WASHINGTON—In response to Treasury Secretary Janet Yellen pledging more corporate transparency at the Summit for Democracy, Daniel Castro, director of the Center for Data Innovation, issued the following statement:
Shell corporations have long been a safe haven for criminal activity, including dangerous counterfeits, online piracy, crypto scams, and other cybercrime. Shell corporations list a legal owner, typically a lawyer or trust, but obscure the identity of the individuals who have influence over the corporation or stand to benefit from its transactions.
While many online platforms are working to validate business accounts and adhere to stronger know-your-business-customer processes, there is a limit to what they can do when bad actors can hide their identities in shell corporations. Similarly, law enforcement and journalists can hit roadblocks on exposing fraud and corruption when bad actors can obscure their true identities.
It has been nearly a decade since the United States pledged to create rules to disclose the beneficial owners of shell companies. It is heartening for Sec. Yellen to reaffirm this commitment at the Summit for Democracy and work with other global allies to do the same. As the Treasury Department works to build a database of beneficial owners for U.S. businesses, it should work to make as much of this information widely available in machine-readable formats not just to law enforcement, but others working outside government to identify and stop illegal activity.
The Center has long championed more corporate transparency on beneficial ownership. For background, see:
- Joshua New, “Why the U.S. Needs Federal Legislation to Unlock the Secret Dealings of Shell Companies” (Center for Data Innovation, June 2015).
- Daniel Castro, “Europe Should Follow UK’s Lead on Corporate Transparency” (Center for Data Innovation, May 2016).