Texas A&M Law Review


Nicholas Vail

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In early 2016, the International Consortium of Investigative Journalists released a report detailing thousands of leaked documents demonstrating how a Panamanian law firm had, for years, helped wealthy clients conceal their financial activities through the use of offshore shell companies. The Panama Papers, as the leaked documents came to be known, directed renewed attention at the use of shell companies. Shell companies are used by the world’s wealthy and powerful to lower their taxes, but are also used by tax evaders, criminal organizations, and terrorists. While much of the renewed attention has been directed at offshore tax havens such as Panama, the United States is itself considered a tax haven by many, largely due to states such as Delaware, which has long catered to individuals desiring secrecy. In response to the Panama Papers, numerous international jurisdictions have looked to strengthen their laws governing the creation of shell companies and considered the mechanisms used to facilitate exchanges of information. This Article will examine one of those responses—the European Union’s Anti-Money Laundering Directive—as an example of the changes the United States should apply to its own domestic laws and as an example of the multilateral framework needed to address a global issue. This Article will argue that the United States should follow the European Union’s Anti-Money Laundering Directive’s lead in strengthening its laws regarding the disclosure of beneficial ownership information, creating shared registers of beneficial owners, implementing penalties for noncomplying entities, and moving towards creating multilateral, as opposed to bilateral, agreements to combat the misuse of shell companies.

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