For more than a decade, Teodorin Obiang, the eldest son of the president of Equatorial Guinea, held a modest government post in his native country that paid him US$80,000 a year. But according to the US Department of Justice, Obiang siphoned off $300 million through corruption and money laundering to finance luxury purchases in the US, including a $30 million seaside mansion in Malibu, California, and a $38.5 million Gulfstream jet. He even purchased Michael Jackson’s Thriller Jacket and diamond-encrusted Bad Tour glove.
How did a foreign government official halfway around the world make such extravagant purchases on his modest salary?
In part, by funneling public funds through anonymous shell companies with innocent-sounding names like “Sweet Pink, Inc.” and “Beautiful Vision, Inc.” Meanwhile, more than 1 in 7 children under the age of 5 were dying from preventable diseases inside his country, and as much as three-fourths of the population lives in poverty. Corruption is considered to be widespread in the country, with members of the ruling family the subject of corruption investigations in the US, France, and Spain.
Sadly, this is just one of many examples of bad actors abusing corporate secrecy to siphon money out of some of the world’s poorest countries.
Anonymous shell companies are secretive entities that enable the identities of their true owners to remain hidden. In some US states, you can set up such a company in under an hour on the internet, with no one the wiser. In all 50 US states, less information is required to create an anonymous shell company than to get a driver’s license, or even a library card. Once your company is created, you can open a bank account and anonymously move or hide large sums of money – including money obtained illegally — with zero accountability. Even law enforcement agents won’t be able to track your activities.
Sound crazy?
It is. Anonymous shell companies have long been the vehicles of choice for the criminal and corrupt, who rely on secrecy to get away with crime. Anonymous shell companies have been at the center of some of the world’s biggest corruption cases, and have been used for terrorist financing, drug and human trafficking, money laundering, fraud, and much more.
How anonymous shell companies affect poverty
At ONE, we advocate to tackle corruption because every single dollar lost to corruption is one less dollar available to combat extreme poverty, including the financing of quality health and education systems. In the case of Equatorial Guinea, Obiang funneled public funds through anonymous shell companies that could have been used to address poverty in the country, such improving the country’s poor health and education systems or providing clean drinking water to half of the country’s population living without it.
Fortunately, the world is paying more attention to this issue (including Hollywood, with a new Meryl Streep, Gary Oldman and Antonio Banderas movie). And policymakers are (finally!) starting to do something about this corruption. Dozens of countries have taken action to curb the abuse of anonymous shell companies in recent years, making it harder for corrupt actors to remain hidden.
Now it’s the US’s turn to act. In October 2019, the US House of Representatives passed bipartisan legislation that would eliminate anonymous shell companies. Now, the Senate is considering similar legislation, the ILLICIT CASH Act, which, if passed and signed into law, would for the first time provide law enforcement agencies with a key tool to investigate and prosecute complex crimes.
