20 December 2010

Shopping for Anonymous Shell Companies: An Audit Study of Anonymity and Crime in the International Financial System

The last few years have seen an international campaign to ensure that the world's financial and banking systems are "transparent," meaning that every actor and transaction within the system can be traced to a discrete, identifiable individual. I present an audit study of compliance with the prohibitions on anonymous shell companies. In particular, I describe my attempts to found anonymous corporate vehicles without proof of identity and then to establish corporate bank accounts for these vehicles. (Transactions processed through the corporate account of such a "shell company" become effectively untraceable—and thus very useful for those looking to hide criminal profits, pay or receive bribes, finance terrorists, or escape tax obligations.) I solicited offers of anonymous corporate vehicles from 54 different corporate service providers in 22 different countries, and collated the responses to determine whether the existing legal and regulatory prohibitions on anonymous corporate vehicles actually work in practice. To foreshadow the results, it seems that small island offshore centers may have standards for corporate transparency and disclosure that are higher than major OECD economies like the United States and the United Kingdom.

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