Anonymous companies help fraudsters spread counterfeits and can therefore pose a serious threat to the economy. This is the conclusion of a new report by the Financial Accountability and Corporate Transparency (FACT) Coalition. According to FACT Coalition, counterfeiters often use anonymous shell companies to launder illicit funds and evade prosecution.
In recent years, such anonymous corporate structures were e.g. used to sell counterfeit fashion items and luxury accessories worth several billion US dollars in the USA alone, the report says. Burberry, Chanel, and Nike, were among the manufacturers affected. In addition, anonymous companies for example financed illegal online pharmacies, which sold fake medicines from China and India for hundreds of millions of US dollars, according to FACT Coalition.
The counterfeiters apparently employ the opaque ownership structures of anonymous companies to disguise their identities and to hide the true functions of related bank accounts or real estate. According to the report, specialized service facilitators such as accountants and lawyers often help the fraudsters hide their illicit activities.
Meanwhile, law enforcement authorities frequently lack the necessary legal means to take appropriate action against the practice, the report notes. In particular, the lack of transparency on the beneficial ownership information in the USA is problematic, says FACT Coalition: When setting up a company, the natural person who is controlling the entity does not need to be disclosed. This makes it difficult to trace and seize illicit funds.
FACT Coalition thus calls for calls for changes in US legislation: „To win the fight against illicit trade, including combatting sophisticated criminal networks and the counterfeit goods that they introduce to the marketplace, we must close the gaps in current laws that enable anonymous incorporation,“ the report says. FACT Coalition, a non-partisan alliance of governmental, national, and international organizations, is dedicated to fighting corrupt financial practices, among other things.