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Financial Transparency in the First State
Transparency has become a buzzword in every sector. But, nowhere is it more persistently pursued than in the financial realm and, today, no state in the Union is in such dire need of a substantial helping of transparency than Delaware. Even the New York Times hailed Delaware as a “Den of Thieves” and for good reason—Delaware is known as a hotbed for tax evasion, underground financing and other felonious acts perpetrated by an abundance of anonymous shell companies. In fact, Delaware, Nevada, and Wyoming, and the US itself, has a growing reputation as a haven for corporations seeking nefarious levels of economic secrecy.
Delaware is currently the incorporation locale for more companies than the state’s living residents. Approximately 64 percent of corporations on the Fortune 500 list and a whopping 50 percent of all United States publicly traded companies trace their incorporation back to the tiny state. It’s a well-thought-out decision for both the institutions themselves and the state, as Delaware has very favorable tax arrangements specifically aimed to draw businesses.
While this has worked wonders for the state’s income (roughly one quarter of which has come from taxes and fees in previous years), the appealing nature of incorporation continues to draw in business of a darker nature. From drug dealers to dictators, anonymous shell companies have taken advantage of Delaware’s friendly legislation to secretly launder illegally obtained funds. Most notoriously in recent memory, former Ukrainian president, Pavel Lazarenko was prosecuted for laundering millions through anonymous companies incorporated in the US, specifically in Delaware and California.
Something obviously needs to change. In response, a coalition of 13 state-based organizations, along with the Americans for Democratic Action, distributed a statement which announced to criminals and corporations alike that Delaware is no longer willing to be a playground for dirty deals. The statement called for the legislature to bolster laws on economic transparency and after it was issued, local lawmakers joined the fight as well, calling on the Delaware Congress to take action.
How the legislature itself will move forward is anybody’s guess. Will the lure of dirty money be too strong a siren call for the state, or will the recent outcry push Delaware to join the growing global movement towards economic transparency? While few things are certain, it looks like the First State’s anonymously corrupt days may be numbered.
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Proposed FinCEN Rule Should Help Track Down Perpetrators of Fraud
Federal Trade Commission staff filed a comment on a Notice of Proposed Rulemaking published by the Financial Crimes Enforcement Network (FinCEN) of the U.S. Department of Treasury, in which FinCEN proposed a rule to clarify and strengthen existing customer due diligence requirements for financial institutions under the Bank Secrecy Act. Among other requirements, the proposed Customer Due Diligence Rule would require financial institutions to collect information on the individuals who are the beneficial owners of a legal entity when the entity opens an account.
The comment of the FTC’s Bureau of Consumer Protection and Bureau of Economics notes that the proposed Rule should improve the FTC’s ability to track down those perpetrating fraud against consumers. FTC staff provided examples from FTC enforcement actions in which individuals used legal entities or “shell” companies to disguise their involvement with fraudulent operations and transfer the proceeds of fraud— instances in which information about the individuals behind a legal entity would have helped the FTC’s law enforcement, particularly in its efforts to quickly shut down fraudulent operations.
The Commission vote to issue the staff comment was 5-0. It was sent to FinCEN Director Jennifer Shasky Calvery.
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The Future
The story’s told of a clock that spent a great deal of time worrying about it’s future, reasoning that it had to tick twice each second. “How much ticking might that be?” the clock thought. So it began to calculate that it would tick 120 each minute, which is 7,200 times each hour. That meant in a twenty-four hour day it would have to tick 172,800 times, and 63,072,000 times every year. By this time the clock began to get overwhelmed and sweat profusely. Finally, it calculated that in a ten-year period it would have to tick 630,720,000 times – and at that point the clock collapsed with a nervous breakdown. Psychologists reckon that about 95 percent of all we worry about never happens. What about the other 5 percent? Four out of five times things turn out better than we anticipated, including a lot of outright blessings! In the end, only 1 percent of all the bad we think might happen actually does, and of this it’s rarely as bad as we feared. That’s why Jesus said, “Don’t be anxious about tomorrow. God will take of your tomorrow too. Live one day at a time.” The apostle Peter gives us the right perspective to live by in these words: “Casting the whole of your care, all your anxieties, all your worries, all your concerns, once and for all on Him, for He cares for you affectionately and cares about you watchfully.” So the word for you today is – don’t obsess over the future.
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Diagnostic & Prescriptive Judgment Enforcement
By: Joe H. Dickerson, CFE
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