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U.S. Failures to Track Beneficial Owners Create AML Headaches Internationally

Joe Mont | July 7, 2015

The dirty secret in the global effort to combat money laundering: despite the United States positioning itself as a leader in financial regulation, state incorporation laws here create a massive loophole that terrorists, tax evaders, and other nefarious figures can exploit.

The United States has no federal law for business incorporation, leaving each state to chart its own incorporation course as it sees fit. Over the years, that has led to several states—notably Delaware, Nevada, Utah, and Wyoming—attracting the lion’s share of incorporations, thanks to their minimal legal requirements.

From a compliance standpoint, that can create holes when a state allows “beneficial ownership” information—that is, who really controls a company or related bank accounts, even if they do so behind the scenes through a proxy—to remain anonymous and unreported. Delaware, for example, has world renown for its no-questions-asked incorporation process.

Now that loose approach to...

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