Anonymously-owned companies are risk for investors: letter to U.S. Congress

Recently, 22 institutional investors told U.S. Congress that they want all American companies to disclose who owns and controls them.

These investors support a bipartisan act called the Incorporation Transparency and Law Enforcement Assistance Act (S. 2489), which would oblige such companies to be transparent about their operations and to keep ownership records updated–The Act has been read twice but has yet to be passed.

In a letter, the group of 22 investors say, “Currently, in all 50 states, companies can be created anonymously, effectively removing personal responsibility or accountability […] As a result, anonymously-owned American companies have been used by the criminal and corrupt to evade taxes, skirt sanctions and win U.S. government contracts in order to steal taxpayer dollars.”

Read: Canada’s record on finding tax evaders is dismal

This is a problem, the letter notes, because investors “rely on access to accurate information […] Opaque corporate structures are not just an obstacle for law enforcement, but also inhibit investors’ abilities to identify risks.”

A recent release says the Administration in the U.S. supported the proposed Act in 2014, but that it then proposed an alternative approach should be taken for collecting information about U.S. companies. However, no further progress was made. Then, in light of the information revealed by the Panama Papers dump, there was renewed interest in the Act.

Read:

• How much do you know about the Panama Papers? Take this quiz
• See the major Canadian firms in the Panama Papers

In their letter, the group of investors conclude, “There’s a real cost of corruption to investors, shareholders, small businesses, consumers and the general public.” Further, “International business leaders have stated that ending anonymous companies will mean more competitive markets, more stable financial systems and more sustainable development.” Read the full letter.

Read: CRA prepares next phase of tax crackdown

Staff

The staff of Advisor.ca have been covering news for financial advisors since 1998.