April 29, 2016

Whitehouse Highlights Bill to Close Corporate Loopholes Exposed by Panama Papers

Senator’s bill would help reveal true owners of shell corporations used to launder money, hide financial fraud, and fund terrorism

Scituate, RI – Senator Sheldon Whitehouse today joined state and local law enforcement officials and members of the legal community at the headquarters of the Rhode Island State Police to highlight his legislation that would make it more difficult for criminals to hide assets from tax authorities and law enforcement, addressing corporate transparency loopholes exposed in the recent Panama Papers leak.

“The Panama Papers show that a criminal no longer needs a Swiss bank account or to book a trip to the Cayman Islands to hide illicit funds.  It’s easy enough to form an anonymous shell company right here in the United States,” said Senator Whitehouse.  “My solution is simple: have states keep track of the actual human beings who own corporations formed under state law.  My bill would give law enforcement a powerful new tool to fight tax evasion, human trafficking, terrorist activity, and many other crimes made easier by impenetrable shell companies.” 

Currently, applicants can form corporations and other business entities anywhere in the United States without disclosing the people who really own the companies.  Shell corporations in multiple states were recently exposed by the Panama Papers leak, and the Department of Justice is investigating possible crimes, including tax evasion. 

“The Rhode Island State Police has investigated cases where it was difficult and time consuming to identify suspects in crimes, such as domestic and international money laundering, drug trafficking, and terrorist activities, because they were hiding behind a ‘shell’ corporation or LLC,” said Colonel Steven G. O’Donnell, Superintendent of the Rhode Island State Police and Commissioner of the Rhode Island Department of Public Safety.  “Many times these criminal enterprises have legitimate businesses, as a means to thwart law enforcement detection.  The Incorporation Transparency and Law Enforcement Assistance Act would require the actual owner of the business to be named.  This information would be readily available on the Secretary of State’s corporations database and allow access to relevant information.  I support Senator Whitehouse’s leadership in introducing this bill, which will be a valuable tool for all law enforcement agencies.”

The Incorporation Transparency and Law Enforcement Assistance Act introduced by Senators Whitehouse and Dianne Feinstein (D-CA) would: 

  • Require states to obtain information on the true owners of corporations and LLCs formed under state law and to make the information available to law enforcement upon receipt of a subpoena or summons; and 
  • Extend money-laundering due diligence requirements that currently apply to banks to professionals that help form business entities. 

“In law enforcement, we are constantly strategizing how to stay one step ahead of emerging trends regarding criminal activity,” said Colonel Hugh T. Clements, Jr.  “As Chief of the Providence Police Department and President of the Rhode Island Police Chiefs Association, I fully support this legislation and commend Senator Whitehouse for pushing this bill which will bolster our efforts in prosecuting and dismantling corrupt and criminal organizations.”

Even before the Panama Papers leak, recent investigations uncovered American shell companies used by Iran to own a skyscraper in Manhattan with related proceeds going to fund terrorist activities; a Mexican drug cartel to launder money through a horse farm in Texas; and Moldovan criminal bosses to conceal a worldwide human trafficking ring. 

“We all know that when companies make products that hurt or take advantage of regular people, our legal system should be able to protect all of us and make people whole,” said Miriam Weizenbaum, a partner at DeLuca & Weizenbaum, Ltd.  “As a lawyer, I can only level the playing field for the little guy if I can actually find the big guy.  Our legal system will work better for families, children, consumers, workers, when the law helps us find the real owners responsible when a company causes harm.  This legislation gets us closer to the kind of fairness that we should expect in a democracy.”

The bill has broad support in the law enforcement community.  It has been endorsed by dozens of national and international groups including the Federal Law Enforcement Officers Association, Society of Former Special Agents of the FBI, United States Marshalls Service Organization, Fraternal Order of Police, National Association of Assistant U.S. Attorneys, Jubilee USA Network, and Oxfam America.


Press Contact

Meaghan McCabe, (202) 224-2921