JANUARY 12, 2016
Mention the second smallest US state to corruption fighters, and they’ll tell you of a very different Delaware: a place where extreme corporate secrecy enables corrupt people, shady companies, drug traffickers, embezzlers and fraudsters to cover their tracks when shifting dirty money from one place to another. It’s a haven for transnational crime.
Low taxes, the state’s business-friendly laws and a sophisticated court system for hearing business disputes draw thousands of brand-name corporations to Delaware. In fact, nearly 65 per cent of Fortune 500 companies are incorporated there, making it the state with more corporations registered within its borders than people. In many cases, firms flock there for legitimate business reasons – but not everyone is squeaky clean.
Delaware is also home to thousands of anonymous shell companies thanks to its strict corporate secrecy rules. Got dark secrets to hide when setting up a business there? No problem! No data is collected on beneficial owners, and company formation agents based in the state can act as nominee directors. It’s a cinch for a criminal to set up a shell corporation to launder illicit money, and gain access to the US banking system.
With the backing of a US corporate address to clean up their image, dodgy firms – including those run by Russian arms dealers and Serbian smugglers – can conduct their dirty tricks in peace. But Delaware is not alone in the US. Nevada and Wyoming have similarly lax corporate registration laws and have attracted large numbers of shell companies, along with the registration fees that they add to state coffers. But Delaware is the leader.