Corruption

Shell corporations pose a major risk to our national security

There is growing recognition of the link between corruption and national security. Corruption, especially of the transnational variety, poses a major threat to democracy throughout the world. Rogue nations, terrorist organizations and arms traffickers have exploited the global financial system. This is part of a strategy to weaken American institutions, provoke conflict in unstable regions, and erode public faith in elections and the rule of law in fragile democracies.  

Let’s start with the example of Victor Bout. A former Soviet military officer, Bout turned international weapons trafficker, conspiring to sell arms to FARC insurgents in Colombia and allegedly smuggling supplies to Liberian strongman Charles Taylor, the Taliban and others in conflict zones around the world. Bout used a series of anonymous U.S. shell companies to launder money and facilitate his smuggling.

Iran also has proved adept at hiding financial moves, even under conditions of strict economic sanctions. The Iranian-controlled Bank Melli bought property in New York City through a series of anonymous companies. Tenants unwittingly paid rents totaling millions of dollars that likely were used to support Iran’s nuclear program.

The common feature in these cases is the abuse of companies created in the U.S. with anonymous ownership. The U.S. is one of the largest and most stable economies in the world. But according to a recent study out of University of Texas, we also are easy prey to the corrupt use of anonymous companies.