Posted in: news
9th December 2016
Corruption is bad for business. And it’s bad for communities.
The Open Government Partnership Global Summit 2016 in Paris this week concludes a busy period for anti-corruption fighters around the world, following closely on the heels of the recent International Anti-Corruption Conference in Panama.
The B Team has compiled 10 top reasons that business should get active in the global movement to end corruption and take immediate steps to cease the use of anonymous shell companies which help to enable it.
1) Anonymous companies enable criminals to launder stolen cash and finance terrorism
According to a report by Transparency International UK, anonymous shell companies are a key enabler in money laundering. Approximately $800 billion-$2 trillion US dollars—as much as 5% of global GDP—is laundered globally every year and used to finance a range of illicit and illegal activities, including terrorism.
2) They hinder efforts to stop trafficking of humans, drugs and weapons
Speaking before a Congressional task force investigating the finance of terrorism, New York County District Attorney Cyrus Vance Jr. stated that “On a near-daily basis we encounter a company or network of companies involved in suspicious activity but we are unable to glean who is actually controlling and benefiting from those entities, and from their explicit activities. In other words, we can’t identify the criminal.”
3) Corruption stifles sustainable economic development
When companies avoid their taxes, they rip off ordinary citizens. Take the case of The Democratic Republic of Congo, for instance. A Global Witness investigation revealed that opaque corporate structures deprived citizens of billions of dollars of revenues when their copper and cobalt mines were sold. Mines purchased at a fraction of their market value by companies incorporated in the British Virgin Islands were later sold to FTSE 100 companies for closer to their true market value. In doing so, someone pocketed a fortune and billions were diverted from state coffers. Transactions which divert this much needed revenue make it harder for governments to sufficiently invest in health, education, infrastructure and other vital public services.
4) Unethical public officials exploit them to launder bribes
The Panama Papers revealed more than 100 politicians and public officials using anonymous companies to mask their identities, often aided by a network of lawyers, bankers and company formation agents. Operating beyond effective scrutiny, these officials are then able to transfer and spend the illicit funds. Making company ownership more transparent can significantly curtail this.
5) Anonymous companies encourage dirty business
Opaque business ownership enables fraud and bribery, and compromises fair competition for government contracts. More than $1 trillion is paid in bribes each year. This, in turn, hurts the bottom line for companies: corruption increases the cost of doing business by as much as 10% globally.
6) They increase the risk of doing business with unethical actors
Anonymous companies make it hard for business to know who they’re doing business with. A recent EY survey revealed that 91% of senior executives think it is important to know the real people that own and control the companies they do business with.
7) They pose significant risk and investment uncertainty for companies entering new markets
In September 2016, institutional investors managing over $505 billion in assets sent letters to the US Congress calling for an end to anonymous shell companies. As one asset manager puts it: “Corporate secrecy and a lack of transparency pose real risks to companies and investors alike and have real bottom line costs associated when it leads to corruption.”
8) Want to erode public trust in your company? Make it opaque
The link between a company’s market value and its reputation is well known. A Deloitte survey of corporate executives shows that reputational damage continues to be the leading risk concern for companies, which are compounded by related business ethics and integrity issues such as fraud, bribery and corruption.
9) They are pervasive and everywhere
If you think such subterfuge lives only on the sandy shores of the Cayman Islands or in the exclusive dens of Luxembourg, think again. Corruption knows no borders. The USA is one of the largest creators of anonymous companies in the world, and thus a significant potential nexus of illegal and illicit activities.
10) It’s the right thing to do.
Visit ownershiptransparency.com to find out more and join the movement.