 This is Heather Lowe, and I am legal counsel and director of government affairs at Global Financial Integrity. Thank you very much for coming out to the OpenGov Hub this morning. This is a fantastic new space, and we're really pleased to have the opportunity to be here and to present this really important topic, the topic of anonymous companies, and how they're created around the world. Specifically, we're here to talk about a new book called Global Shell Games, which was based on exhaustive field research by Dan Nielsen, Mike Finley, and Jason Sherman, looking at the ease of setting up anonymous shell companies around the world. Now, an anonymous shell company or an anonymous company doesn't necessarily have to be a shell. It's a company for which no information is collected about the people who essentially own, control, or really benefit from the function of that company and the existence of that company. At Global Financial Integrity, we've been working on this for a very long time. We've really been trying to raise awareness of the role of anonymous shell companies in the opaque financial system that moves some $1 trillion in illicit financial flows from developing countries every year. We've really been harping on the role of the US, the UK, and other OECD countries as the facilitators of these outflows and the locations where actually a lot of this money ends up. As a result, I think the book does slightly incorrectly suggest that GFI focuses our criticism and policy recommendations on the island nation tax havens that are so prominent in public perception. This GFI is very strongly believed, actually, that the majority of the facilitation and absorption of illicit financial flows from developing countries is actually from the developed countries, the OECD G20 type countries. That's supported by our research. In 2010, we released an absorption report, which estimated that between 56% and 76% of illicit financial flows from developing countries are actually absorbed by developed country banks. That means that less than half or down to about possibly a quarter of those illicit financial flows are actually ending up in tax havens, or what you traditionally think of as tax havens. Our US government context can certainly attest to the years of work that we've put into addressing this problem, the problem of creation of anonymous shell companies in the US. Work that I am very pleased is supported by the research in global shell games. But let's get to the meat of today's event. We'll be hearing from the authors themselves in a minute who will explain their novel approach to international relations research, which is a little bit different, and discuss the findings of their global research on anonymous companies. The first speaker today will be Dan Nielsen. Dan is chief social scientist at the Aid Data Center for Development Policy at the College of William & Mary, as well as being director of the Political and Economic Development Labs and associate professor of political science at Brigham Young University. Dan's research uses randomized control trials and extensive field experimentation to study foreign aid, international development, government corruption, and international law. Following Dan will be Mike Finley, a political scientist at the University of Texas in Austin. Mike's research and teaching address development, terrorism, and civil wars, and his research methods also include field experiments, as well as statistical and computational models and interviews. Mike is currently conducting ongoing field work in Uganda, South Africa, and Malawi, and also works extensively with the international development organizations. In particular, his work on geocoding foreign aid has been adopted by or developed with the World Bank, USAID, the African Development Bank, the International Aid Transparency Initiative, and many aid recipient countries. Finally, we will hear from one of our good friends and resident experts on anonymous companies and the international movement of tax evading and other criminal money, Jack Lump. Jack is an attorney as well as chairman of Tax Justice Network USA. Jack's legal practice focuses on areas of bank and securities firm compliance, congressional investigations, international financial crime, money laundering, and offshore tax evasion, where he works and also teaches globally, and on which he has actually testified numerous times in Congress. Jack has also served for many years as a United States Senate staff attorney, where he was involved in a number of well-known investigations, including the investigation of Bank of Credit and Commerce International, or BCCI, as most of you may know it. General Noriega's drug trafficking and Lockheed's overseas bribes. That's really where he cut his teeth on those types of investigations. All of our speakers today have published widely, and we've provided you with more details of their work and their publishing in the biography that we have made available. So please do jot down any questions that you have. Be thinking through this stuff. Think critically during the presentations, and hopefully we can have a really lively Q&A session at the end. And with that, I will hand it over to Dan. Well, it's a great pleasure to be here. And really, a great thanks to Heather Lowe and E.J. Beggin, and the others at Global Financial Integrity for actually putting on this event. It's an honor, and it's a very important topic, as we've talked to you all out. So we're happy to work on it. Just to acknowledge our co-authorization, Charmin, who really is the judiciary expert. My work focuses on government corruption and sort of center of gravity. Mike's work is on political violence, especially terrorism. So you can see the convergence of interests here. But Jason's been working on financial crime and international financial issues for quite a while. So OK, let's get into this. This is Luzang. It turns out that she was a, her main job for a long time was working at Burger King. It turns out she also was a notorious financial criminal, which was unbeknownst to her. So for a few dollars per page, she would sign whatever documents the folks at an incorporation service put in front of her. And she was surprised to learn that she had masterminded arms sanctioned, or arm-busting sanctions, transfer of arms from Iran, of North Korea to Iran, and two of the three axes of evil in one shot. So this is a house in Cheyenne, Wyoming. And from Florida's ceiling, and this was reported very extensively by Thomson Reuters, from Florida's ceiling, there are 2,000 mailboxes in this house, in the main room of the house. And each one houses an anonymous shell company, including a company owned by Pablo Lazarenco, which Transparency International has named the eighth most corrupt politician of all time. So more on him in a minute. So among other things, including Pablo Lazarenco's real estate assets, the Wyoming Corporate Services Incorporated has companies that sold bogus parts to the Pentagon, illegally internet poker, subprime credit cards that are illegal, and, of course, many other things that are notorious and the genocency is bad. So here is one of the responses we got to our study. So and I'll explain more about that in detail in a moment. But we approached thousands of corporations around the world, corporate service providers around the world, and asked them for shell companies. This is one of the responses. This came from a Canadian company in response to an A-list we used from Guinea. It sounds like you want to form your company anonymously with the state. Is that correct? We can do that for an extra $25. If you're just setting up a corporation, and that's it, we don't require any documents from you at all. This is not how it's supposed to work. This is how it's supposed to work. Whenever, and of course, many of you are deeply familiar with this area, whenever you incorporate international standards, international recommendations, that nearly every country in the world signed on to require that you produce notarized photo identification, usually a photocopy from your passport picture page, and proof of address. And so these global standards require that all corporate service providers working in the discriminatory countries ask for these documents when they incorporate from the beneficial owner, the person who actually is in control of the company. But of course, we worried that this was not universally followed as the example of the Canada Airfields. OK, let me just tell you what we did, basically. So a lot of people talk about this in the policy world. They talked about it as a secret shopping operation, which to some degree it was, was an important part of what we were doing. It was also something that in social science we call a field experiment. In a field experiment, you randomly assign different conditions, in this case, different information to different corporate service providers to learn if that information causes them to behave differently. And because of the rank of assignment, everything else might be different, and that might cause a change in the level of compliance is health constant. It's all balanced, except for that information difference. And so if there's a difference in the outcome, you can go, you can be very confident anyway, that it can be attributable to that information and not to anything else. So that's the advantage of a randomized control trial, which is what we're specializing. So in this way, we can get causal effects, not just correlations, which is typically what we would do in social science. OK, so to give you a sense, first we had to get an institutional review board clearance for this, Human Subjects Ethics Board, universities. I'm looking around a few of our former research assistants are actually here. I'm not going to point them out to you. But they really did the bulk of the work here. And so we generated aliases. We used deception. And we just couldn't figure out a way to do this without deception. And we made a case that sometimes when the harm that's caused by a global activity is big enough that it might overcome the clear wrong that's caused by lying. So in this case, we found that the costs of that were outweighed by the benefits. So we sent just under 4,000 emails to corporate service providers in more than 180 countries. And of course, we randomly buried the information we gave them to learn if any information we gave them would make it harder or easier to obtain a non-less shell. When the companies responded to our emails, there were several different responses that they could provide. They could not respond at all. I should say they didn't have to respond. And that was about half of them, just under half didn't respond at all. And they could just refuse service altogether, which the significant share did. They could demand notarized photo ID, which others the significant share did. They could ask for some ID, but not required to be notarized or certified or hostile in any way. Or they could just say olay and say whatever you want. And many did that. And I'll show you later, we'll show you what that looked like. So some people that have questions about this study have worried that once we actually got an answer about what documents were required, we said, thank you, our business needs have been met. Implying it was met elsewhere, but we learned we wanted to learn we were done. And some wondered that maybe these corporate service providers would, at the first node, say, no, we don't require any documents. But then later in the line, say, now we require notarized photo ID. And that's a good question. It turns out that Jason, our co-author, has actually gone all the way to the end and purchased some shell companies. And with 50 more, he has done everything but wire transfer them. So we're pretty confident that what they say and not in a single instance and not one instance did someone switch. So corporate service providers have strong incentives to be forthright and transparent on front of what they require. And we haven't seen any switching going on. So the evidence we show you here, we're pretty confident actually reflects what would actually happen if we got all the way to the end of the line and purchased corporations. We call these subject pools in social science. This was the set of targets that we were after. Just under 4,000 of these firms, we reproached them all twice, at least twice and in a few cases, three times. The majority were around the world. And then a significant minority were in the United States. So we could get a really good sense of both cross-national variation and variation within the United States. We did some social science things to make sure that we had pretty good balance across the different types of countries and types of states. And then we randomly assigned these conditions. Here they are. Just really go through pretty quickly. We had to have a baseline, something a parodist. And in social science parodists in medical science are called the placebo. And our placebo was what we call North Australia, the inventor of this term is in the audience. And it was the four Nordic countries. So the service providers in this condition saw an email from one of eight aliases originating from one of eight countries, the four Nordics, and the four other minor power, very low corruption, wealthy developing developed countries, and Netherlands, New Zealand, Australia, and Austria. We call this Australia. And all of the approaches asked for the same thing. They asked for incorporation as confidential as possible and for reasons of tax liability and tax payments and legal liability. And then they asked, what documents do you need? We wondered if just telling the corporate service providers about international law, if that would make a difference for them. So maybe they just didn't know. A survey that Mike will talk about later, we actually followed up with them and asked them, were they aware of the financial action task force standards? And 70% said no. So for a large share of these corporate service providers, they did not know there was international law governing this. They were fully aware of any domestic law that covered it, but they were not aware of international law. So we just made them aware. So for about 70% of the firms, roughly, if the survey can be believed, they weren't informed, so we informed them. And we wanted to know just if telling them about the law, that would make a difference. But then it's a double-edged request, because then we want to say, but we really would like to make this as confidential as possible. So it might be a little wink-wink, but not now. So the question is, is this real, is this information, or is it just something I already knew? And our point would be, if they already knew it, then we're bringing it to the foreground of their minds. Psychologists call this a prong. And so it should have the same effect. Law should matter whether or not they didn't know about it, and they were informed the first time, or whether or not they knew about it, and now we've made it in the foreground. So that was the idea behind it, consistent ideas there. We also offered a bribe. We said, I'm willing to pay a premium to one of the most famous scholars of international relations suggested this to us. And I think he's tickled by it, that he came up with this bribery condition. So we also told them, at least for the service prize in the United States, we said that this realm is governed by the internal revenue service, and they enforce it, which is what they say on their website. Of course, we know that this is really governed by states, and that the federal government has little to do with this domain. But that's what the IRS says in reporting its connections with the financial action task force. So we thought we could do this without deception. Just a little story to introduce the next condition. Somebody are familiar with this. Kenya wanted to change its passport system, and so they tender bids for a contract to do that. A French company bid 6 million euros. UK firm bid 30 million euros, and won the bid. Now, I'm not really good at math sometimes, but that suggests that that's not the way it's supposed to work. The company named A. Engle Leasing turned around and contacted with the French company for the 6 billion euros and pocketed the rest. But the investigation had to stop at a post office box and deliver it to the citizens. And on the shelf. So this brings up the corruption treatment. We call this guinea stand. So the A. Leasing's come from one of eight countries that have very little in common except, or at least across the guineas in the stands, have very little in common except that they're all among the 20 most corrupt countries on the planet according to Transparency International. And in these emails, we said, we work in government procurement. The A. Leasing said, I work in government procurement, which is the most corrupt sector. So this was a very strong signal that this was involved in corruption. You can see that you see the eight countries. To introduce the next treatment, terrorism is a little bit interesting here because terrorism doesn't cost that much, for the most part. But they still have. And sometimes it's the opposite of money laundering. They're taking good money and actually moving into terrorism. But anonymous shelf companies are very useful for that purpose. And allegedly, one of those was involved in funneling money to an important operative from a set of shady shell companies in my home state of Utah. So here's the terrorism treatment. In this treatment, we said that the A. Leasing was moved from one of four countries that had been associated with suicide terrorism. And then we said, I work in Saudi Arabia for Islamic charities. We tried to raise every red flag in the hood for terrorism. And some actually picked up on this. But some were still, perhaps, willing to give us an anonymous shell, but we'll talk about that in a minute too. OK, I'm going to give it to Mike now and let him talk about the results. OK, so I'm going to talk about three different sets of results. One, first talk through the country by country league table, the United States state league table, just looking at basic overall compliance rates. And then introduce something we in the book refer to as a dodgy shopping count, which I'll explain in a moment. And then I'll walk through some of the statistical results, but in brief just to sort of let you know what we did there. So on the country by country table, let me first say before putting it up, again, this is not a measure of compliance that's somehow at the national level. This is a measure of compliance that's based on reaching out to these corporate service providers, observing how they react, and then taking all of their different responses within a given country or within a given US state and aggregating them. So when we say the US has a compliance rate of x%, what that means is for all the service providers in the US, if you add up their compliance rates, you're going to get some percentage that's compliant or non-compliant. So here's the basic table, the basic figure, which was also in the book. It's tough to see, so let me just talk through a little bit of it here. And I'm thinking the laser's not working there. So at the top we've got Cayman Islands, Jersey, a few others. I guess the other thing to note very quickly is we only included in this league table countries that received at least 15 or more approaches from us, right? So we actually, in total, reached out to about 181 countries. This represents a smaller set of this, right? But these were the countries that got the most outreach on our part here. So Cayman Islands, Jersey at the top, Isle of Man, Libya, strangely enough, British Virgin Islands, and some others. Just to begin, this is in the book, and you can sort of look at it elsewhere. But let me point out some interesting things about where the US is. We actually broke out the US into three different categories. So we have US law firms, US corporate service providers, and then an overall account. So just to give you a sense of where they are here. Here's USA law firms. And again, this is the proportion compliant, right? So if you have a compliance rate of one, you're fully compliant. So USA law firms are coming in at about 60% compliant. So of those that respond to 60% compliant, USA overall, about right here, zero, about 30% compliant. So again, be a mathematician. You do the math, and you figure out where the corporate service providers are. These are these independent companies, dead last. So down here, about 10% compliant. And this is just of those that respond. So it certainly doesn't look good for countries like the United States in here, which pushes us to the next step of let's actually look at which states within the United States are the best and which ones are the worst. So this one's probably a little bit easier to see here. Again, compliance, I think this is compliance rate. So 100% compliant, zero, 0% compliant. The usual suspects come in right here at the bottom, Delaware, Wyoming, Nevada, a few additions at the bottom of the pack here, or Montana, Alabama, Missouri, and so forth. So while at least there's a lot of suspicion that the tax havens are where most of the action is occurring, it turns out that the US and specific states within the US are probably the worst defenders here. This also just raises from a kind of a scientific perspective to what we can sort of glean from this. And in some ways you see there's some suspicions about places like Delaware, Wyoming, and Nevada. And we actually found that they were highly compliant. We started to question whether the study was really on track. But the fact that we were able to find some of these usual suspects and measure them, and they came in where we might expect within the United States, suggests a lot of at least sort of face validity to the results here. So that's compliance. Again, this was based on the one outcome of compliance, whether they actually requested the proof of identity or notarized ID and proof of residence. One of the other outcomes that Dan brought up was non-compliance, the way you put it. These are the ones that say, oh, they do whatever you want. We can take that measure and we can turn it into what we call a dodgy shopping count. And the idea behind a dodgy shopping count is we just wanted to figure out, if you were to wake up one morning and think, hey, I'm going to go get an anonymous shell company today, I'm going to do a little looking around. I'm going to start at the top of the list. And I'm just going to go down the list until I get one. How many do I actually have to go through? That's the idea behind a dodgy shopping count. It's derived from the non-compliance rate. So it ends up being mathematically just one over the non-compliance rate. So in this case, a 5% non-compliance, 1 over 0.05, would indicate you'd actually have to go through. You'd have to go 20 firms or 20 corporate service providers down the list before you got your anonymous shell. So we calculated this for both at the country level and grouped them into a country groupings as well as by the treatments, the experimental treatments, which Dan brought up. So here's what we find when we organize it by country groups. So for the OECD countries, easiest place, you would actually have to go through about 7.8 approaches before you would get an anonymous shell. And just to give you a sense here, when a few of our RAs are in the room here, they can attest to this, if you get your list and you start reaching out, it doesn't take that long to go to make eight approaches. I mean, it's, I don't know, an hour, something like that? Maybe a little over an hour to put out your eight approaches and then you've got your shell. On the tax havens, you'd have to go through about 25 approaches before you're able to get an anonymous shell. So the hardest places would be the tax havens and then the developing countries in between those two, coming in at 12 approaches. To do this by experimental treatment now, which would be randomized, we can see, so for international, we're just reporting a few of them here. The placebo, this is the one Dan mentioned before, where we don't signal a lot of new information. We just request an anonymous shell. In these ones, you'd have to make 11.5 approaches before you successfully obtain your anonymous shell. The FATF, this was, again, informing them of the international standards here, no different. Maybe just slightly better, although there's sort of meaningful difference in a statistical sense. So bringing up international law just doesn't seem to have an effect. And ironically, when we were putting this together, we decided to include this treatment and we would tell people about it and people would laugh at us. And they'd say, oh, you're going to tell them it's against the law or against international standards and then see what they say. They're all going to be compliant, every last one of them. They're not stupid, right? And it turns out, we don't find any big difference here. The premium, this is the kind of, Dan described as the bribery treatment here, right? Just saying we'd pay an extra premium. So 16 approaches, a rather large increase here. Almost, so in statistical parlance, I would say it's statistically significant, sort of trying to say that there's a real meaningful difference between the premium and the placebo here. It's very, very close to being a meaningful difference in a statistical sense. Corruption, not much different. And then the terrorism one, which we bolded here to say that this is a statistically significant difference or a large enough meaningful difference from placebo. To look at this in the United States, we see something fairly similar for placebo, FATF and corruption, no meaningful changes there. But for the IRS and the terrorism treatments, we see meaningful increases here. So in other words, giving them information about the IRS and about the potential enforcement from the IRS makes it harder to get your anonymous shell. You'd have to go through 13 approaches rather than just nine approaches in order to get it and then again terrorism, very high as well. Okay, so I'm not gonna spend, we've got a few different graphs like this that sort of goes through all possible results. I'm not gonna go through all of these, but let me just give you a bit here just to show you kind of what shows up in the book here. You know, in the book, I think it's very, we spend a lot of time discussing the more intuitive measures like dodgy shopping count and other things. But these graphs here contain kind of the overall picture of what's in the results here. And basically what they show is, if you look at the upper pane here, it's telling you the proportion that fall into each of the categories. So the upper left proportion non-compliant, okay? So among the, in the international sample, proportion non-compliant. So for the OECD countries, we end up with like, what's that, about 13% non-compliant tax havens much lower, maybe three or 4% non-compliant. Developing countries, what, about eight or 9% non-compliant, right? So these are the proportions. So what you can begin to do is compare. So what we're really worried about is non-compliance, right? Then we can look at this and say that OECD have higher proportion of non-compliant providers, right? So a higher proportion of service providers that are willing to say, you can do what you want, right? We'll set you up. You don't need to, we don't have to go through any of the requirements here. This begins to shift as you move up. So you go to part compliant, right? So this is actually a better outcome. They're at least requesting something, okay? And then we see the relationship flip between OECD and tax havens. Now, the tax havens are more partially compliant than the OECD. And then you go to the compliance and you actually see the tax havens really jump up much higher, right? And so looking at the ones that actually say, we need this, we need this, we're gonna be compliant, right? The tax havens have a much higher proportion here. The bottom pane is just that showing statistical differences. And so I'll walk over here real quick. So what this is showing here is for the tax havens, this is showing the difference between the tax haven and the OECD. So if you look at this difference here, right? We can say, we compute a statistical difference here, right? And then these little bars say, can you be confident in the result? And if the bars cross this line of zero, you can't be confident, okay? But if they don't cross zero, you can be pretty confident that that's a meaningful difference that would not just occur by random chance, right? So we can see that this tax haven, that the lower proportion of non-compliant providers and tax havens is indeed a meaningful difference, right? So if we look at this and say, ah, you know, whatever, this is not, you know, that's not all meaningful. Well, it may not be right, but this is statistically, if we use the tools of statistics, it shows that the tax havens are meaningfully different. The developing countries are meaningfully different from the OECD. We can see this on the partial compliance tax havens are more partially compliant than OECD and that's a meaningful difference. We see another meaningful difference there, okay? So that's the basic intuition behind these graphs. Again, I'm not gonna go through them all, but just to, you know, sort of some trust me slides, so to speak, that we actually tried to go beyond just simple bar graphs, right? I mean, there's some statistical tests underlying what we've done here, okay? So I won't point out much on these. Let me just say briefly, one of them that we didn't sort of raise earlier was an intervention where, rather than bring out public standards, public international standards, we raised private standards from the ACAMS body, which is this private standard center that, you know, that does things fairly similar to what the FATF would do, but from a private perspective. And, you know, notably, again, if you see on these, on the statistical differences here, I said that these lines crossed over zero, then there was no meaningful difference, right? And if you look across the board here, in pretty much every case except one, there's no meaningful difference here, okay? So bringing out public and private standards doesn't change things, okay, in relation to the placebo condition, which is, again, a pretty worrisome, okay? I'm gonna move forward in the interest of time. So let me just bring up one final set of analyses we did. Dan brought up this survey very briefly. Let me give just a bit of context here. You know, when we started this, the social scientists in the room were pretty, were pretty queasy about what we were doing, little worried, you know, okay, you're setting up aliases, right? You're proposing violating some, you know, pretty important international standards potentially, we're doing lots of things to conceal your identity. Is this maybe all legitimate, right? Why not do something else, right? And so for political scientists, the standard would be do a survey or do a survey experiment. And you know, it doesn't just have to be blindly asking someone, hey, would you break international, or violate international standards? You could use different techniques potentially, right, to try to tease things out. But in general, the proposal was, why not just do something like a survey or do some other investigation? And then about midstream, and we would respond and say, well, you know, if we just ask them, they're gonna lie, right? Anyway, about midstream and the experiment actually dawned on this that we could do a survey, right? When the experiment was completed, let's just do a survey at the tail end of that and actually see what they would say, okay? So they didn't know that they were part of the field experiment. So when they got the survey at the very end, they thought this was their first, you know, their first interaction with some researchers. And then the clever part of this, what we did is we took the information that they had in the field experiment where they didn't know they were being studied. So if they had the terrorism intervention in the field experiment, we piped that into the survey and we gave them the same basic context. We changed the wording and stuff so you couldn't match these things up. But we basically gave them the same information in the survey context that they had in the field context so we could compare apples to apples here, right? So when we do this, for those responding, here are the basic results. So the blue shows the proportion, I guess, yes, the proportion of non-compliant in the field experiment. When we ask them in a survey, it drops a little bit, right? We also see a big increase in part compliance. So they're reporting higher levels of part compliance when you ask them in the survey context and then for full compliance, some differences. So in some ways, they don't look all that far off. We're getting fairly close but we do see a huge jump in part compliance. So when you ask them, they seem to be hedging a little bit more once you come right out and ask them. So this is the international samples. It gets much worse, I think, in the U.S. sample. So you see a bigger decrease in non-compliance goes down by almost 10 percentage points here. A huge, huge increase in part compliance and a very large increase in compliance suggesting these are all running in the direction you might expect, right? People are reporting that they would do bad things less and they're reporting that they would do good things more. Okay, let me just close then with one of our favorite anecdotes that came out of this. A response to the terrorism condition from a Florida-based corporate service provider, right? Your stated purpose could well be a front for fighting terrorism. I wouldn't even consider doing that for less than 5,000 a month. This admittedly was cherry-picked out as one of our sort of favorite responses, but there are many, many, many more that are in this spirit, right? So when we throw up lots and lots of numbers, again, there's a bunch of anecdotes that underlie all these things and they're pretty troubling in a lot of different situations. So pretty easy to acquire. Tax havens may be some of the best places. OECD may be some of the worst. And the results in many ways, I think, are understandable and rigorous and systematic. There's some puzzles that are thrown in there as well. But anyway, but we look forward to discussing it further. Well, I'd like to begin by expressing my gratitude to these three political scientists. Throughout my career, I've been accused of being a storyteller. All I do is tell these tales of wandering around the offshore world and finding these crooks and that's not data. And in the political science world, if you've gone to any of the conventions of the American Political Science Association, if you tell about what you've experienced out there in the real world, you're considered a fool. Where is your PowerPoint with the data? Well, guys, you've done it. Here's the data. Only it's even worse than you think, okay? And I'll go back to being anecdotal and push you in the direction of doing some more research. So here are some examples of the kind of thing I'm talking about. Jersey is the most compliant of all the jurisdictions. You could walk in through a Jersey provider and they'll want everything short of fingerprinting you and getting certified copies of every document you ever had, birth certificates, passports, god knows what else. So you go to set up a corporation and they'll warn you that they're gonna have to turn over a lot of information about that corporation pursuant to international requests. But gee, maybe you wouldn't want to do that. Maybe you'd like to set up this new thing they have called the foundation, which doesn't have these same requirements, which has a local board, which in turn can set up corporations so we don't have to go through a lot of the rigmarole that the law here in Jersey requires us to go through. And these are the best guys in the business. So what they managed to do is sort of raise the cost of doing this kind of thing in a way that makes them look super compliant. That's one of the kinds of problems. That is the jurisdictions have figured out, gee, we have these restrictions on us. How do we make ourselves look better but not really deliver anything? And they're getting good at it. Now, a second thing to talk about is what is going on with these offshore corporations? Well, the essential function of this entire offshore industry, not just corporations, it's trusts, it's all of the devices, insurance policy, wrappers, and all sorts of things that are used. It's to thwart regulation of any kind, to launder money, to escape any liability for what the corporation has done. I'll just note for the record that Union Carbide had this chemical plant in Bhopal, India, which blew up and killed God knows how many Indians. I don't think we know how many in the many, many thousands. And that lawsuit to recover money on behalf of the people who were injured is still pending in court in Michigan, which is stunning because we are now what 20-some years past the original Bhopal piece of litigation. It's also designed to defeat national legal systems. America has quite a group of banksters who've gotten away with it all. You look at the financial crisis and ask who was prosecuted who wasn't, and you find out that prosecution was just too difficult for the Justice Department to bring in many cases because the paper trail was so grotesque and it led through so many offshore jurisdictions. Nobody could get the evidence, nobody could put the pieces together, and regulation simply collapses in the face of that kind of paper problem. And then there's the issue of IRS. If it hadn't been for informants who came forward with literally copies of the records that showed offshore structures and how they were working, and I give you here the case involving a client of mine who walked out with the records of LGT Bank in Liechtenstein, those records included the structure, the trust, the on-stop corporations, it was all laid out as to how that was gonna be used to defeat taxation or supervision in any of the underlying jurisdictions. So this is a massive problem. Now, there's a terrible fact. For this all to work, it takes two to tango. So here the culprit is the United States Treasury, and they ought to hang their heads in shame because they steadfastly refuse to not recognize corporations that are a shell and exist in name only. So, for example, there are some 25,000 corporations, I think more by now, operating out of the island of Nevis. There are about 7,000 people on Nevis, 3,000 work for the hotel before season's Nevis. The number of people who are on the boards of directors of these corporations, well, there are about 30 people who cover the 25,000 corporations. In 2008, I testified at Senate Finance, I said you could get these directors in water quality and still not find out what the corporation did, who owned it, and what it was about. And if you go to Nevis and try to find any record other than a group of signatures and maybe some passport pictures, and for the Nevis corporations, they have wonderful passport pictures of all of the directors, which were sent to the US institutions that opened accounts for these people. So let me come back to the Treasury Department and its role in perpetrating this nonsense. First, no requirement of filing for American corporations, mind you, much less foreign corporations who are opening accounts here, any kind of taxpayer identification number. You come in, you do business, you don't have to have any way of being identified. But the second and probably most troubling aspect of this offshore business is there's no substance to the corporate entity. And there are forms and requirements, like the IRS, W-A-B-E-N, that require the identification of the beneficial owner. Now, if you go to the regs for IRS on the subject of the W-A-B-E-N, it says, oh, the corporation is the beneficial owner of the corporation. Now you talk about mumbo jumbo, nobody's better at it than the reg writers at Treasury. Why wasn't that changed? They've known about it, it's been talked about, it's a hell of a problem, but they absolutely refuse to change it. And all it requires is to change in the regs. If you read the instructions for the regs, it says you have to identify the beneficial owner. They just don't enforce it. They have the regs set up so that a shell corporation is the owner. So what I'm saying is it takes to the tango. It takes a willing department of Treasury to accept sham to make all of this worthwhile, otherwise you wouldn't bother with it. And the question is, why are they so adamant about protecting this shell game? Now I've put a bit of thought into it, and what strikes me is that they prefer to have a shell game that allows corporations, and we're now talking about the major multinationals, to set up a tax structure that is absolutely opaque because there is no way for an IRS audit team to figure out what a multinational corporation is doing if it has enough corporate shells. So if you go to the 10Ks, and by the way, the SEC has managed to become somewhat complicit in this, by not requiring public companies to list all of their subsidiaries, all they have to do is say they're non-material. And the accounting world takes all of these subs and consolidates their books so that when IRS does the audit, what it sees is not the underlying activity of a shell company, it only sees the consolidated books of a major company. So it turns all auditing of international, multinational corporations into a waste of time. The best IRS can do is look around to see whether deductions have been taken in the proper year, reserves have been played with one way or another, the banks are very good at that, but really looking at the underlying offshore gains off the table, not to be looked at, not to be questioned. So I asked, who is the Department of Treasury working for? Ain't working for me. And I think that's the next line of research and the next set of questions. Let's come back to the work guys have done. It puts a floor under all the nonsense that is said about enforcement and boy, we've got these tough rules and I just come back for Miami where a clown from the British Virgin Islands was talking about how wonderfully tough BVI has become on its corporate service providers, how well it regulates them. And he's going on and on about the rules and one of the panelists asked him, I asked him, can you explain the regulatory steps you've taken based on the exposure of one of your trust companies and the ICIJ material and the guys like stunts? Why did you bring that up? If you don't know what I'm talking about, the International Consortium of Investigative Journalists got the internal files of one of these BVI trust companies. And they put, this is all up on the web, it's a searchable database. BVI didn't do anything. Even though many of the disclosure showed that the trust companies were being used by crooks and thugs. So what is this about the regulation? The answer is, whenever these international organizations promulgate a new set of rules, BVI immediately adopts them. We're compliant, look at us. The fact is there's no enforcement. So how do you get away with standing up and saying what you say? What the guy from the BVI didn't say was their response to the ICIJ disclosure was to change the penalty for violating financial secrecy and BVI from the year in jail to 20 years in jail. This is transparency. This is opening the books. So here's the question I want you to take away and ask every time this comes up. Why does the world want to respect a corporation that is not required to keep books that has nominee officers, directors and shareholders that has no corporate records in the place of incorporation and that maybe or maybe not knows who incorporated the corporation? Now why should anybody pay attention to that? And why are we? And why is the Treasury Department protecting? Well, thank you very much to all of our speakers and for that final question that you may not, you could all cogitate on, shall we say. I'd love to open the floor to some questions. We have a microphone which we can send around. Can I actually ask Josh to help us with that? Thank you. So, questions today. All right, we've got two here. Should I wait for the mic or just go for it? Yeah, if you could wait for the mic, that would be great. Justin, there we go. Where was the question? Over here. Thanks. My name is Aaron. I'm with the HSBC Bank. This is fantastic work. I'm really glad you guys did this. One of the questions I had was about your treatment of the no response. My thinking is that in some ways, for a sensitivity analysis, if you include those as compliant, how drastically does that change? If they looked at your request and basically said, we don't even want to deal with these guys, obviously you can throw it out. There's no certainty, but just from a sensitivity aspect, have you included it sort of making different assumptions about how you interpret what a no response means or were those just excluded entirely from kind of the calculations? So I'll let Mike jump in here too, but we were very worried about what no response meant. We weren't certain. And so we approach these CSBs many times with either the initial request or with multiple follow-ups. If we haven't heard from you, please let us know. And we did that in two different rounds for all of the corporate service providers in the study and it's free for some. If at the very end of that, we didn't get any responses whatsoever, we went back to them with one of the administrative aliases and basically we said, are you still in business and helping customers? Right? And it turns out that the vast majority of the CSBs didn't even answer that. The most innocuous approach we could design. So we think that the no responses are just that. They're not trying to be compliant. They're just, they either don't do international business or they're not answering their email. And so now there is some sensitivity to no response. You can see that some of that non-response is what we would call soft compliance. They're not responding because they don't want to do business with us. And you can see that in the differences between the treatment effects, right? Between placebo and any of the treatments. So we do know that some of that is happening, but it turns out that the vast majority of the non-response is just not. I guess all this. Hi, my name is Margo, I'm from ICIJ. And I have a question about the methodology about the service providers. Did you ask them to set up the companies in their own country? Because in looking at the data that we have, we see that a lot of requests for company setups are from other service providers in maybe some of the OECD countries to the BDI service provider. Sure, so we left this open in what we asked them. Like we didn't specifically say we want to do it in your country. In some cases they would raise recommendations or possibilities, right? So they might say something like, well, you have your option of these three or I think these three will suit your needs really quite well, right? In which case we would just respond and kind of randomly choose one. But generally we didn't have a specific question about whether we would go in that particular locale. I actually did a little bit of investigation of my own walking around talking to service providers at one of the Channel Island jurisdictions. And when I raised the question of setting up a shell company in the Channel Island, they go, oh, you don't want to do that because our regulation of corporations here is too tight. Wouldn't you rather have us set up through our BDI office a BDI entity? So the answer is that goes on all the time. Another question. Hi, I'm Stephanie Ostfeld with Global Witness. Thanks to the authors for being here and for your presentations and Jack to your presentation. I just want to reiterate something that Jack said that this data, this evidence is so important to what so many of us here do that we'll do investigations and put out case studies to try to illustrate how this stuff works or how the O beings could use a California anonymous company set up by their lawyer to buy a $30 million mansion. But what you have is the data that shows that it's a systemic problem and it's not a one-off case that we were lucky to find. So this data is so incredibly important to what we do. So my question is about the book that one of your recommendations is about regulating corporate service providers and requiring them to collect beneficial ownership information. And you recommend that rather than having the government entities that create these companies in the first place, collect that information. So if I want to set up a company here, I don't need to use a corporate service provider. I can go to the internet, I can do it myself. I can just fill it out and put whatever I want there. Isn't that a massive loophole to trying to figure out who's actually behind these companies? Wouldn't the best way to address this problem be requiring the government entities that create these companies in the first place to collect that beneficial ownership information? And if they're using corporate service providers and you're in a jurisdiction which regulates corporate service providers, which the United States is not one of those at the moment, they could be collecting and providing that information to the government entity. But that shouldn't the onus fall on the government entity that allows companies to be formed in the first place to collect information on the ultimate owners. That's a great question. And so, you know, I mean, we're not policy makers. You know, we're the messengers. We're academics to do this study. It seems to us, I mean, one of the objections to have your regulation is that the states in the United States anyway are the ones that actually manage all the regulation of incorporation and corporate ownership. They, you know, the Association of Secretary of State have made it really clear that these, some of these are pretty small states, right, with limited budgets, that they just don't have the capacity to do that, to do that regulation. You know, that may or may not be the case, but we took that at face value, roughly, right, and said, yes, I mean, some of these small countries, this is a hard thing to do, right? I mean, it requires a lot of management. And so I thought was, if it were the responsibility of those who benefited, profited from it, and if they were just audited, you know, randomly and periodically, you'd probably get the same effect, but put the illness on those who most benefit from the industry, but yet still get, you know, still get the beneficial owner information. Where, I mean, that's in the policy realm of you that know much more about this than we do, but that was our recommendation because of the costs that would fall, you know, disproportionately on taxpayers. I would say that at the moment, IRS is buried in data about offshore service providers who are in the industry of helping tax evaders. That all came about because of voluntary disclosure and the massive amount of data collected by the IRS criminal division. I have yet to see any of that data used to prosecute a corporate service provider for assisting in a tax evasion case. Thank you Treasury Department. Why are we protecting these people? And the protection is just inexplicable. It is against our national interest. It's against our international interest. It's against international regulation. And the more you think about it, the angrier you get. Over here. Thank you very much for the presentation. I'm Elena Shostko. I'm from Ukraine. I'm visiting Fulbright School here and I have several questions in this connection. It's a very actual problem for Ukraine, you see. And my first questions. What is the perspective of adoption of living bills in the USA? What is your evaluation? And second question is connected to these new European, first money laundering directive and new legislation of United Kingdom about open registered of beneficial owners. It's a work of what is how you may evaluate it. And what obstacles do you see in tracing, freezing and recovery of assets, the Yanukovych that may be placed in U.S. financial system? And thank you very much for this good presentation. I'll give it a shot for openers. The answer is that it's, first of all, on asset recovery, a plane doesn't work. If you look at the total amount stolen from different countries, Ukraine, phenomenal amount. I mean, there's been corruption ever since the day Ukraine broke away from the Soviet Union and the Soviet Union disintegrated. And those assets wound up in the West. I was an expert witness in the Lazarenko case. And in that case, assets moved into a major Dutch bank, they moved through U.S. banks, Lazarenko was convicted. I mean, this stuff is prevalent, but nobody gets the money back. And that's even true in American fraud cases, where a classmate of mine in law school wound up as the president of a Miami bank called Sun Trust. And he was caught out having looted the bank to the tune of about 800, 900 million, close to a billion dollars. And he wound up putting a bunch of that money offshore in trusts that were run in a way that the U.S. government, even though he was convicted, couldn't figure out how to crack. So he's now out of jail, figuring that he was paid about six, $7 million a year for serving time, which is kind of a dumb proposition. Now, the recovery failure is because the trail leads through so many places. So a friend of mine does asset recovery. He's a very good lawyer on the island of Jersey. And he just recovered, I'd say about $20 million for the state of Sao Paulo in Brazil, because a governor of Sao Paulo's state had ripped the state off unversively. And that case took 10 years to bring to fruition at a cost of several millions of dollars in litigation that required a political entity that was willing to pursue the case in the end. I worked on the Abacha asset recovery case. Abacha stole somewhere in the area of $9 billion, $7 billion, something like that, but well up there. And maybe a billion was returned. One of the grand ironies of the Abacha case, which I have to describe for you, was how a bunch of his money was frozen by those wonderful people in Liechtenstein. And the Liechtensteiner said, well, we can't give it back to the Nigerians because there was no criminal conviction in Nigeria of Abacha. Well, if you know anything about the American or English legal system, when a guy dies, that's the end of the criminal case. Abacha died. So this money is sort of frozen in perpetuity and each one of the shell companies has a Liechtenstein lawyer representing it and a Liechtenstein banker taking management fees for managing the money. And this is all gonna roll on in perpetuity. And as far as I'm concerned, it's an annuity for the lawyers and the bankers in Liechtenstein. And nobody seems to be terribly embarrassed. So these are real problems. And what Ukraine can do about it is a very difficult problem because that money is all in the West. And the will to do anything about it is minimal because I think people managing it are doing too well off the managing of it. And what's worse is they realize that if that money goes back, all this other illicit money that's been stolen from different places is apparel and maybe they'll take it out of their banks and move it somewhere else. So these are very good questions and they're questions we have to look at very strongly because I'll be damned if the United States should be going to war or threatening or using very heavy political stuff to solve a problem that comes out of not having done anything about corruption or not having done anything to effectively retrieve the money that has been stolen from a country that has in turn precipitated the crisis. Before talking about a little bit of legislation that you're referring to, I will say that we have spoken to critical officials who I'm sure you know that there's this task force that's been created now. And we've been told actually just so you know that the Ukrainian officials, the sort of bureaucrats that were left in place that they've now been working with are actually among the best people that they've ever worked with are trying to trace money and figure out where it went to bring it back. So asset recovery has a lot of challenges, a lot of massive challenges to it which is why we focus on the prevention end. But I will say that the U.S. government feels is happy with the people that they are working with so that you should need a little comfort, slightly a bit of comfort in that. With respect to the legislation that you're referring to, I will go through those bits and pieces. So in the U.S. we have two bills pending before Congress, one in the House and one in the Senate. The Senate bill is S1465 and the House bill is HR1333. Both of these bills, they're called the Incorporation and Transparency and Law Enforcement Assistance Act and both of these bills are in fact bipartisan in both houses. They are not moving because of opposition of Secretary of State and primary focus. The American Bar Association is also opposed to the bills. Essentially they would require states to collect beneficial ownership information on corporations when they're incorporated. The House bill is a little bit different in that it says Treasury would have to collect that information unless the states are already doing so. In all other respects, they're pretty much the same. Both of those bills would also regulate corporate service providers. That is also a provision of the bill and that is why the American Bar Association imposes them because they don't want lawyers to have to be brought into that system. So those are the basics on that bill. This is the Fourth Congress that these bills have been introduced and they've changed a lot in the different congressional sessions as they've been reintroduced. We have learned a lot, the congressional champions have learned a lot about the issue and where perhaps appropriate exceptions should be made for different types of companies. For example, a public company as a stockholder company, it doesn't make a lot of sense to have to collect beneficial ownership on that kind of company so they would be accepted, those kind of things. We are losing our main champion on this in the Senate however. Senator Levin is actually retiring this year and we're not seeing a lot of progress being made in this congressional session on moving these forward. We would really love to see a hearing in the Judiciary Committee where the Senate bill now sits and would love any support you can give us on moving that forward so we can at least get a hearing and some testimony on the record on this issue. So those are the US bills. Moving on to the EU anti-money laundering directive. For those of you who don't know, the third EU anti-money laundering directive is being revised to create a fourth European Union anti-money laundering directive and as part of that, the European Parliament has approved some amendments to that directive which would require each of the nations and the member states to actually collect beneficial ownership in a public registry and not only in corporations but also in trusts. So that information, beneficial ownership information would have to be collected by the governments, put in a registry and published for both corporations and trusts. That legislation is currently with what we call the Trilog. It's going through further deliberation by the Council and the Commission and it's sort of more of a closed door type of a process so it's difficult to know what's going to come out of that. They can change that text. I think it's likely that they will. The question is how much and we're not sure what that balance is. It comes down to what each of the individual European Union countries really feel as what they think is the way forward and what they're willing to do and change in their systems. And we know we have some countries on board and we know we have others that are not. So it's a bit of a black box at the moment with respect to the EU. I don't know. There are other people in the audience who could probably elaborate on that if they'd like to and then welcome you to raise your hands if you'd like to. And I will also move on to, you were asking about the UK and to the United Kingdom is the first country to really take a strong public stance on this issue. They have committed to creating public registries of beneficial ownership information for companies. Not necessarily for trusts. They're looking at the trust issue now. I think it's more likely that they're going to end up doing private registries of trust that's available to law enforcement and that's in line with some information, international information exchange treaty approaches that are going on now as well. So, UK is absolutely committed and they're currently going through the process of trying to implement that. So, we will see. We will see where that goes but it's certainly looking strong for the collection of beneficial ownership information and availability of it to the public in the UK. Thank you. I saw a handbook here. Correct, I just got a question. This is to any of the panelists. Could you give an overall perspective? We're talking about primarily the show games here but we've also seen companies like Apple arranging for all of its profits to be taken in Ireland because of favorable treatment there. How would you characterize the overall universe of this kinds of corruption and tax avoidance in terms of proportions and so forth? As far as I'm concerned, this is the global economic issue, particularly with respect to the lack of revenue that governments face to meet the challenges of their own populations. The way the architecture of the international tax system allows multinational corporations to play with as many of these corporate shells as they'd like and as many jurisdictions as they'd like in ways that make figuring out what their tax bill is virtually impossible or in ways that arbitrage the differences in the laws of different jurisdictions. So, there's no tax at all. So, in the case of Apple, Senator Levin properly commented, they'd reached the holy grail of corporate taxation which was figuring out a way to put the money in nowhere so that no jurisdiction had the ability to collect tax. And that is the genius of this tax planning. The problem is that the architecture also is set up in a way that makes it impossible for any national tax authority to properly audit what's going on worldwide in any of these corporations. And if you want a screaming example of the failure of anybody to be able to get control of the situation, last week, the Wiley Brothers, I don't know if you saw anything about this in the papers, but the Wiley Brothers were convicted of SEC fraud in the New York court. Now, the Wiley Brothers own the series of public companies, one of which was Michael Stores. I don't know if you know what Michael Stores is, but anyway, they own Michael Stores as principal shareholders and they had gone through with tech company and some other companies and they brilliantly decided they personally weren't gonna pay tax on anything. So they had a series of trust set up and literally everything in their lives was owned by an offshore trust including wristwatches, clothing, paintings hanging on the walls of their houses, which also were owned by offshore trusts. And they decided that the stock options and the other stuff they got from their involvement with these corporations would also be placed in offshore arrangements, which completely concealed the fact that they were majority shareholders of some of the corporations they were involved in. So there was securities fraud as well. So these guys committed tax fraud, securities fraud, they were never prosecuted, IRS thought the case was too complicated, couldn't touch it, didn't touch it. SEC finally shamed into doing it and we are now, this is 2014, this stuff was disclosed in 2004 in suspicious activity reports filed by Fidelity Investments and only looked at, and the reason it came to a case was because Morgenthau, who was the New York County District Attorney, came upon these reports and began to push the SEC and say what the hell are you doing about this? And it took from 2004 to 2014 to do anything because of the sheer complexity and the investigation and the stuff the lawyers did, the discovery in this case is unbelievable, the point being that you can have a lot of law and regulation but if there's nobody around to enforce it and there aren't people who know how to follow the trail and you can't shortcut it, it takes forever. So the ultimate question is why the hell do you permit it? Why could the Wiley's open 20 different accounts at Fidelity in various all-shore corporate names without identifying the fact they were all owned by the same guy and then run the scam for the better part of 20 years and have nobody figure out what was going on and that's because there was no requirement made that the W8BEM that would show that these corporations were owned by the same individual, there was no requirement that they actually disclose their ownership because the Treasury Department says the beneficial owner of the corporation is the corporation. This violated corporate law, tax law, everything else and if they had disclosed beneficial ownership the anti-money laundering laws and the suspicious activity reporting requirements would have opened this Pandora's box years before. A quick comment and follow up with a question. One of the terms that gets kicked around especially in the private sector, they talk about due diligence and private sector gets kind of hammered about doing customer due diligence and it kind of seems to me that regardless of whatever legislation or existing regulations, it seems as though we're pretty much back at the issue of enforcement and so just kind of a comment. I think there's an expectation that even the government does due diligence so that we pay into the tax funds, there's an expectation that they execute or enforce the rule of law. But if I could just switch gears here, just do a research about shadow banking institutions and if you could provide a comment. According to a 2013 shadow banking monitoring report, 2012 about $5 trillion of new investment was entered into the shadow banking system and they estimate according to the Financial Stability Board, estimate about $75 trillion worldwide is in shadow banking institutions. For people that don't know, shadow banking system is a credit intermediary but they pretty much package financial assets and they buy and sell these financial assets to other institutions. Just a recommendation or do you have, and according to the, I think the IMF published paper within the last year or so talking about how shadow banking institutions aren't going anywhere anytime soon, is there any recommendations on what we can do or what the government can do, what the private sector could do in order to reduce the kind of the vulnerability that this new type of non-banking institution provides? Sure, the answer is pretty simple which is close them down and move it back on shore but instead the mentality has become offshore is the norm. So the United States through the Commodity Futures Trading Commission sets up and says you're now required to trade derivative securities through an exchange. The banks go to set up the exchange. Where is the exchange incorporated in the Cayman Islands? Why is the exchange incorporated in the Cayman Islands because the banks want to use offshore money to capitalize the exchange and not pay tax on the offshore money? Federal Reserve says great, worth of that. The New York State Banking Commission says great, worth of that. I'm a taxpayer, I see you guys out of your goddamn minds. That's the problem, the mentality is that this offshore world whether it's for finance subsidiaries of major corporations who can then not be subject to any bank reserve requirements which is really the underlying problem. All of this can be closed down by saying you gotta do it on shore. Where reserve requirements apply, where regulation applies, all of the offshore stuff allows the escape from these things. But the banter in the business world is, that's all legitimate. That's the good offshore, I'm sorry, it's not. Well I just wanna say thank you again to all the panelists for their great work and their insights into this pernicious problem. My name is Mark Hayes, I'm also with Global Witness and I had a question for Michael and Daniel about research in our organization where we're continuing to do research to uncover case studies where these companies have been used to facilitate this sort of crime. That research is probably a little bit different from yours in some ways, but I'm curious in that vein what's next for you all in terms of exploring this or related issues further and how has your experience with this body of research perhaps informed those next steps in terms of how you approach it or where you might go? I mean that's a great question, I mean we're still trying to decide what the next move is. Sometimes when we, I presented Jason and I and Mike came to this with various audiences of practitioners, right, so it's sort of industry kinds of conferences and meetings, they're very interested. But some have said, you told us about incorporation, we believe your story, we just think that banking is much more important. And that everything stops at banking and there the regulations are well followed. And my answer is we don't know because then a study hasn't been done. We suspect that there are big issues and problems there. Sometimes when we raise this with practitioners, it takes a few minutes for them to stop laughing. You know, about the question of banks. So we're contemplating doing a banking study. I'm not sure we will, but because there's lots involved there and we're very worried about the ethics of our research and banks are required to file reports on any suspicious activity. So if we did so, so we have to do it with the full knowledge and disclosure of the IRS and other banking regulation bodies. But we think there's probably value in an independent academic study on this issue. And so we're thinking about doing it. I don't know if we'll go. I have a question for you guys, the authors. Jack touched on it a little bit, but if you could sort of share your insights about why you got the results that you did. Do you have any hypothesis about why the OECD countries had so much lower compliance? I haven't read the book. So if you talk about it a lot in there, but I'd be curious about your thoughts on that. So one of the nice things about experiments is you can try to uncover these causal effects. What they often don't do is tell you like the mechanisms that are driving like what's there, right? And so we've heard lots of people sort of throughout alternative explanations, right? And I'm not sure we can say confidently like what's sort of what's driving what. And so we've heard things like the tax havens or providers in tax havens are just much better at figuring things out too, right? So not from the perspective of what you said of sort of like moving into different avenues, which is also really interesting, but just sort of like picking up on like, what's going on and reading between the lines and stuff like that and figuring out like what do you need to say and when and so forth. And so that's some plausible alternative. The other thing is there's so much that's happening at the domestic level, right? And in some way CD countries and probably a lot of our results are driven by the United States, right? Where in our country by country or sort of the overall country grouping analysis, right? We have lots and lots of countries in there, but you have a really big offender and being the US where so much happens because it's a federal system, so much happens at the state level as opposed to the national level, right? And so, you know, so it's possible that, you know, just given certain sort of say federal structures and so forth in highly influential countries, right? That we're seeing, you know, some of that drive, you know, only CD down and perhaps tax havens up and so forth and so, you know, I mean, ultimately, you know, this is maybe somewhere where we need to go next is starting to pick apart what's actually going on, you know, at these different levels. I would just add that, I mean, if you look at sort of the diplomatic history of this, the US, UK, and other OCD countries were very vigorous in creating the financial action task force and put lots of pressure on especially tax havens to comply with these rules that the FATF has put forward. What's not clear is that those rules are biting at all on the founders and originators of these international standards. So, you know, I mean, it's complicated, right? I don't think that the US government really wants this system, but given the constitution and that, you know, businesses are regulated by states, it's really hard to move around it. UK has a lot easier time in making a switch here because of its, you know, parliament is sovereign there. It's just not the case with the US constitution. So, but it does smack many as hypocritical, right? So, the US and UK and others have put the pressure on and at least there's really good evidence that the tax havens are complying, at least with this one important piece, which is, you know, disclosure of financial owners, but they haven't followed suit. For those of you who were old enough to remember this, there was a push for a while or a federal incorporation law that would move this stuff out of the hands of state governments and make anybody that was doing business across state lines do a federal incorporation. And that would then give federal regulatory authority the ability to set the rules for those corporations. I think that that's a debate that really ought to be ginned up again. The problem in the state of Delaware is, my good neighbors, I live in Maryland, don't pay sales tax, don't pay income tax, and they're living on the float that comes from the sea of criminality. And I'm sick of it. You know, they ought to pay sales tax, they ought to pay income tax like the rest of us at the state level. We've got to start figuring out how to stop making this a profit center for state governments. And Nevada is really a sick example because these people went into the business at first to cheat California. Their idea was we'll set up our corporations, we won't cooperate with anybody on the information about our corporations. So if we can get California businesses to set up in Nevada, nobody will be able to audit them. And by the way, Nevada won't cooperate with the federal IRS. The way our system works is state tax authorities sign agreements with the federal tax authorities. So Nevada is a real outlier. And if you wanna play for a system that doesn't work at all, you couldn't have designed anything better than Nevada came up with. A state shouldn't be able to do that. But I'll point out that when I testified on this whole question before the committee that was then the Committee of Jurisdiction, Homeland Security, whatever, the chief player in it was a senator from Delaware who railed at me for probably 20 minutes before I could open my mouth because Tax Justice Network had published a report pointing to Delaware as the major culprit. He was not happy and he sure as hell wasn't gonna let any legislation to correct the problem, get out of his committee. I'm just gonna go back in real quick on Dan's comment about the hypocrisy too. I mean, one thing that Dan and I see sort of as international relations scholars more generally is this playing out in domain after domain, right? And so the powerful countries in the world can sort of set the rules that they want everyone else to live by and that they don't necessarily have to respect and so the US and other countries love having international courts, right? When it means you can go after people you really don't like, powerful countries don't like the courts, right? When it means that their own people might be able to go through, they have to go through those courts, right? The powerful countries wanna be able to conduct covert operations and so forth when it's beneficial for them, they don't want that ability for other countries and so forth. So many ways this certainly fits into a larger pattern that we see in international relations which is OECD countries are powerful, right? And they can try to call the shots in various ways and unfortunately it leads to some what feels like pretty blatant hypocrisy. But one of the things you were testing for, right, is non-compliance. So you were asking these companies to do something that they should not be doing under the law. So in that sense it strikes me not as a, we've set up a system that allows this to happen in the broader sense, yes, with the beneficial ownership but for what you were testing specifically, these guys were violating regulations and laws. They required to do this. So it strikes me as an enforcement issue that we're just not enforcing these things if these companies were really concerned that hey, you might be the IRS on an undercover operation and they were gonna get busted hard if they responded in the ways that they did here in the United States, they wouldn't be doing that. So it strikes me kind of as an enforcement issue. The other thing I wanted to throw out there is just do you think the new FATF approach to rating countries now that it's gonna look more in actual effectiveness rather than just laws on the books is likely to have any impact on this at all or not really? Sorry, is the question whether the new FATF has an impact on research or research on that? Whether going forward, do you think that the new approach FATF is taking to rating countries and their compliance not just with laws on the books but actual effectiveness will likely have an impact on this issue overall or not? Yeah, I mean, Jason has talked to some folks there and they're not interested in doing this kind of auditing, the kind of thing we did. And I think unless you're doing careful audits, you're gonna have a hard time tracking and enforcing. So, and that's why the Caymans have been so successful in shutting, or at least making sure that all beneficial owners are tracked is because they audit pretty aggressively. So the Jersey Isle of Man, the Channel Islands, right? So they do that. And I think unless FATF is doing that as well or somehow being involved with that, it's gonna be hard to know whose compliance is not. You just can't read this from the laws on the books and know what the compliance rates are. So as I understand the new rules, or what they're planning to do, a lot of this is gonna be based on convictions, right? And as a social scientist, we know that this can become very problematic, like very, very quickly, right? I mean, it's like crime statistics. When you see crime statistics go up, right? Sometimes that means that, you know, if they're based on things like convictions, right? Sometimes it means that there's more crime, right? And you're really capturing more crime. And sometimes it just means that you're, and you know, that you're doing a whole lot more. There's no change in crime, but you're just doing a lot more, right? And so, when you start to get into something like convictions, you have a huge selection problem, right? And that selection problem becomes very difficult to disentangle. So if it goes forward primarily on the basis of convictions, then, you know, we're potentially just gonna be continue, are we gonna continue to mislead ourselves about, you know, what the problems are, where they're located, and so forth? I think on the enforcement front, there are a few things that have to be said. First of all, the Swiss banks are probably the most outstanding example of the failure of enforcement. Because in bank after bank case, when IRS had all the goods, there's no way to criminally prosecute the bank or its top officers. Instead, a small selection of lower ranking people were sent to the guillotine. And even they, if they don't come to New York to go shopping, won't go to the guillotine, they'll just be imprisoned in Switzerland. And maybe some of the people who have turned over the information will be prosecuted. But the other problem is a basic problem of criminology, which is the purpose of all criminal law is deterrence. You don't get deterrence unless somebody actually is afraid of the outcome of the enforcement action. And these 10 banks, you know, who pays the penalty, the shareholders. And what kind of penalty is it, one quarter earnings? Does that really matter? Does anybody care? And the executives gotta help us double their bonuses in the year that the bank's been hit with a multi-billion dollar penalty. So where's the deterrent effect of the enforcement action? And the answer is, hey, it's a parking ticket. And God knows how many people I know have piles of them in the back seat of their car. And the only time they'll ever pay them up is if the car is booted. Now, somewhere one of these banks has to lose its license and these people have to be put in jail. And at that point, we may have enforcement that works. But as long as it's this business of, we're gonna send you a letter saying you were a bad boy, which is what happens when somebody violates the know your customer rules or there's an audit of an institution to see how well its compliance department is working. Or they're something more than a passing fine we're in a fool's game. And the enforcement just isn't gonna happen. Okay, so I've got one more here and then we'll go to Joe and Brent. And I think that may be all we have time for. Thank you for waiting. Yeah, thank you. Now, in connection to what you just said, and also I mean from the irony of choosing between show companies and buy cameo. I mean, I'm looking specifically now at the Caribbean and the institution, more in connection with organized crime and women trafficking. But one of the things that I kind of find out is he's not clear who are the owners of all the investment companies and the thousands of banks that operate there. So, and I don't know what you're experiencing with that. Well, here's another thing that's lost in this whole damn debate. The corporation was a pretty important invention. But the purpose of the corporation was to allow businessmen to go out and do some kind of business without risking anything more than the assets they put up in the corporation. So, initially to set up a corporation you had to specify what business you were gonna do, who you were, the people by that had to be known because this was gonna go on a public register and whoever did business with them would be on notice of who they were doing business with. And in the event of a failure, their liability would be limited to the capital that was put in the business. Now, that original model morphed into a situation where no stated capital or maybe a dollar stated capital, no known officers, directors, or shareholders, no known location for business books and records, no ability to figure out anything about the entity and its sole purpose is to provide anonymity. Now, that is a perversion of the original purpose of the corporation. Why is that recognized by any legitimate government that wants to have enforcement of its laws? So, I mean, and you mentioned before the case of navies, guys, and kids, and you have another compound element there, which is like Dominica or some kids, you pay 100,000 dollars and you get a second season of shit. Yeah, well, that's the other part of what they, they're full service. My managing director tells a story about, he was at a bar, we travel a lot in my organization, he's at a bar one night somewhere, God knows where, some capital of a European country and it turns out the guy next to him at the bar is a banker and they get to chat and Tom says, so how do you decide how many layers of corporations you're gonna put in any given structure? And the guy said, well, we figure, we figure that it's something like, it'll cost them an extra $500,000 at least to investigate each layer. So we just ask the people, we look at what the enforcement is and sort of do a calculation based on that. How much is an enforcement going to put into actually an investigation from where this person is originating the company? It's just an interesting calculation, right? Right, mine is not an issue. Hi, Joe Krause with the One Campaign. First of all, thanks to the authors for this great research. Those of us who are on the front lines of policy change on this issue, like Jack said, this is really valuable for us in terms of making concrete arguments and people do love members, so this is really helpful. So a couple of quick comments before I have a question. One is to this issue of enforcement, I think as Jack noted, you can have the best regulation, the best laws in the books, but if there's not active enforcement, then you have to question how strong the whole system is. And I actually was on the panel a couple weeks ago that Jack referenced in Miami on beneficial ownership and I was on that panel with someone who is in the private sector from the Cayman Islands and someone who's from BBI to BBI regulator. And those two gentlemen I talked with at length, both during and after the panel and then a number of other people who are from the Caribbean Islands and to a person, they all are adamant that they have the best, strongest regulations in the world for company service providers, because maybe there's one reason why there's a difference between the critical tax havens in your study and others, is the regulations are stronger and they're watched more closely, but the flip side of that is Jack alluded to earlier is if there is an active enforcement of that, then you're gonna still have a few bad apples who decided to do business, especially if you're offering them a premium. And as the ICIJ investigation, offshore leaks investigation highlighted, there's still the number of at least suspicious cases that came out of the offshore leaks that's still being investigated. A lot of those were based in BBI and other similar jurisdictions. So they have the best regulated company service providers in the world, but they're still obviously issues, which gets to the enforcement issue. And as I'm sure the two authors can validate, it takes a whole army of people to pull off this relatively small study, right? Imagine doing this all the way through every single country and have, you'd need law enforcement would have, need to have a small army in each country to do real rigorous enforcement. So I think for us and a number of other groups in the room who work on this issue and the policy side, think this is a really valid reason for why having this information being publicly available so critical. And I think the ICIJ investigation really highlights that there is real value to having public involved in this, having journalists on the ground in specific countries who know the names of these people and what their connections may or may not be. So I think that's really important. A couple of really quick other points. My organization works on this issue in the EU. We have a number of offices, including in Brussels. I spent a couple of months, they're working on this myself last fall. Heather did a great job of describing where things stand here. King Parliament's position is super strong. It's now in the back door rooms being negotiated. Unfortunately, we don't have a lot of transparency in that process. But just to note that there's an important meeting amongst the council and that the later this month, the 20th of May, and then it's likely this issue won't be resolved until sometime in the fall, given the parliamentary elections, et cetera. And then just one other note, the number of the tax savings, the opposite, especially the overseas territories and crime dependencies of the UK have are currently going through public consultations on this issue of beneficial ownership, whether or not they should have centralized registries rather than just having the fat of requirements of having company service providers hold this information. Jersey has done a VBI, Cayman Islands have done it, Montserrat finished yesterday, Turks and Capos's consultation runs to the end of this month. So they've been under quite a bit of pressure by David Cameron, who's really been a leader on this issue. So it's, you know, the cynic in me wants to suspect that this was probably a rhetorical exercise that they've been forced to the table to address this issue and that they're holding these consultations. In the case of Montserrat, it literally was a one page tick box exercise. So it's not clear how seriously they're taking it. But I think it demonstrates that there's momentum. There's more attention being focused on this issue. So just a quick question for the authors. You mentioned, and maybe I had a chance to read the book, I've read the paper that I think was the background for this book, that you looked at 181 countries and then you had the graph as show of the results that you only listed the ones we had 15. Was it responses or 15 approaches? 15 approaches. 15 approaches. This curious why- Some of them were much lower than 15 responses. I'm just curious why you didn't approach all of them at least a minimum number of times so that you can have something that was statistically relevant. I mean good question. The issue was that in some places we just had a hard time finding very many corporate service providers. So in some of these small countries, in some countries you'll notice, if you look online at our map, globalshodgings.com, you'll see that Africa's mostly missing. And that's because we just couldn't find them there. So, and we didn't want to do more than two approaches because we worried that they might detect this was something other than the face value customer that we were pretending to be. So that's a great question. So I mean, we put the lead table out there as something we think is interesting for the policy debate, but that graph is probably one of the things we put the last social scientific weight on, right? We're much more confident about discussing experimental results than we are those, we call those observational results. But they're interesting, they're valuable, they probably tell us something. So, and we were astimatic about it, but not as comprehensive as we would have liked to have been. I'd like to respond to the whole approach of regulating the service providers. DVI has now pushing on over a million corporations. Look at the population of DVI, look at the number of companies in the service provider business. And now let's posit that they make the service providers get the information. And now a million companies were waiting for mutual legal assistance requests from around the world as to beneficial ownership. And DVI has a guy who once a week opens the mail to look at those requests. How many months, years do you think it will be before even if DVI had the accurate information, it would actually get it to the cop who needed it. And by the way, if it weren't a cop, would they give it to somebody who's simply involved in something minor, like recovering assets after a big fraud, or some other kind of financial shenanigans where there are now victims of a fraud that we're trying to recover, or let's say hedge fund investors where the hedge fund disappeared, it's in liquidation, the assets have disappeared and who's behind what. And the answer is even if they had all the damn information, it would operate at such a glacial pace inevitably that it wouldn't much change the picture. And the question I come back to again and again is why should any of those corporations be allowed to open a bank account anywhere else on the planet? Why should they be allowed to be subsidiaries of major U.S. corporations? Why should they be allowed to have any roots in the financial system? There's no, absolutely no legitimate reason for it. And secrecy, I would argue, is not legitimate. I just want to add sort of one comment back on the issue of kind of regulation versus enforcement. What's interesting is we observe a lot of variation in the data and so you could think of a lot of possible combination, well at least three or four possible combinations of regulation and enforcement, right? One is that there's a set of countries out there where there's no regulation, no enforcement, right? And I'm dichotomizing, right, which, you know. But no regulation, no enforcement, then there might be somewhere there's regulation and enforcement, right, both, and then there's probably somewhere there's one of each perhaps, right? Perhaps not enforcement without regulation, but regulation without enforcement. I think what's interesting is we see, when you go from say countries with no regulation, no enforcement to countries with regulation but no enforcement, we actually observe some change there, right? We observe some variation. And so the question being like, you know, is if there's no enforcement at all, why are we observing some differences still in the results, I guess? And so, so I guess it's sort of a, just kind of throw a caveat out there, I guess, that regulation may do some things, right? And I think we observe some differences in the data. But the point is well taken, enforcement just seems like, you know, just absolutely crucial here in order to really get where things need to go. Okay, one last question over here. Yes, this is a question for the authors. Are you in the midst of a book tour? What are your plans in that regard? And have you targeted any groups to try to make presentations or any localities, such as Dell, where are you going to get universities? Or I'm serious, are you looking at religious congregations or small businesses? Just could you tell us what you're thinking is there? This pretty much is the book tour. So, yeah, this is academic work. It's just a different world, right? This is typically academic projects like this tend to be pretty low profile. And you can tell because, you know, after 10 years, only four people have ever cited the work, right? We think this will probably get a few more than four, but yeah, that's, I mean, you know, it's a different kind of exercise than what we typically see in the popular press. So, but we're certainly open to those possibilities. Yeah, I'd love to hear concrete suggestions whether, you know, should we call up Delaware and go there? I mean, anyway, we'll be able to get out of here. Yeah. Well, I think that wraps it up. Thank you all very much for coming. I would say, I would just add that, you know, for those of you who are looking for a more concrete and very relevant time-appropriate issue as well, anonymous companies are a problem in campaign finance as well. And U.S. Perg has done, the public industry search group has done a fair amount of work on that. I think it's, and now we find that very interesting. And then I'll leave you with one fundamental question and that is, why shouldn't you be able to figure out who you're doing business with? Right, that's a very fundamental question and why I will leave you with. So the authors and the panelists are generally available for chatting after and we have some books on sale. GFI is not getting any cut at this at all. It's face value. I just don't know what the face value is. I just, what do you get? So the discounted price from the ARMAG is 2639. Okay, so there you go. They are available for sale if you'd like to buy a book. And.