Unmask the corrupt

Unmask the corrupt

Who says secret companies are bad? We do!

Do you ever wonder how a corrupt public official manages to shift stolen funds to a luxury resort to build a beachfront getaway? Or how the son of the president of one of can make use of stolen cash ? It’s actually quite easy. The first step is to find a country where lax corporate registration rules allow a person to set up a secret company.

These places are called “secrecy jurisdictions” and they exist all over the world from the Cayman Islands in the Caribbean to the U.S. state of Delaware.

Once a corporate home has been chosen, a pack of eager facilitators including bankers, lawyers, accountants and others can quickly and easily set up secret companies and bank accounts. Thus begins the oft-used process to move illicit cash flows around the world. 

Shell companies, secrecy jurisdictions and opaque corporate ownership structures allow the corrupt to hide their ill-gotten wealth. At Transparency International, we say it’s time for governments to unmask the corrupt and make it mandatory to reveal who really benefits from every company registered on their soil.

Today too many leading economies don’t require or record information about who really owns or controls companies registered in their country, making it easier for the corrupt, terrorists or organised criminals to hide their stolen money.

Step right up! Companies here! Set up your cheap companies here!

With an internet connection, a credit card, and as little as US$935, it can take under 10 minutes to set up a shell company. Read more .

That is why we are asking the members of the G20 countries meeting in Australia to make it impossible for the corrupt to hide their identity behind secret companies.

G20 countries need to make it mandatory for business registers to include information about the ultimate “beneficial owner” of any asset and to make that information public. If that happens, law enforcement and the public will know who really benefits from every company registered on their soil.

This will make a difference in the fight against corruption. A World Bank report said that among the 213 cases of grand corruption it investigated over the last 30 years, more than 70 per cent showed ownership of the stolen funds had been disguised through the misuse of corporate entities, half of which were anonymous shell companies.

The dead come back to life

A Global Witness report, , found that in one case, the identity of a dead man from Russia was used as the front for a UK company. While this person had died three years before the company was set up, he was listed as the company’s owner and he even ‘attended’ a company meeting in London.

What needs to be done

Last year the UK government committed to introduce legislation to ensure that beneficial ownership information is incorporated into public registries. France passed a law to incorporate the beneficial ownership information of trusts into public registries.

More needs to be done. Corruption is a transnational problem that connects bribery and stolen assets to fancy resorts and financial centres around the world, through a maze of secret mechanisms. The G20 can raise the game by showing global leadership and pushing its members to be more transparent, share information on illicit flows and work together to unmask the corrupt.

Transparency International recommends:

Preventing luxury lifestyles derived from corruption

Cover of policy brief

Alongside efforts to stop illicit flows, more work needs to be done on the denial of entry for the corrupt to keep them from traveling freely across borders to enjoy luxury lifestyles funded by theft and corruption.

Furthermore, governments should make sure that luxury retailers are not handling corrupt money by enforcing legislation requiring proper checks and due diligence on their customers.

It may be easy for a luxury car dealer to turn a blind eye and accept cash for a luxury car from someone who on paper should not be able to afford one. But it should be against the law. Corruption is not a victimless crime. An investigation might show that the money used to buy the luxury automobile should have been used to buy medicines to save lives.

Resources

For more on beneficial ownership, secrecy jurisdictions and denial of entry, please see our policy brief, 'Ending secrecy to end impunity: tracing the beneficial owner'

For more on denial of entry, please see our policy brief, 'Leaving the corrupt at the door: from denial of entry to passport sales'

For more on luxury goods retailers, please see our policy brief, 'Regulating luxury investments: what dirty money can't buy'

For any press enquiries please contact [email protected]

Solicitude

Support Transparency International

Is Hungary’s assault on the rule of law fuelling corruption?

In June 2018, Hungary’s parliament passed a series of laws that criminalise any individual or group that offers help to an illegal immigrant. The laws continued worrying trends in the public arena that began with the rise to power of the Fidesz party in 2010. What are these trends, and what do they mean for the fight against corruption and the rule of law in Hungary?

Will the G20 deliver on anti-corruption in 2018?

This week, activists from civil society organisations all over the world gathered in Buenos Aires, Argentina for the sixth annual Civil 20 (C20) summit.

Returning Nigerians’ stolen millions

The stakes are high in the planned distribution of $322 million in stolen Nigerian public money.

Three priorities at the Open Government Partnership summit

Transparency International has been at the Open Government Partnership's global summit in Tbilisi, Georgia, pushing for action in three key areas.

Civil society’s crucial role in sustainable development

Key players in the development community are meeting in New York for the main United Nations conference on sustainable development, the High-Level Political Forum (HLPF). Transparency International is there to highlight how corruption obstructs development and report on how effectively countries are tackling this issue.

Comment gagner la lutte contre la corruption en Afrique

Aujourd’hui est la Journée africaine de lutte contre la corruption – une occasion opportunité pour reconnaitre le progrès dans la lutte contre la corruption en Afrique et le travail significatif qui reste encore à accomplir.

How to win the fight against corruption in Africa

African Anti-Corruption Day is an important opportunity to recognise both the progress made in the fight against corruption in Africa and the significant work still left to do.

Why rather

Follow us on Why rather