Shell companies undermine sanctions against North Korea
On Aug. 5, the United Nations Security Council voted to pass powerful new sanctions on North Korea. If successfully enforced, the new sanctions could deal a significant blow to the regime, cutting off much of its foreign currency supply.
But if sanctions are going to have any effect on the North Korean regime, we cannot continue to leave open critical loopholes that allow them to launder money and get around the sanctions.
We undermine our own interests by making it harder to enforce sanctions as we allow illicit actors to hide behind anonymous shell companies. It is possible to create a secret company in most U.S. states where the true name of the beneficial owner of the company is hidden from law enforcement, banks and people with whom the company does business. That company is then able to open bank accounts, buy property and generally do business as a legal U.S. entity, regardless of who the real owner is.
This problem is not theoretical. Beginning in 1989, Assa Corp., a shell company incorporated in New York, owned a 40 percent stake of the 36-floor New York City skyscraper at 650 Fifth Ave. Assa was itself owned by Bank Melli, the stateowned bank of Iran.
For nearly two decades, Assa funneled millions of dollars of hard U.S. currency back to Iran despite numerous sanctions. The remaining assets, valued at a $1 billion, were recently awarded by a jury to victims of terrorism and the 9/11 attacks.
Research authored by one of us found that the U.S. is the second-easiest place in the world to incorporate an anonymous shell company.
We posed as fictitious consultants working on behalf of shady clients modeled on realworld terrorism and corruption cases. We asked incorporation providers to create anonymous shell companies despite obvious warning signals.
We found it frighteningly easy to create a U.S. shell corporation. For example, one corporate service provider in Florida responded to an inquiry with the following: “[Y]our stated purpose could well be a front for funding terrorism . ... I wouldn’t even consider doing that for less [than] 5k a month . ... If you are working with less than serious money, don’t waste anybody’s time here.” This is unacceptable. Our local representatives can do something about anonymous shell companies. The Corporate Transparency Act is a bipartisan, compromise bill that would require all companies created in the United States to collect information on their true owners — and make that information available to police, prosecutors and financial institutions to assist them with their anti-money laundering responsibilities.
U.S. Rep. Roger Williams is a key vote on the House Financial Services committee, where the committee chairman, U.S. Rep. Jeb Hensarling, has indicated that this issue is a priority. We implore Williams to support the bill.