Drug running. Human trafficking. Credit card scams. Housing scams. Money laundering.
Tax avoidance.
The common thread that runs through all of these crimes is the use of anonymous shell companies — phantom entities set up to hide the flow of money. We hear about these companies in the news, often in the context of stories about the ultra-rich and their efforts to avoid taxation. We think of the Cayman Islands and banking transactions made poolside. But anonymous shell companies have far more to do with average Americans than we think.
A recent study by the World Bank that looked at more than 200 large-scale corruption cases from around the world showed that American shell companies were used more often than those from any other country to move dirty money. In fact, the U.S. is actually one of the easiest places in the world to set up an untraceable company. It is perfectly legal to incorporate a company without disclosing who actually owns and controls it. In many states, it is easier to form an anonymous company than it is to get a driver’s license or register to vote.
Anonymous companies are used here at home to facilitate crime and hurt Americans. They have been used to scam Americans with poor credit, force vulnerable homeowners into foreclosure proceedings, steal from government programs, avoid taxes and launder money for drug cartels.
The Washington Post discovered that homeowners in several states, including Iowa, faced the prospect of losing their home. They fell prey to Aeon Financial and a man named Mark Alan Schwartz. Schwartz and Aeon bought up property debts, known as “liens,” piled on tons of legal fees, increasing the debt several times over and gave homeowners a stark choice: pay up or lose your home. After the story was brought to light, the reporter tried to dig through the layers of anonymous companies to determine the actual owners of Aeon Financial. Only after the story received widespread attention did Schwartz disclose in a letter to the editor in the Washington Post that he is a beneficial owner of the company.
Fortunately, there is a bill in Congress that would address these problems. The Incorporation Transparency and Law Enforcement Assistance Act, was introduced during the last Congressional session and awaits reintroduction for this session. Iowa’s own Senator Chuck Grassley was a lead sponsor of this bill during the last session of Congress. And, as Chair of the Senate Judiciary Committee, Senator Grassley would preside over a hearing on this bill upon reintroduction. He has the power to move this bill forward by reintroducing it this session of Congress and scheduling it for a committee hearing. This is an historic opportunity to put an end to the rampant abuse of anonymous companies and to help communities here in Iowa, across the country and around the world.
As a person of faith, I am concerned about Americans victimized by these problems and about our sisters and brothers being victimized overseas.
The poorest countries across the globe are spending on average five times as much paying off old debt than they are receiving in official aid. Countries that have received debt relief have invested the money in health, education and the fight against AIDS, and have seen much progress, including a decline in child mortality rates, changing the lives of women and children. But ending the cycle of debt requires that countries be able to raise their own revenue so they aren’t dependent on loans. And raising revenue is difficult when poor countries lose far more money to corporate tax avoidance, tax evasion and corruption — activities often facilitated by anonymous shell companies — than they receive in official aid.
So if we’re serious about protecting vulnerable communities both here and abroad, if we’re serious about stopping crime and aiding law enforcement, this is where it has to start. Anonymous shell companies are at the nexus of crime, poverty and our global financial system. They exacerbate inequality and decrease financial stability.
I call upon Sen. Grassley to continue his tradition of upholding fiscal transparency by making our companies and our financial system more transparent, and therefore protecting hardworking Americans and vulnerable communities everywhere.
The Rev. Julia Rendon is the pastor of
Crossroads United Church of Christ in Indianola.