Delaware: The US corporate secrecy haven

Delaware: The US corporate secrecy haven

Vote for Delaware to end its corporate secrecy

At first glance, there’s nothing too remarkable about Delaware – a small, seemingly sleepy state on the US north-eastern coast. If people have heard of it at all, it’s probably in relation to being the home of chemical company DuPont or US Vice-president Joe Biden.

Transnational crime haven

But mention the second smallest US state to corruption fighters, and they’ll tell you of a very different Delaware: a place where extreme corporate secrecy enables corrupt people, shady companies, drug traffickers, embezzlers and fraudsters to cover their tracks when shifting dirty money from one place to another. It’s a haven for transnational crime.

Low taxes, the state’s business-friendly laws and a sophisticated court system for hearing business disputes draw thousands of brand-name corporations to Delaware. In fact, nearly 65 per cent of Fortune 500 companies are incorporated there, making it the state with more corporations registered within its borders than people. In many cases, firms flock there for legitimate business reasons – but not everyone is squeaky clean.

Strict corporate secrecy

Delaware is also home to thousands of anonymous shell companies thanks to its strict corporate secrecy rules.

Got dark secrets to hide when setting up a business there? No problem! No data is collected on beneficial owners, and company formation agents based in the state can act as nominee directors. It’s a cinch for a criminal to set up a shell corporation to launder illicit money, and gain access to the US banking system.

With the backing of a US corporate address to clean up their image, dodgy firms – including those run by Russian arms dealers and Serbian smugglers – can conduct their dirty tricks in peace.

Delaware has taken a small step to lift the veil of secrecy, but advocacy groups say it’s mere window dressing. In 2014, Delaware enacted legislation requiring some minimal disclosure of corporate ownership – but not to the public. Heather Lowe, legal counsel for Global Financial Integrity, said the measure does not “even approach the issue of anonymous Delaware corporations.’’

Poor company

But Delaware is not alone in the US. Nevada and Wyoming have similarly lax corporate registration laws and have attracted large numbers of shell companies, along with the registration fees that they add to state coffers. But Delaware is the leader.

By hiding behind the cloak of an anonymous company, corrupt people are free to prey on ordinary citizens without attracting attention from authorities. According to Global Witness, lawyers used secret companies from Delaware and Nevada to con elderly people into investing their life savings in worthless enterprises, while a congressman used anonymous companies from Delaware and Louisiana to pocket almost half a million dollars in bribes. 

Global Witness describes secret companies as “getaway cars for criminals and the corrupt across the globe”, but the United States, where you need to give more personal information to get a library card than set up a company, is certainly the weakest link. 

Must reads:

  1. New York Times, “How Delaware Thrives as a Corporate Tax Haven”
  2. International Consortium of Investigative Journalists, “Lobby groups ‘see right through’ US state’s financial transparency attempt”
  3. Delaware corporate law, “Facts and Myths”

For any press enquiries please contact press@transparency.org

Latest

Support Transparency International

#18IACC: Call for workshop proposals now open!

The 18th edition of the International Anti-Corruption Conference to take place in Copenhagen from 22-24 October 2018 is thrilled to announce that the call for workshop proposals is now open. Help us shape the #18IACC agenda! Anyone interested in the fight against corruption is welcome to submit a proposal.

A redefining moment for Africa

The newly released Corruption Perceptions Index (CPI) provides a good baseline for the African Union (AU) anti-corruption efforts in 2018. This year’s theme for the AU is “Winning the Fight against Corruption: A Sustainable Path to Africa’s Transformation.” As the AU rolls out its plan, this is an important moment for Africa to take stock of the current situation.

Perceptions remain unchanged despite progress in the Americas

In the last few years, Latin America and the Carribbean made great strides in the fight against corruption. Laws and mechanisms exist to curb corruption, while legal investigations are advancing and citizen anti-corruption movements are growing in many countries across the region. However, according to the Corruption Perceptions Index (CPI) 2017, the region continues to score poorly for corruption. How can we explain this contradiction?

Slow, Imperfect Progress across Asia Pacific

While no country in the Asia Pacific region scores a perfect 100, not even New Zealand or Singapore, which both experienced their share of scandals in the last year, our analysis reveals little progress across the region.

Europe and Central Asia: more civil engagement needed

In 2017, authoritarianism rose across Eastern and South East Europe, hindering anti-corruption efforts and threatening civil liberties. Across the region, civil society organisations and independent media experienced challenges in their ability to monitor and criticise decision-makers

Rampant Corruption in Arab States

In a region stricken by violent conflicts and dictatorships, corruption remains endemic in the Arab states while assaults on freedom of expression, press freedoms and civil society continue to escalate.

Digging deeper into corruption, violence against journalists and active civil society

To mark the release of the Corruption Perceptions Index 2017, we analysed corruption levels around the world and looked at how they relate to civil liberties – specifically, the ability of citizens to speak out in defence of their interests and the wider public good.

Corruption Perceptions Index 2017

This year’s Corruption Perceptions Index highlights that the majority of countries are making little or no progress in ending corruption, while journalists and activists in corrupt countries risk their lives every day in an effort to speak out.

Social Media

Follow us on Social Media

Would you like to know more?

Sign up to stay informed about corruption news and our work around the world