MONEY LAUNDERING LOOPHOLE ALLOWS CHINA’S SHELL COMPANIES to attack + steal from USA
America faces a serious, pervasive and anonymous threat to national security. A top Pentagon official recently called it the “biggest concern [and] weakest link” in U.S. defense procurement. U.S. law enforcement and intelligence agencies are routinely stumped by it.
And in the Treasury Department’s most recent strategy for combating terrorist and other illicit financing, it is identified as the top vulnerability in the U.S. financial system and an immediate priority for action.
What is this mysterious new threat? In fact, it is a basic money laundering loophole that we have known about for decades: The ability to own and control U.S. shell companies without having to disclose their true ownership.
Drug cartels, terrorists, kleptocrats and everyday fraudsters have long exploited this loophole to facilitate activities that undermine America’s security and prosperity. For example, U.S. shell companies are used for money laundering in transnational corruption cases more often than those of any other country — including notorious tax havens such as Switzerland or the Cayman Islands.
Indeed, experts have sandwiched the United States between those two countries as one of the worst financial secrecy jurisdictions in the world. Yet, in all 50 U.S. states, more personal information is required to obtain a library card than to create a shell company.
But the problem assumes a new urgency as U.S. policymakers contemplate a protracted struggle with China. Indeed, it is astonishing that this vulnerability has yet to be addressed in that context, as shell companies routinely play a key role in facilitating espionage, intellectual property theft, cyberattacks, and sanctions evasion by CCP officials and their proxies.
Opaque corporate networks also propel the broader wave of crime and corruption emanating from China as a byproduct of Communist misrule, including the illegal opioid trade, human trafficking and counterfeit goods. And China’s most prominent political families hypocritically rely on shell companies to conceal their vast private wealth overseas.
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