of Secretaries of State has adopted a series of recommendations that we feel offer a very reasonable solution if they were instituted consistently in all the states," Rowley said in an e-mail. "Senator Levin is introducing this bill as though the states have been completely unresponsive, and that simply isn't the case."

The registered agent association worked with the Nevada secretary of state's office to help lawmakers adopt legislation for dealing with the same issue, he said.

The new Nevada law provides that law enforcement can request ownership records from corporations and LLCs. If the company fails to respond, the secretary of state can dissolve the corporation.

Rowley thinks the federal bill goes too far.

"(The Levin bill) mandates the disclosure of 'beneficial ownership' of all corporations and LLCs in the U.S.," he said, "a feat that is technically impossible."

Contact reporter John G. Edwards at jedwards@ reviewjournal.com or 702-383-0420.

Full text in http://www.lvrj.com/business/18544189.html

Full text of Bill http://thomas.loc.gov/cgi-bin/query/z?c110:S.2956:

Obama Joins Levin and Coleman to Introduce Bill to Stop Misuse of U.S. Companies http://obama.senate.gov/press/080501-obama_joins_lev/

Summary of Incorporation Transparency and Law Enforcement Assistance Act http://levin.senate.gov/newsroom/release.cfm?id=297089

UCLA Prof says bill "burdens states and legitimate businesses" http://www.businessassociationsblog.com/lawandbusiness/comments/the_incorporation_transparency_and_law_enforcement_assistance_act/

Vote for/against the bill http://www.washingtonwatch.com/bills/show/110_SN_2956.html

Letter criticizes bearer instruments in Panama, not in Wyoming or UK

Reporter Rafael Berrocal writes about the letter sent to the American Chamber of Commerce and the U.S.-Panama Business Council by the current U.S. Ambassador Barbara Stephenson (Anonymity in Corporations is Criticized, La Prensa http://mensual.prensa.com/mensual/contenido/2009/06/25/hoy/panorama/ 1832992.asp). According to the report, the Ambassador wrote that bearer shares ensure anonymity of the owners of a Panama corporation. “The damage to the reputation for lack of transparency is higher than the speculative damage of maintaining a public practice”, when justifying the pressure by US Democrats on Panama to shut down its financial center and sign a tax information exchange agreement. She said that the US also faced this problem when prohibiting bearer shares.

Panama has a Mutual Legal Assistance Treaty for Criminal Matters which allows US authorities to demand cooperation from Panama judicial authorities in criminal cases (even if Panama authorities complain that US assistance to Panama requests is close to null). This includes requesting Panama authorities to demand from Panama lawyers to provide client records despite attorney-client privilege rules. However, this has proven to be insufficient for competitors of the Panama financial center. Doubts are prevalent among local practitioners that ending Panama bearer shares will even take the country out of the OECD gray list, where British Virgin Islands (BVI) and Bahamas are still listed after discouraging or eliminating bearer shares.

Bearer shares have proven to be like a gun with no bullets: banks do not open accounts for them, lenders demand that those bearer shares be pledged before disbursement and an “anonymous” shareholders loses his anonymity when he tries to enforce his rights in a Panama court (a “John Doe” shareholder cannot sue).

The bright side of the letter is that it shows the willingness of foreign diplomats to tackle issues which were considered meddling into another country's affairs. We just hope the same effort is displayed when tackling CORRUPTION by Panama judges used against US investors.

Those that still want bearer instruments can find them in the heart of the countries which criticize them: the Wyoming bearer scripts and the England LLC bearer shares.

Even though bearer shares are null in Wyoming after October 1, 2007, shares do not need to be issued and the Wyoming Business Corporation Act provides:

17-16-604.� Fractional shares.

(a)� A corporation may:

(i)� Issue fractions of a share or pay in money the value of fractions of a share;

(ii)� Arrange for disposition of fractional shares by the shareholders; or

(iii)� Issue scrip in registered or bearer form entitling the holder to receive a full share upon surrendering enough scrip to equal a full share.

(b)� Each certificate representing scrip shall be conspicuously labeled "scrip" and shall contain the information required by W.S. 17-16-625(b).

(c)� The holder of a fractional share is entitled to exercise the rights of a shareholder, including the right to vote, to receive dividends, and to participate in the assets of the corporation upon liquidation.� The holder of scrip is not entitled to any of these rights unless the scrip provides for them.

(d)� The board of directors may authorize the issuance of scrip subject to any condition considered desirable, including:

(i)� That the scrip will become void if not exchanged for full shares before a specified date; and

(ii)� That the shares for which the scrip is exchangeable may be sold and the proceeds paid to the scripholders.

This is similar to the blank transfer of suscription rights document, which Panama corporation founders sign in blank form to clients purchasing bearer shares.

Several Wyoming and UK incorporators advertise:

Wyoming Corporations
Why Use Wyoming Corporations?
There are many reasons why a Wyoming Corporation can be useful. The following is a list of some of these reasons.

Wyoming is a tax-free state, there is:
No corporate tax
No franchise tax
No inventory tax
No stock tax
No inventory tax
No personal income tax
No estate tax
No inheritance tax
No gift tax

Wyoming Does Not Share Information:
Wyoming is one of two states in the Union that do not voluntarily share information with the IRS or with any other state.

Wyoming Allows Bearer Shares:
It is one of two states that allows for bearer shares. Whoever holds bearer shares owns them. The stock does not need to be registered in anyone's name. In fact, in Wyoming it is not necessary to issue stock.

The names of owners or stockholders of Wyoming corporations are not a matter of public record. Only the officer’s names are made public. However, with creative planning you can remove your name as an officer or director. See Nominee Officer Services

Wyoming Allows Bearer Script:
A client can hold Bearer Script which can be redeemed for shares but the client is never required to own stock in the corporation. If asked if they own stock in a corporation, the client could state under oath that they did not.

Wyoming Protects Officers And Directors:
There is no personal liability. Wyoming indemnifies directors and officers from personal liability for act committed on behalf of the corporation or by the corporation.

Wyoming Annual Reports:
In Wyoming, as in Nevada, a corporation is required to list the names and addresses of Officers and director(s) when they file their annual report With the Secretary of State. All of these positions may be held by one person. International Registration Services, LC can provide a nominee to fill all of these positions, ensuring your complete privacy.

Wyoming does not require stockholders to register with the state. Because of this, you can own all the shares in the Corporation, maintain complete control of operations and designate representatives as your officers and directors. Your identity will be kept completely confidential.

Avoid Some Of Your Home State Taxes:
Have your Wyoming Corporation bill you for the services provided. The Wyoming Corporation will generally add some amount to the bill for its service costs and overhead. By doing this, you are able to transfer some of your profits to tax free Wyoming!

Example 1:
Have your supplier provide an invoice to your Wyoming Corporation for the products that you normally purchase. Let's say that the invoice is for $100,000. Your Wyoming corporation will pay the bill and bill your local company $150,000. You have just transferred $50,000 of your profits to tax free Wyoming. Major US corporations have used these tactics for years. Not only within the United States but worldwide.

Protect Your Substantial Assets:
When someone comes snooping around make sure there is no equity in your real estate.

Example 2:
Have the Wyoming Corporation put a lien on major assets such as your home, rental property, or business property.

International Registration Services, LC

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WYOMING CORPORATIONS and LLCs have a tax haven within the United States with no income taxation,anonymous ownership and bearer shares. The annual upkeep costs less and you can issue as many shares as you want with no extra filing fee. We can help you set up banking for your Wyoming LLC or Wyoming corporation from your home state. Did you know that Wyoming invented the LLC? Numerous European companies as well as US companies have used the State of Wyoming for their Wyoming LLCs as well as for corporations. If you call we can tell you all of the similarities and differences between a Wyoming LLC and Nevada LLC. Click for details and pricing at $69 plus state filing fee. Please call us for any assistance or ideas.

Corp95.com

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+ Wyoming protects corporations with the strongest laws and protects your privacy.
+ Wyoming requires only one person to form a corporation. You have total control.
+ Wyoming has close corporations with less rules and paperwork for small family run companies.
+ Wyoming was the first state to offer LLC's. Close LLC's are available. Perfect for a family LLC
+ Wyoming allows Bearer Shares, Nominee Officers and Lifetime Proxies. These can make you invisible.
+ Wyoming allows corporations to be transferred in from other states and still retain original incorporation date.

Wyoming EZ Corp

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A Side by Side Comparison of Wyoming and Nevada and Delaware Benefits Nevada Wyoming Delaware No state corporate income tax No tax on corporate shares No franchise tax Minimal annual fees One-person corporation is allowed Stockholders are not revealed to the State No annual report is required until the anniversary of the incorporation date Unlimited stock is allowed, of any par value Nominee shareholders are allowed Share certificates are not required Minimal initial filing fees No minimum capital requirements Meetings may be held anywhere Officers, directors, employees and agents are statutorily indemnified Continuance procedure (allows Wyoming to adopt a corporation formed in another state) Doesn't collect corporate income tax information to share with the IRS Nevada vs Wyoming Perhaps you’re one of those who have read all the web sites that promote incorporating your business in Nevada. The reasons given usually are: 1. Nevada does not share information with the IRS. Wyoming Answer: Nevada makes the IRS mad. Wyoming does share information with the IRS, but only the information given by companies with real assets inside the state. So you have the best of both worlds, the IRS is not targeting you because you are in a non friendly state (like they may in Nevada), and yet there is no information that is shared because most businesses do not have real assets inside the state of Wyoming. Corporations Today, Inc.

UK COMPANY INCORPORATION WITH BEARER SHARES British Companies with the Bearer Shares. Bearer Share Basics: In addition to incorporating an ordinary company limited by shares we can provide formation & management of companies with bearer shares! Bearer shares can be converted into registered shares and vice versa. Bearer shares are legal instruments denoting company ownership. They are not the same as stock certificates, however. Usually, the legal shareholders of a limited company are those persons whose names appear on the corporation's official shareholders list, or register. These shareholders may or may not be issued a tangible stock certificate which they may possess. A common stock certificate will bear the name of the shareholder, and how many shares of stock the certificate represents. It will contain other information such as the name of the company, any par value the shares have, and most importantly, whether there are restrictions on the transfer of the shares. Many UK residents have never heard of bearer shares. The trick behind Bearer Shares, however, is that they must be issued properly by a qualified and knowledgeable corporate director. As long as you do not have them in your possession at the time you are questioned, you can legally and truthfully say under oath, "I am not the owner of that corporation." It's always recommended that people keep their bearer shares. This way, if your nominee officer is ever questioned about your corporation, he can say the same thing: "Bearer shares were issued, I don't know who owns the company, and I can prove it." In contrast to ordinary stock certificates, bearer shares do not list the name of a shareholder. Instead, they state that shares of stock in the corporation are owned by the "bearer" of the certificate. Therefore, whoever has physical possession of the certificate can exercise the rights of a shareholder of the company. The advantage of bearer shares is privacy and ease of transfer. A company with only bearer shares has no shareholders list or register. Therefore it is impossible to know for certain who the shareholders of the company are. Because a transfer of the shares can be made by simply handing them to another person, bearer shares can be transferred more easily than non-bearer shares. How Bearer Shares are Suppose to Work: Normally, when you fill out the back of a stock certificate, you must print the name or the company name of who owns that stock. Then you must record in the stock ledger the shareholder, address, date, number of shares, and if it was an original issue or a transfer. Obviously whomever the stock is issued to is the owner of the company. If it is to the bearer, then whoever holds that certificate, at a particular moment, will thereby be considered the owner of the company. DO YOU WANT TO INCORPORATE OR REGISTER A COMPANY WITH BEARER SHARES? CODDAN OFFERS ENGLAND, WALES, SCOTLAND AND NORTHERN IRELAND BEARER SHARES COMPANY FORMATIONS FROM - £ 142.00! Ukincorp.co.uk Tax Haven UK - 2 - Bearer Shares August 2nd, 2007 Alistair Darling has said the UK is not a tax haven. That is not true. It is, using any reasonable definition, including that which I proposed recently. I’ve already suggested one obvious reason why it is, which is the existence of the domicile rule, so let’s take a second example that is less obvious. This is the fact that the UK allows the issue of bearer shares. This is deliberate. The right survived into section 779 of the Companies Act 2006. As one formation agent who seems to specialise in the more esoteric end of the market has noted, UK companies with bearer shares are ‘our most popular package with UK residents’ taxreasearch.org.uk