The attorneys claim the process is an “overreach” which won’t combat tax evasion, financial crime, and money laundering.
The lawyers also said the new regulations would make it increasingly difficult for LLCs in Nevada and Delaware. The rules, if approved are seen by experts as reversing years of work to make the process simple and bring in needed revenue to Nevada — often called the “Delaware of the West.”
“It’s much ado about nothing,” Las Vegas lawyer Nicholas Woolridge said. “Most attorneys believe that 100% of our clients are not laundering money.”
Las Vegas lawyer Steve Oshins said he had two clients in 21 years were later were found to be doing something wrong.
Concerns raised by the release of the Panama Papers are meant to be addressed by the change in rules. Others claim the guidelines will make it more challenging for people to form corporations in the Silver State.
The corporate records of a single global law firm, Panama City-based Mossack Fonseca are collective called The Panama Papers. The documents reveal the lengths wealthy people have gone to hide their identity as they secretly hid money around the planet. While there is nothing criminal about utilizing offshore companies, tax cheats and money launderers take advantage of the secrecy and privacy provided by firms such as Mossack Fonseca.
M. F. Corporate Services, a subsidiary of Mossack Fonseca and based in Las Vegas, incorporated hundreds of LLCs which have been connected to the Panama Papers.
Nevada doesn’t require proof of identification when establishing a new company. For a few hundred dollars and a few hours, anyone can open an LLC in Nevada and be secure in their anonymity.
While people who are attempting to hide illegal financial transaction, they don’t need to form an LLC. A general partnership can be formed in any state, and the documentation kept private. “They’re free to engage in their illicit actions,” Oshins said.
“Whatever loopholes Washington believes it is closing won’t end illicit activity,” said Wooldridge.
While a shell company can be built, the person still needs a bank account, and there are strict regulations for opening a bank account in America. One new rule announced by the administration proposes to require banks, brokers and dealers and mutual funds to gather and confirm personal information on the persons owning, controlling or profiting from corporations which are their clients.
If a company is owned by 100 people, all 100 people may have to jump hurdles to open a (bank) account. “My fear said Oshins, “is the government is overstepping.”
Disclosure advocates welcomed the suggested rules. “Our thinking is this should be the beginning of due diligence — not the end,” Heather Lowe of Global Financial Integrity about the rule.
The Takeaway
States like Nevada have better corporate laws which permit the state to draw corporate filings to make money. “We shouldn’t be a target because our laws are too good,” said Wooldridge.
