* Any views expressed in this opinion piece are those of the author and not of Thomson Reuters Foundation.
In case there was any illusion that the police crackdown in Oakland, California might let the steam out of the Occupy Wall Street (OSW) protesters, a joint report released by the World Bank and the United Nations this week may well provide additional fuel to propel the growing call for economic fairness. The report, titled The Puppet Masters: How the Corrupt Use Legal Structures to Hide Stolen Assets and What to Do About It underscores what many of the protesters believe about capitalism. They do not oppose capitalism per se, they oppose a capitalism in which the deck is stacked against them. The World Bank/U.N. study shows how that process works.
In a review of 150 cases of grand corruption the study notes that the resulting data “casts light on how corporate vehicles are misused to conceal the proceeds of grand corruption.” The World Bank and U.N. ultimately point the finger at the use of corporate opacity to hide corrupt activity. The study describes how “banks, financial institutions, lawyers, accountants and other professionals . . . can be employed to facilitate” corrupt activity.
But it does not stop there. The study also notes that a similar use of shadowy corporate entities can facilitate “other criminal behaviors, including escaping international sanctions and the funding of terrorist organizations.” And, while it is not mentioned overtly, it is difficult to read the report without recalling the Enron scandal and how the use of hundreds of offshore entities were used to hide risky investments and accounting gymnastics to perpetrate fraud and corruption.
Puppet Masters notes that the key to curtailing those global ills is the ability of law enforcement and tax authorities to identify the beneficial owners of a company, (i.e. who controls and profits from the company). Without that key information, which if not collected on a regular basis in many jurisdictions including the United States, it is exceedingly difficult to determine who is to blame for criminal activity of all types. It is not overstating the point to say the lack of beneficial ownership information has reached a crisis point. In September, an article in the Economist magazine described how a researcher’s attempt to create corporate entities in western European counties without using a real identification was successful 75 per cent of the time. By comparison, the article noted, “classic tax havens were on the whole much more rigorous” in their review of the applicant.
The World Bank/U.N. report opens by telling the not so unusual story of more than $4 million in bribes paid by a car manufacturer to “customers, their designees or third-party shell companies that provided no legitimate services . . . with the understanding that the funds would be passed on” to Russian government officials. Despite significant evidence no “individual or company [has] been convicted of a corruption offense,” the report said.
It is this impunity that angers so many around the globe, whether they are trying to occupy Wall Street or simply find a job on Main Street. With that there also seems to be a growing feeling that the rules to the game being played are not readily apparent to all, that not everything is above board, that the game is rigged. And so while some naysayers claim the OSW protesters hope to “end the capitalist system” they truth is they probably just hope to be able to figure it out and call for changes to level the playing field. To do that they need to know what’s hidden in the shadows.
