International banking and tax laws are a joke, says a university researcher who used Google and $10,000 to establish a series of shell corporations which could easily have been used by criminal organisations to launder money.
Professor Jason Sharman, from Queensland's Griffith Business School, set up shell corporations and bank accounts without any identification.A shell company serves as a means for conveyance for business transactions without necessarily having assets.He found it was banks in the US and UK which were flouting the rules, not the smaller island tax havens.In one case, he said, a US provider in Wyoming offered to use their own employees' social security numbers as the tax identification number for a corporation.
Prof Sharman set out to see how difficult it was to violate recent global standards stopping anonymous participation in the international financial system.He emailed 45 corporate service providers across 22 countries soliciting offers to set up anonymous shell corporations - and 17 agreed.Of these, 13 were from OECD countries, including seven in the United Kingdom, four in the United States, one in Spain, and one in Canada, and the remaining four from some of the 28 better known tax havens.
From the 17 anonymous corporations, Prof Sharman solicited offers for five bank accounts - two from US, two from UK and one from Liechtenstein - without having to provide any certified identification as to the true owner of the company and account.
"It cost from only $800 to $3,000 for up-front costs followed by a slightly smaller amount on an annual basis for each corporation," Prof Sharman said.
"I found small island offshore centres traditionally thought to be loose with tax and international laws to have standards that are much higher than major OECD economies like the United States and the United Kingdom." He said even without direct access to the banking system, anonymous companies could be useful in financial crime by holding share portfolios in the name of a foreign shell company so as to avoid capital gains tax.
"The most flagrant breach of international standards came from a US provider based in Wyoming which offered to use their own employees' social security numbers as the tax identification number for a corporate vehicle," he said.
Prof Sharman said the findings show the problems of financial opacity are for G7 countries - not palm-fringed tropical islands.
"Unlike the Cayman Islands and Panama, the United States, United Kingdom and other OECD states have simply chosen not to comply with international standards they had a large hand in creating," he said.