For years, while the U.S. has tried to combat foreign dictators and regimes aimed at undercutting American national security, U.S. laws have also provided the types of tools those regimes need in order to continue funding their operations — specifically, anonymous shell companies.
Thanks to the way companies are formed in the U.S., it’s the states, not Congress, that oversee who gets to set up shell companies across the country. Those states, for decades, have been more than happy to let any and all set up companies from Delaware to Nevada to Wyoming. All of it, completely anonymously.
These anonymous shell companies have allowed everyone from autocrats to arms-traffickers to move their money throughout the U.S. completely anonymously. These companies mask who the true owners are, or where that money — whether linked back to terrorist networks or dictatorships ransacking their populations — originally came from.
And we’ve already seen the kind of damage these anonymous American shell companies have done.
Iran, for instance, was recently caught using American shell companies to purchase real estate in Manhattan, allowing the Iranian regime to circumvent American sanctions for years. The most notorious gun-runner of the past few decades, a Russian national named Viktor Bout, used shell companies formed in Delaware, Florida and Texas to help hide his arms-smuggling network, which armed everyone from dictators in Africa to the Taliban.
There’s no reason to think these regimes have stopped — or that they’re limited only to Tehran or Pyongyang.
Indeed, it’s possible few regimes have taken as much advantage of this anonymity as China. Time and again, anonymous shell companies have helped the Chinese Communist Party continue to loot their country, continue to fund their human rights atrocities and continue to threaten American interests.
We already know that Chinese officials have used anonymous shell companies as one of their primary tools in funding bribery networks abroad to exert influence. For instance, Chinese officials turned to anonymous shell companies as part of an operation to help crooked Malaysian figures launder billions of dollars. Similar revelations have popped up almost everywhere China has tried to extend its so-called Belt and Road Initiative. As the D.C.-based Hudson Institute found, dirty money linked to Chinese investments has found its way into shell companies everywhere from Sri Lanka to Kenya.
Sen. Tillis has the opportunity to close down the largest vulnerability in our nation’s financial defenses by calling for Senate leaders to include the Corporate Transparency Act in the final defense bill.
At the same time, China is taking advantage of the anonymous companies to undermine legitimate U.S. businesses. According to the OECD, China and Hong Kong are the source for eight out of every 10 counterfeit products in the world — and many of those are sold through anonymous shell companies. Anonymous shell companies have even been linked to the kinds of fentanyl networks out of China that have already caused an untold number of deaths in the U.S.
Anonymous shell companies are a key piece of China’s overall efforts to dethrone the United States as a global superpower and extend its interests at our expense.
Thankfully, our policymakers have finally woken up to this threat, and are starting to do something about it.
The House of Representatives recently passed a bipartisan measure that will end anonymous shell companies in the U.S., known as the Corporate Transparency Act. The law was included in the House’s version of the defense bill, the National Defense Authorization Act. It’s now up to House and Senate leaders to negotiate which parts of this House bill ultimately make it into the final congressional defense bill to attack this threat.
Fortunately, the Senate has been working on this issue, too. Just last year, a similar measure known as the ILLICIT CASH Act was introduced by eight senators — four Democrats and four Republicans, Senator Tillis has a very influential voice in this process s a member of the Senate Banking Committee, the committee with jurisdiction over these issues. Sen. Tillis has the opportunity to close down the largest vulnerability in our nation’s financial defenses by calling for Senate leaders to include the Corporate Transparency Act in the final defense bill.
The time has come to end the incorporation of anonymous shell companies in the U.S. Doing so would be a significant step forward in keeping America — and North Carolinians — safe.
Tom Murry is a veteran and attorney.