Funny but true story about the number 1 tax haven in the world – The United States of America. The Nevada Secretary of State responded this week to a U.S. senator concerned about shady shell companies in light of the massive Panama Papers leak, saying her office has limited authority to demand the names of owners who incorporate business entities in the state.
Secretary of State Barbara Cegavske sent a letter Thursday to Sen. Ron Wyden of Oregon, the top Democrat on the Senate Committee on Finance, detailing her office’s role in business incorporations. She said Nevada law doesn’t require business entities to file lists of their owners, and she can’t request that information unless law enforcement officials tell her to do so. None have done so in the past three years.
“The Secretary of State does not have the authority to investigate illegal activities such as money laundering or tax evasion,” she wrote, “and does not therefore demand ownership information for investigations of this nature, except as requested by a law enforcement agency.”
Oregon Sen. Ron Wyden wrote a letter to Cegavske in early May, saying he’s concerned that anonymous shell companies, while not illegal, are being used to conceal criminal activities. Nevada is a popular place for business entities to incorporate, in part because state law allows them so much privacy.
The issue of shell companies has been in the spotlight since early April, when stories were published after a leak of documents belonging to Panamanian law firm Mossack Fonseca.
The articles detail how world leaders, celebrities and businesses use shell companies to hide money. Public figures named in the reports have come under fire, including Iceland’s Prime Minister David Gunnlaugson, who resigned amid reports that he set up a company in the British Virgin Islands that had holdings in Iceland’s failed banks.
A Las Vegas-based company, M.F. Corporate Services, has been linked to the firm. The registered agent who worked there has since dropped more than 1,000 business clients she represented. M.F. Corporate Services paid a $10,000 fine after Cegavske’s office found the business wasn’t maintaining all required records.
Former Nevada Secretary of State Ross Miller established a task force in 2011 to investigate corporate fraud linked to shell companies, and Wyden asked whether it had investigated any cases or prompted any changes to the law.
Cegavske responded by saying, “This administration has no documents or records related to the task force.”
In the past, she said she wanted organize a committee to look further into state policy on registered agents, who are third parties, located in the state where a business is incorporated, that are designated to receive legal and government correspondence on behalf of the business.
“The Office of Secretary of State is committed to ensuring that businesses and registered agents properly maintain records in accordance with Nevada law,” Cegavske said in a statement last month.