THE Isle of Man has once again defied the critics after new research revealed it’s far harder to set up untraceable shell companies in those jurisdictions branded tax havens than in OECD countries including the US and Britain.
A large majority of shell companies – which exist on paper only, with no real employees or offices and are quick, easy and cheap to set up – are used for completely legal and legitimate purposes.
But untraceable shell companies are the vehicle of choice for those engaged in money laundering, sanctions busting, tax evasion, major corruption, the financing of terrorism and other financial crimes.
More than 180 countries, including the Isle of Man, are committed to the standards of the inter-governmental Financial Action Task Force (FATF) which states that all necessary measures must be taken to prevent the misuse of companies for money laundering and terrorist financing and that adequate, accurate and timely information on their beneficial ownership is obtained by the authorities.
In a study to test FATF compliance, a research team impersonated a variety of low and high-risk customers, including would-be money launderers, corrupt officials and terrorist financiers who made more than 7,400 email requests to some 3,700 corporate service providers that make and sell shell companies in 182 countries.
And the results of the Global Shell Games study, carried out by Griffith University’s Centre for Governance and Public Policy in Australia, make surprising – and alarming – reading.
The study found that nearly half (48 per cent) of all replies received did not ask for proper identification and 22 per cent did not ask for any identity documents at all to form a shell company.
But it also found that those selling shell companies from so-called tax havens were significantly more likely to comply with the rules than those in Organisation for Economic Co-operation and Development (OECD) countries like the US and Britain. In fact, providers in poor, developing countries were also found to be more compliant with global standards than those in rich, developed countries.
In a ‘dodgy shopping count’, showing how many approaches on average had to made to providers before being offered an untraceable shell company with no need to supply any identity documents, Britain, the US, Canada and OECD countries all ranked near the bottom of the list with a score of 10 or below – while an average of 43 approaches had to be made to CSPs in the Isle of Man. Jersey and the Cayman Islands scored better still, with no non-compliance found.
As a whole, the research team found that it was three times harder to obtain an untraceable shell company in a tax haven than in an OECD country.
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Wednesday 22 May 2013
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