Tax Research UK

Yes, addicts need help. But all you casual cocaine users want locking up | George Monbiot | Comment is free | The Guardian .

I know people who drink fair-trade tea and coffee, shop locally and take cocaine at parties. They are revolting hypocrites.

Every year cocaine causes some 20,000 deaths in Colombia and displaces several hundred thousand people  from their homes. Children are blown up by landmines; indigenous people are enslaved; villagers are tortured and killed; rainforests are razed. You’d cause less human suffering if instead of discreetly retiring to the toilet at a media drinks party, you went into the street and mugged someone. But the counter-cultural association appears to insulate people from ethical questions. If commissioning murder, torture, slavery, civil war, corruption and deforestation is not a crime, what is?

All faciliated by tax havens George, never forget that. The professional classes have to get their rake off. Add that to the list of hypocrisy.

Richard Murphy Corruption, Secrecy jurisdictions, Tax Havens

I’ve been asked why the UK can’t secure the data it needs to comply with the information exchange demands of Tax Information Exchange Agreements. I’ve also noted what Robert Morgenthau has had to say about abuse of US corporations. So let me take a simple example 

Suppose I buy a UK ‘off the shelf company’ from a formation agent. It’s a pretty easy thing to do.

They send me the forms to register the new shareholders

I may or may not complete them: I probably won’t. The company now has no recorded owners. I suspect this true of the vast majority of small companies in the UK, at least until their first annual return is filed 21 months after incorporation.

I might register the company at a false or nominee address (for example, somewhere offering a postal forwarding service). I may do so in a false name. As the only data that is checked with regard to any of this is that the postcode is real (but not that it is valid) that is easy to do.

I may have (quite easily) provided a false name as a director - no one ever checks.

I can still open a bank account. Banks do not seem to do company searches. The inconsistencies will not matter to them.

And HMRC will not now know where to find me - or who owns the company - and their enquiries will go unanswered.

After 21 months when the first accounts are due I ditch the company - maybe changing its name whilst transferring the original name to a now company, where I repeat the process. I forget to tell the bank about the change of identity and continue to use the bank account I now have with that new company.

Now maybe you might say I have the mind of a fraudster - but I see no way the UK can stop the above at present, and it would be easy to do.

And if I used an Eastern European bank account, which seem readily available, then this would became so easy it would be ridiculous.

My point is this: the UK is a great tax haven, one of the easiest places on earth to open a bank account and has about the laxest regulation there is.

And you still don’t believe me? Consider this: more than 100,000 companies are struck off the UK register of companies a year with no questions asked, many having never filled a set of accounts. Why do we let that happen? Isn’t this laxness one of the biggest recipes for fraud and abuse ever created? And we do it here in the UK.

Richard Murphy Corruption

More from the Robert Morgenthau testimony to the Senate:

We also receive regular requests from foreign law enforcement seeking to trace money moved through accounts held by U.S. corporate entities. A case indicted in Brazil involved criminal proceeds sent to an account at a U.S. bank. Again, a U.S. shell corporation was created and used to open the account. In this case, the defendants discussed using a British Virgin Island company as the nominee director of the corporation. Consider the following communication from the U.S. incorporating agent to the Brazilian defendant:

The recommendation is to open a US Limited Liability Company (LLC). This entity combine the advantages of a limited with the ones of a partnership, especially about the taxes (we will open “a pass-through entity).”

The instruction is to not mention in the public files the owners’ names.

It is possible to point a Registered Agent to receive the official letters.

The LLC might be managed directly by its owners, but it must be done preferentially by operating managers (equivalent to directors) and that will have duties and responsibilities similar to the corporation’s directors.

The Managers don´t need to be American citizens or to live in United States and their data may, but not necessarily, be disclosure to the public records.

The total cost for the opening procedures is US$ 6,000 including a Nominee Member. Per year the managing will cost US$ 1,600.

This communication, and the examples set forth above, demonstrate how the systems of anonymity in this country’s incorporation processes are being exploited by criminals. They also demonstrate why we need to be able to retrieve beneficial ownership information from the states directly, and not from the sham nominee of a domestic shell company.

Richard Murphy Corruption, USA

Robert Morgenthau, New York District Attorney of enormous repute, gave evidence to the hearing of the Senate last week on the Bill requiring that the beneficial ownership of all US corporations be available to all regulatory authorities.

Amongst the classic comments he made are:

In so many areas of financial crime we see transparency as a simple solution to a host of problems. Systems promoting opacity and secrecy are the best friend of the money launderer, the child pornographer, the tax cheat, the fraudster, the corrupt politician, and indeed, the financier of networks of terror. The beauty of the bill we are discussing today is the simple solution it brings to a host of problems: Transparency. If there is one lesson we have learned in investigating financial crimes, it is that the best and easiest solution for many areas of criminal conduct is to encourage and require transparency in financial arrangements.

and

My goal in presenting this testimony is to provide the law enforcement perspective on the issue of beneficial ownership registration; to wit, that anonymous shell companies present current and ongoing problems to the law enforcement community

and

There is an aspect of this issue not readily apparent to those who do not investigate and prosecute crime for a living. Critics have charged that the law will not work because criminals will continue to use false names to hide their identities. This criticism misses the point. By requiring the inclusion of beneficial ownership information, all people seeking the benefits of corporate status from the states will be expected and required to provide accurate and truthful information. When a criminal uses a false name, or a straw man, or incorporates in the name of a family member – there are two significant results from the law enforcement perspective.
• First, it provides evidence of what the criminal law refers to as “consciousness of guilt.” To put it another way – why would someone use false information? Would an innocent person do that? The answer is usually “no,” and this type of evidence is tremendously important in establishing a suspect’s criminal intent. Simply by requiring information regarding beneficial ownership, criminals would be forced to lie. And a lie goes a long way to establishing criminal intent.
• Second, and equally importantly, it will give law enforcement a criminal charge to bring against criminals who use false information to incorporate, and also against the agents who intentionally assist such criminals. If an incorporation agent sets up 100 shell companies for an identity theft ring that plans to steal and launder money, the incorporation agent may or may not be guilty as an accomplice to identity theft, larceny, and money laundering. But, the agent is certainly guilty of filing false incorporation documents with the state. The ability to punish the enablers and middle men will go far in cleaning up corruption.

I do like that. But this is also true, and why the US (and UK) must act:

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.

Go read the rest. I don’t agree with all of it, but the message is clear: the time has come for change. Let’s deliver it.

Richard Murphy Corruption, USA

On Thursday, June 18^th the US Senate Homeland Security and Governmental Affairs Committee will hold a hearing on the Incorporation Transparency and Law Enforcement Assistance Act, a bill to help law enforcement stop the misuse of U.S. corporations.  The bill was introduced in March by Sen. Carl Levin, D-Mich., Sen. Chuck Grassley, R.-Iowa, and Sen. Claire McCaskill, D-Mo. Carl Levin has said:

At the same time that we are calling for an end to offshore secrecy we need to put our own house in order and meet our international commitments by obtaining ownership information for corporations formed within the United States.  The Levin-Grassley-McCaskill bill would do just that.

Currently, nearly two million corporations and limited liability companies (LLCs) are formed within the United States each year.  The States generally form these corporations without asking for the identity of the corporation’s beneficial owners, meaning the real owners.  Law enforcement and national security problems have resulted when some of these corporations have become involved with money laundering, tax evasion, or other misconduct.  The new Act would require the States to obtain beneficial ownership information for the corporations formed under their laws and to provide access to this information to law enforcement upon receipt of a subpoena or summons.

The Senate Permanent Subcommittee on Investigations, chaired by Senator Levin, has been pursuing this issue since 2000, when the Government Accountability Office (GAO) conducted an investigation, at the Subcommittee’s request, into an individual who set up over 2,000 Delaware shell companies, established bank accounts for some of those companies, and without revealing their identities, moved $1.4 billion dollars through the bank accounts.  In April 2006, the GAO prepared another report at the Subcommittee’s request entitled, “Company Formations: Minimal Ownership Information Is Collected and Available.”  This GAO report reviewed the legal requirements in all 50 states to set up corporations and LLCs, found that most states failed to request beneficial ownership information, and reported that the absence of this ownership information impeded law enforcement investigations of suspect corporations.

In November 2006, the Subcommittee held a hearing in which the GAO report was released, and officials from the Department of Justice (DOJ), Internal Revenue Service (IRS), and Treasury Department’s Financial Crimes Enforcement Network (FinCEN) testified about an increase in the use of U.S. shell companies for illicit activities, and the problems caused by the lack of beneficial ownership information.  The Subcommittee has collected numerous examples of these shell company problems, including the following.

· The Manhattan District Attorney’s Office recently announced several cases which involved the movement of funds through New York banks by entities controlled by the Iranian military and two related matters in which U.S. shell companies were established to hide secret Iranian interests.

· The Immigration and Customs Enforcement (ICE) arm of the Department of Homeland Security (DHS) uncovered a network of nearly 800 U.S. companies in 2004, that were located in nearly all 50 states, were engaged in hundreds of millions of dollars in suspect money transfers, and were associated with shell entities in Panama, an offshore secrecy jurisdiction.  None of the 800 incorporation forms identified a true company owner.  Nearly 200 had been formed in Utah by the same Utah company formation agent, which told ICE it had formed them at the request of a Delaware company formation agent.  Neither the Utah nor Delaware company formation agent could provide information on the true company owners, since that information is not required by law.  The ICE investigation was unable to proceed due to the lack of ownership information.

· A company formation agent called Corporations Today Inc. offers to sell U.S. “aged” companies via the Internet, claiming: “We have the largest inventory of aged shell corporations in the United States.”  Corporations Today recently offered for sale, for a price of nearly $6,000, a Wyoming shell company with 4 years of tax returns and an Employer Identification Number issued by the IRS, even though it had never actually been used since incorporation.

· A 2005 analysis by FinCEN of suspicious activity reports indicated that as much as $18 billion in suspicious transactions have occurred through international wire transfers utilizing U.S. shell companies.

· In recent years, the U.S. Department of Justice and DHS have received, but have been unable to answer, hundreds of requests from foreign law enforcement agencies for beneficial ownership information on U.S. companies suspected of criminal misconduct.

Bill Summary

The Transparency and Law Enforcement Assistance Act would:

Beneficial Ownership Information.  Require the 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.

Non-U.S. Beneficial Owners.  Require corporations and LLCs with non-U.S. beneficial owners to provide a certification from an in-state formation agent that the agent has verified the identity of those owners.

Penalties for False Information.  Establish civil and criminal penalties under federal law for persons who knowingly provide false beneficial ownership information or intentionally fail to provide required beneficial ownership information to a State.

Exemptions.  Provide exemptions for certain corporations, including publicly traded corporations and the corporations and LLCs they form, since the Securities and Exchange Commission already oversees them; and corporations which a State has determined, with concurrence from the Homeland Security and Justice Departments, should be exempt because requiring beneficial ownership information from them would not serve the public interest or assist law enforcement.

Funding.  Authorize States to use an existing DHS grant program, and authorize DHS to use already appropriated funds, to meet the requirements of this Act.

State Compliance Report. Clarify that nothing in the Act authorizes DHS to withhold funds from a State for failing to comply with the beneficial ownership requirements.  Require a GAO report by 2013 identifying which States are not in compliance so that a future Congress can determine at that time what steps to take.

Transition Period.  Give the States until October 2012 to require beneficial ownership information for the corporations and LLCs formed under their laws.  

Anti-Money Laundering Rule.  Require the Treasury Secretary to issue a rule requiring formation agents to establish anti-money laundering programs to ensure they are not forming U.S. corporations or other entities for criminals or other suspect persons.

GAO Study.  Require GAO to complete a study of State beneficial ownership information requirements for domestic partnerships and trusts.

This is good news.

Now we need this here in the UK.

And we should demand that this data is also on public record. This is because limited liability is a privilege granted by the state: we should know who is using it. Disclosure and paying tax are the quid pro quos of limited liability.

Richard Murphy Corruption, USA

Why did France shut down fraud investigation against the late Omar Bongo? | Opinion | The First Post.

All governments have to commit to tackle corruption.

Even when it is used to finance political parties in their own state.

Richard Murphy Corruption