Download - Global Shell Games Book Launch Presentation
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Michael Findley !UT"Austin#Daniel Nielson !BYU#
Jason Sharman !Gri%th#
16 May 2014
http://www.globalshellgames.com/ -
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Meet Lu Zhang
Chinese National in New Zealand Lu Zhang worked at:
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Lu Zhangs part"time job:
Shipping arms from North Korea to Iran. In this case,the arms were intercepted in Bangkok.
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Wyoming Corporate Services Inc.
2710 Thomes Ave.
Cheyenne, Wyoming
Pavlo Lazarenko
Former Prime Ministerof Ukraine
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Wyoming Corporate Services Inc.
! Main room in house has 2,000mailboxes, floor to ceiling
! Each mailbox is a shell corporation
! Companies in name only
! No employees or products! Shell companies at WCSI:
! Sell fake parts to Pentagon
! Hide illegal Internet pokerwinnings
! Route earnings from banned sub"prime credit cards
! Shelter Pavlo Lazarenkos realestate assets
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...&F'or an extra (25... we
dont require any documentsfrom you at all.
! Canadian company in response to a request from a PapuaNew Guinea alias working in government procurement:
! It sounds like you want to form your company
anonymously with the State, is that correct? We can do thatfor an extra (25. If we are just setting up a Corporation foryou and thats it we dont require any documents from youat all.
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How Its Supposed to Be
! Hard and soft intl. law
! Incorporation servicesshould demand:
! Notarized identification
! Proof of residence
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Field Experiment orRandomized Control Trial !RCT#
! Need subjects to behave normallywithout detection
! Field experiments can helpthrough
! Employing intervention/treatment
! Randomlyassigned to arelatively large group of subjects
! Where randomization balancesobservableandunobservableconfounding factors
! High internal validity to revealcausal e"ects
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Basic Study Design! Get Institutional Review Board
ethics clearance.
! Generate aliases hailing from a 21countries.
! Pose as consultants seekingconfidential incorporation.
! Send emails to roughly 3,800incorporation services and businesslaw firms in 181 countries.
! Randomly vary the informationprovided to the subjects.
! Learn if any conditions cause greatercompliance with international law.
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Outcomes of Interest
! 1. No Response
! 2. Non"Compliance: no ID
! 3. Part"Compliance: ID butnot notarized
! 4. Compliance: notarized ID
! 5. Refusal of Service
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Bait and Switch?! Do services promise anonymity
then later demand documents?
! In prior audit study, co"authorJason Sharman followed up 45
times, pursuing incorporationuntil last step.
! In three cases, Jason actuallyincorporated using his own name
!in Seychelles, UK & Nevada#.! In all cases, no incorporation
service first promised anonymity& later required ID.
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Subject Pool
! 3,756 corporate service providers !CSPs,businesses or law firms that specialize informing companies#
! 2,049 foreign CSPs; 1,707 in U.S.
! CSPs in 181 countries! Found mostly through Google searches
! Block randomized by
! Country group: OECD, tax haven, WB
ease of doing business levels! Service type: incorporation service vs.
law firm
! Treatments randomized within blockingstrata
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Placebo Condition:
Norstralia! Email alias claims to hail from one
of eight countries:
! Australia, Austria, Denmark,Finland, the Netherlands, NewZealand, Norway, Sweden.
! Purports to be consultant seeking
confidential incorporation for taxand liability reasons.
! Asks what documents are neededfor incorporation.
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Law or Priming Treatment?
! The ideal: Randomly assignchanges in international law.
! If subjects already know thelaw, the treatment is a prime.
! If they dont, treatmentprovides info. about law.
! Do they know?Probably not in U.S.
Probably yes in tax havens.
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Premium Treatment
! I am willing to pay apremium to retainconfidentiality.
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IRS Treatment
! For the 1,400 services and firmsin U.S. sample only.
! My internet searches show thatUnited States law, enforced bythe Internal Revenue Service,requires disclosure of identifyinginformation when forming a
company.
! But I would like to avoidproviding any detailed personalinformation if possible.
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Meet Musab al"Zarqawi
! Notorious al"Qaida terrorist
! Linked to 700 deaths
! Beheaded Nicholas Berg in viralYouTube video
! Killed by U.S. in Iraq in 2006 airstrike.
! Henchman Shaqwi Omar financed al"Zarqawis operations through
brothers and nephews in U.S.! Bassam Omar used Utah shell
company, Wasatch FrontConstruction Services, to swindle(121k from mortgage title business.
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Terrorism Treatment
! Alias hails from one of fournations:
! Lebanon, Palestine,Pakistan, Yemen
! Resides in Saudi Arabia
! Claims to consult for Islamiccharities
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Cross"Country
Compliance! At the top:
! Cayman Islands
! Jersey
! At the bottom
! US Inc Services
! Costa Rica
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U.S.: Compliance
By States! The usual suspects
! Delaware, Wyoming,Nevada
! Additions
! Montana, Alabama,Missouri
0 .2 .4 .6 .8 1
Compliance Rate
DEMTALNVWYMO
INNYGAMANCPATXCAAZKSKYLA
OHNH
MDFLARWAORIDIL
WICTVAHINJ
COIA
UTMNMEMI
Compliance Rates of US States
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Outcome Measure:
Dodgy Shopping Count!DSC
#
! Dodgy ShoppingCount !DSC#is based onnon"compliance rate.
! Measures average number ofcontacts needed to get ananonymous shell.
! Example: 5 percent non"compliance = DSC of 20.
! Lower DSCs mean shellcompanies are easier to get.
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Dodgy Shopping Counts
by Country Group
OECD Tax Havens Developing
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DSC by Treatment Internationally
Placebo
FATF
Premium
Corruption
Terrorism
Bold = statistically significant
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DSC by Treatment in United States
Placebo
FATF
IRS
Corruption
Terrorism
Bold = statistically significant
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Intl: Premium, Corrupt, Terror
0
.2
.4
.6
Proportion
Non-Compliant Part-Compliant Compliant Refusal No Response
Outcome Measures
Placebo Premium Corrupt Terror
-.1
0
.1
.2
Difference
fromP
lacebo
Non-Compliant Part-Compliant Compliant Refusal No Response
Outcome Measures
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Intl: Private & Public Standards
0
.2
.4
.6
Proportion
Non-Compliant Part-Compliant Compliant Refusal No Response
Outcome Measures
Placebo FATF ACAMS ACAMS+FATF
-.2
-.1
0
.1
.2
Difference
fromP
lacebo
Non-Compliant Part-Compliant Compliant Refusal No Response
Outcome Measures
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U.S.: Corruption & Terrorism
0
.2
.4
.6
.8
Proportion
Non-Compliant Part-Compliant Compliant Refusal No Response
Outcome Measures
Placebo Corrupt Terror
-.1
-.05
0
.05
.1
.15
Difference
fromP
lacebo
Non-Compliant Part-Compliant Compliant Refusal No Response
Outcome Measures
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U.S.: FATF & IRS
0
.2
.4
.6
.8
Proportion
Non-Compliant Part-Compliant Compliant Refusal No Response
Outcome Measures
Placebo FATF IRS
-.05
0
.05
.1
.15
Difference
fromP
lacebo
Non-Compliant Part-Compliant Compliant Refusal No Response
Outcome Measures
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U.S. Sample
0
12.5
25
37.5
50
Non"Compliant Part"Compliant Compliant Refusal
Field Survey
*SE non responders excluded; some survey responders did not respond to the FE
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...could well be a front for
funding terrorism...
!
Response to the Terrorism condition from a Florida"basedcorporate service provider:
! &Y'our stated purpose could well be a front for fundingterrorism.... I wouldnt even consider doing that for less that
5k a month....
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