[Congressional Record (Bound Edition), Volume 162 (2016), Part 4]
[Senate]
[Pages 5163-5164]
[From the U.S. Government Publishing Office, www.gpo.gov]




     INCORPORATION TRANSPARENCY AND LAW ENFORCEMENT ASSISTANCE ACT

  Mr. WHITEHOUSE. Mr. President, I am here today to highlight law 
enforcement legislation that would help crack down on human 
trafficking, terrorism financing, money laundering, Medicare fraud, the 
narcotics trade, tax evasion, public corruption, and a litany of other 
crimes in the United States and around the world. These crimes all 
involve money, and the United States has become a favorite destination 
for criminals looking to hide it.
  Earlier this month, the International Consortium of Investigative 
Journalists published the first of the so-called Panama papers, a leak 
of 11.5 million confidential documents from a Panama-based law firm 
that sets up shell corporations and tax shelters for wealthy clients. 
The documents we have seen so far show that, along with the Caribbean 
islands you might expect, several American States are popular places to 
form shell corporations.
  Our friend Senator Kent Conrad, who used to be chairman of the Budget 
Committee, was fond of using this floor chart showing what is called 
the Ugland House building in the Cayman Islands. This little building 
claims to be the place from which an astonishing 18,000 companies do 
business. As unimaginable as it may be to have 18,000 companies 
claiming to be doing business out of that one little building, I am 
sorry to say that there is a building just a 2-hour drive from the U.S. 
Capitol Building that serves as the official address for a quarter of a 
million companies, many of them shell corporations.
  A shell corporation is a company that serves no economic purpose and 
doesn't conduct any real business. Shell corporations exist primarily 
to hold legal title to bank accounts, real estate, or other assets, 
often obscuring the true human owners. While people can form shell 
corporations in just about any country, many American States make it 
especially easy to do so, perhaps even easier than getting a library 
card. You may actually need to go down to a library to sign up for a 
library card, but you can form a shell corporation with a few clicks of 
a mouse and payment of a small fee.
  There is another reason that the United States has become so popular 
for shell corporations. Currently, none--zero--of the 50 American 
States require the disclosure of the beneficial owners--the real human 
beings who own the companies. Instead, corporate records can identify 
the owner as just another faceless shell corporation, or the owner 
could be identified as a professional agent paid to sign the needed 
forms and never speak of them again or a lawyer who refuses to disclose 
who his client is under attorney-client privilege. Behind this easy-to-
establish veil of secrecy, criminals can and do use these shell 
corporations to open bank accounts, transfer funds, and even to hide 
the ownership of expensive assets.
  This building shown here is at 650 Fifth Avenue in New York City. The 
Iranian Government used a string of generic businesses to obscure its 
ownership of this Fifth Avenue skyscraper. Profits from this enterprise 
helped fund Iran-backed terrorism for decades, until a U.S. Government 
investigation finally uncovered the scheme in 2008.
  How could a state sponsor of terrorism own a piece of the New York 
City skyline and profit from owning that piece of the New York City 
skyline for so long without anyone knowing? Let's look at how Iran used 
anonymous shell corporations to hide its involvement.
  On paper, 650 Fifth Avenue was owned by a partnership of the Alavi 
Foundation, a New York-based charity, and the Assa Corporation, a New 
York shell company. Assa Corporation was, in turn, owned by yet another 
shell company, Assa Company, Limited, and formed in the Isle of Jersey, 
a notorious banking center and tax shelter. The Isle of Jersey company 
was in turn owned by individuals representing Bank Melli, the Iranian 
Government's financial arm, and there is the connection to Iran.
  So to the public, that building--worth about half a billion dollars--
was owned by a charity and a faceless shell company. Because there is 
no requirement in the United States that States keep track of the real 
owners of a company formed under State law, New York State only knew 
that the Assa Corporation was owned by another shell corporation. 
Ultimately, investigators were able to connect those dots and tie Iran 
to the structure from a clue in the corporate records kept on the Isle 
of Jersey.
  How is that for irony? A notorious tax shelter actually had better 
ownership records than we have in the United States. Once Iran's 
investment and involvement was uncovered, the Department of Justice 
moved to seize and sell the building and to distribute the proceeds of 
that sale to American victims of Iranian-backed terror. After years of 
legal appeals, the victims look close to receiving this compensation.
  Of course, Iran isn't the only criminal enterprise hiding behind 
American shell companies. Other recently uncovered examples of 
enterprises hiding behind American shell companies include a Mexican 
drug cartel using an Oklahoma corporation to launder money through a 
horse farm, a crime syndicate setting up a web of corporations in eight 
States as part of a $100 million Medicare fraud scheme, and a human 
trafficking ring based in Moldova that hides their crimes behind 
anonymous corporations in Kansas, Missouri, and Ohio.
  According to the Rhode Island State Police, corporate secrecy in my 
own State has complicated their investigations into real estate fraud, 
illegal prescription drug distribution, and sales tax evasion.
  In January, just months before the Panama Papers hit the headlines, 
``60 Minutes'' aired a segment showing just how easy it can be for 
criminals to hide money in the United States. The program featured an 
investigator with the anticorruption organization Global Witness. That 
investigator pretended to represent a corrupt African leader, and ``60 
Minutes'' brought a hidden camera along into his meetings with lawyers 
in New York.
  The investigator, presenting himself as representing the corrupt 
African leader, made clear that his client wanted help using suspicious 
funds to buy a mansion, a jet, and a yacht in the United States and to 
hide his ownership of these assets. Of the 16 lawyers who met with the 
undercover investigator, only 1 turned him away. It seems the others 
were comfortable helping a corrupt foreign official hide money in 
opaque American shell corporations.
  While the underlying criminal schemes may be colorful and complex, 
the answer to this shell corporation problem is simple and 
straightforward. The Incorporation Transparency and Law Enforcement 
Assistance Act would direct States to require applicants forming 
corporations and limited liability companies to include basic 
information about the actual human beings who own the company.
  The States would maintain and periodically update this information, 
and it would be available to law enforcement officers who present valid 
court-ordered subpoenas or search warrants. It is simple. Have each 
State keep track of who actually owns companies they charter and ensure 
that information is available for Federal, State, and local law 
enforcement agencies through proper processes.
  Transparency in business ownership is not a novel idea. Every member 
of the European Union will be transparent by 2017. The United Kingdom 
and the Netherlands have even announced plans to make their corporate 
ownership registries available to the public. With the light of 
corporate transparency about to shine on criminal assets hidden in 
Europe, their shell corporations will not be effective for these 
purposes. So that money will be looking for new dark homes.
  America should take swift action to make sure these assets don't find 
new hidden homes in opaque American shell corporations. We are supposed 
to be an example to the world, not the place where the world's corrupt 
and the world's criminals hide their cash and their assets.

[[Page 5164]]

  The Incorporation Transparency and Law Enforcement Assistance Act 
enjoys broad support from the national law enforcement community, 
including the Federal Law Enforcement Officers Association, the 
Fraternal Order of Police, the Society of Former Special Agents of the 
FBI, and the U.S. Marshals Service Association, as well as the Rhode 
Island State Police.
  Mr. President, I ask unanimous consent to be able to finish my 
statement.
  The PRESIDING OFFICER. Without objection, it is so ordered.
  Mr. WHITEHOUSE. Chuck Canterbury, president of the National Fraternal 
Order of Police, explains it this way: ``When we are able to expose the 
link between shell companies and drug trafficking, corruption, 
organized crime, and terrorist finance, the law enforcement community 
is better able to keep America safe from these illegal activities and 
keep the proceeds of these crimes out of the U.S. financial system.''
  Of all places, the United States should not be a safe haven for 
criminals, foreign or domestic, to hide their illegal assets. We could 
take a simple major step in fighting money laundering, financial fraud, 
and terrorist financing by passing this bill. I urge my colleagues on 
both sides of the aisle to cosponsor it and to help us get it passed.
  I thank the Chair. I appreciate the extra time.
  I yield the floor.
  The PRESIDING OFFICER. The Senator from Arizona.

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