Last fall, Tulsa officials identified several hundred women who exchanged money for sexual favors. “Operation Velvet Fury” arrested several owners of massage parlors used as fronts for sex work. The workers involved were not arrested, as they were victims of a form of human slavery known as sex trafficking.
Illicit massage parlors like these often act as fronts for trafficking. They typically recruit women from other countries under false pretenses. The women sometimes borrow large sums of money for travel documents and false promises of a better life and are expected to work off those costs. Once they arrive, they are forced into sex slavery. Illicit massage parlors generate $2.5 billion in revenue annually.
The story does not end with earning revenue. Criminals can’t deposit their illegal earnings into bank accounts and wire them to human traffickers. Modern banks and law enforcement have sophisticated anti-money laundering systems to detect illicit transactions. Thus, criminal businesses “clean” their dirty money under the guise of legitimate business.
Cases like the parlors in Tulsa are the exception to the rule. Police can detect laundered money and retrace it to individual owners. When millions of dollars appear in undeclared income into a new account, investigators recognize those irregularities as a function of criminal activity. More often, however, criminals can hide their identities behind anonymous shell companies.
Anonymous shell companies are crucial to money laundering operations. They shield criminals’ identities and the source of their illegally obtained funds. Once owners incorporate under a business name, they can legally conduct business without attaching their name to it. Holding someone accountable for the business’s crimes becomes impossible, because nobody’s name is attached. Shell companies lack accountability; they lack humanity.
The United States is one of the easiest places in the world to create an anonymous shell company. Political scientists asked more than 3,700 incorporation providers anonymously to open a company without identification. In some cases, researchers included language to signal the company would be likely laundering money for drug cartels, terrorists or corrupt regimes. Only a quarter of providers in America asked for identification, the second-lowest rate of any country they studied.
No law in the United States requires companies to name their true owners. You can hide illicitly obtained money in a shell company in less than a few clicks online. The havoc it inflicts on our communities can last for decades, and a lifetime for some.
This issue brings forth a unique bipartisan consensus that shell companies must go. Human rights groups, national security experts, evangelical Christians, conservatives, law enforcement and business groups all support ending shell companies. The Trump administration supports ending shell companies. It is time to put out of business human traffickers and every other criminal organization that comfortably deposits their money into benign-looking bank accounts.
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