America Feels the Burn of Anonymous Companies Financing Fake Commerce

Jun 17, 2019

Trafficking and smuggling counterfeit and pirated goods is a lucrative business hurting America, its companies, and citizens, according to a May 2019 report from the Financial Accountability and Corporate Transparency Coalition (FACT Coalition).

The illegal activity continues to remain profitable and thrive because those running the criminal enterprises operate in secret with anonymous entities that help them launder their fake items and escape prosecution, according to the report “Anonymous Companies Help Finance Illicit Commerce and Harm American Businesses and Citizens: A Need for Incorporation Transparency.”

The stakes are high in the United States. The flow of fake goods and pirated internet services negatively impacts legitimate businesses, markets, and financial systems, puts consumers at risk, and destroys the reputation of American companies, brands, and products.

The Organisation for Economic Cooperation and Development and the European Union Intellectual Property Office (EU IPO) estimated the value of imported fake goods worldwide at $509 billion in 2016, which is equal to 3.3% of world trade.

The global economic value of counterfeit and pirated goods alone is projected to reach $3 trillion by 2022, according to a 2017 report by the International Chamber of Commerce’s Business Action to Stop Counterfeiting and Piracy and the International Trademark Association.

Summaries of Recent Scandals

Criminal enterprises clean their dirty money and evade prosecution through the use of anonymous shell companies. These front companies have helped criminals in the United States sell billions of dollars worth of fake goods that were branded from luxury companies, like Burberry, Louis Vuitton, Gucci, Fendi, Coach, and Chanel. Others have sold sportswear and gear fraudulently branded from the NFL, NBA, and MLB including Nike, Adidas, and Under Armour.

Anonymous companies also were used to import and sell counterfeit medicines from China and India to American consumers for hundreds of millions of dollars. The companies sold fake medications, including Arimidex, a breast cancer pharmaceutical, Lipitor, a cholesterol drug, Diovan, a high-blood pressure medications, as well as drugs that are often abused like the painkillers, OxyContin and Percocet, the anti-anxiety drugs, like Xanax and Valium, and the ADHD medicine, Ritalin.

Additionally, anonymous companies were used to sell a host of other counterfeit items from smartphones and accessories to false securities and Venezuelan oil.

What This Means for the U.S. and Other Countries

The use of such anonymous companies has a direct, dangerous consequence on the U.S., its businesses, and citizens. As criminals and counterfeiters expand their inventories of fake products across American cities via online platforms, they will impact the economic interests of American companies and markets.

Also, these criminal networks lead to the distribution of harmful, sometimes deadly, items, like illicit drugs, faulty vehicle and airplane parts, and tainted food and alcohol, to Americans. These networks have led the serious harm and even death of Americans.

Transparency Leads to Change

Globally, countries are shifting toward transparency.

Currently, the United Kingdom has a public registry that includes the names of the beneficial owners of companies formed in the country in the hopes of cracking down on shell companies. Additionally, the UK passed a law, requiring its overseas territories, including Anguilla, Bermuda, British Virgin Islands, Cayman Islands, Gibraltar, Montserrat, and Turks and Caicos Islands, to create public registers.

The European Union has adopted new rules to require all member nations to establish public registers of beneficial owners by 2020. In addition to the 28 members of the EU, this also effectively extends to members of the European Economic Area, which includes Norway, Iceland, and Liechtenstein.

Other nations and jurisdictions that have enacted or are pursuing enactment of similar laws include:

  • Afghanistan
  • Brazil
  • Costa Rica
  • Curacao
  • Dominican Republic
  • Ghana
  • Guernsey
  • Isle of Man
  • Jersey
  • Nigeria
  • South Africa
  • Ukraine
  • Uruguay

In Conclusion

As these countries take the steps to nip corruption, counterfeit smuggling, and money laundering in the bud, the U.S. needs to step up and do the same. Right now, anonymous incorporation is easy for criminals in this nation. Currently, no U.S. states require companies to provide the identities of the company’s true, beneficial owners. This makes it very easy for criminals and other bad actors to manipulate the system and hide money through anonymous shell companies.

The Corporate Transparency Act, which would quell some of this illegal behavior, has been introduced in some form for the last five congresses. The House continues to discuss it.

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