Money-laundering crackdown should put Nevada on notice

Las Vegas is well-known as a convention hub, but few groups it attracts offered as much unintentional irony as the 11th annual AML and Financial Crime Conference held in early October at CityCenter's Aria.

The conference drew hundreds of anti-money laundering experts and financial crimes analysts from across the globe for workshops with titles such as "Leveraging Financial Intelligence Units to Uncover Financial Crime Patterns," "Spotting Real-Life Suspicious Activity and Red Flags," and "Implementing a Robust Anti-Bribery and Corruption Compliance and Risk Management Framework."

As if they needed reminding, conference attendees were constantly informed that the business of battling money laundering and other financial crimes was constantly evolving with advancing technology, changing statutes, shifting political pictures, and clever criminal groups that move billions in ill-gotten gains into the mainstream economy each year.

Funny they should have such discussions in a city that is no stranger to the subject of money laundering, in a state whose laws of confidential incorporation are widely known as some of the most relaxed in the nation. But, these days, most legalized American casinos are cathedrals of regulation compared to some financial institutions and international businesses, which conceal their true beneficial ownership and tax liability behind multiple shell corporations and limited liability companies.

The news out of the Aria conference was clear: As business and banking cross international borders in a world economy, implementing a uniform system of regulation and ethics is essential to their long-term survival. Without it, even highly successful companies are likely to be tripped by the Foreign Corrupt Practices Act and money laundering and other financial crimes laws.

In Washington, the August appointment of Jennifer Shasky Calvery as the new director of the Financial Crimes Enforcement Network (FinCen) was a sign the U.S. Department of Treasury was raising the stakes in its anti-money laundering and financial crimes fight. Her focus on breaking the confidential veil of shell corporations and limited liability companies ought to put states such as Nevada and Delaware on notice. If they fail to improve transparency, they can expect to attract federal scrutiny.

"The shell company problem has been a perennial problem and something that I have personally dealt with from the very beginning of my career," Shasky Calvery told American Banker. "For 15 years, we've been watching organized crime and others just consistently use shell companies to launder money."

So don't be surprised if one day we learn that foreign business operators, some with shadowy connections, have been using Nevada's corporate laws to mask their transactions. America might be experiencing tough economic times, but it remains an excellent place to invest, whether you're a legitimate corporation, a crooked tax attorney, a corrupt foreign company or government official, or an underworld cartel.

Although IRS Special Agent in Charge Paul Camacho declined to comment, in recent years his Criminal Investigation agents have made numerous successful tax cases against white-collar criminals who attempted to conceal their assets behind Nevada LLCs. In one case, disbarred attorney William S. Reed taught dozens of dupes how to hide their assets in a scheme that generated millions for his partners along with long prison sentences.

Then there was Kansas City, Kan., attorney Scott Ruther, who set up 15 Nevada shell corporations in an unsuccessful attempt to help clients hide their income.

In tax and fraud cases across the country, a broad range of defendants are compelled to explain in court how they tried to evade taxes through the creation of shell corporations and LLCs.

What do many of them have in common?

They took advantage of Nevada's inviting laws of incorporation to further their schemes.

Secretary of State Ross Miller has the impossible task of oversight of Nevada's corporate registration structuring without appearing to drive away potential business investment in the state. As for the increased federal focus on criminal shell corporations and LLCs, Miller says, "We applaud those efforts. We realize that is an area of abuse. We always give law enforcement the information they need to investigate the bad actors."

But despite some statutory improvements, he admits, "It's obviously still a problem."

It's one that now finds itself on the national stage.

John L. Smith's column appears Sunday, Tuesday, Wednesday and Friday. Email him at Smith@reviewjournal.com or call 702-383-0295. He also blogs at lvrj.com/blogs/Smith.