How the US became a haven for dirty money — again

By Al Mayadeen English
Source: Responsible Statecraft
14 Apr 2025 18:16
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The Trump administration’s decision to roll back a landmark transparency rule on US shell companies has ignited fierce criticism from national security experts and anti-corruption advocates.

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An ant walks on part of an artwork by British artist and former Special Forces soldier, Bran, called The Colony (2025), where leaf-cutting ants transport fragments of dollar bills across an AK-47 sculpture, on display at his exhibition Art to Disarm 2025, at HOFA Gallery, in London, Thursday, Feb. 6, 2025 (AP)

The Trump administration has quietly dismantled a critical transparency measure aimed at exposing the true owners of US-based shell companies — a decision that has sparked alarm among national security experts and financial crime investigators.

On March 21, Treasury Secretary Scott Bessent announced that American citizens and residents will no longer be required to disclose beneficial ownership information (BOIs) when establishing or operating shell companies in the United States. The rollback, which comes just weeks after the regulation cleared its final legal hurdle, effectively guts a key provision of the Corporate Transparency Act — a bipartisan reform hailed in 2019 as a watershed in America’s fight against money laundering, arms trafficking, and corporate fraud.

Critics say the move reopens the door to criminal actors seeking to hide behind layers of financial secrecy. As Responsible Statecraft reports, experts warn that weakening the beneficial ownership disclosure requirement will once again make the US a global safe haven for illicit finance — a reputation it had only begun to shed. The now-paused rule, enforced through the Treasury’s Financial Crimes Enforcement Network (FinCEN), had aligned the US with more than 140 countries that maintain national registries to identify those who control and profit from corporate entities. Without such safeguards, analysts fear, the US risks becoming a destination of choice for money launderers, arms dealers, and corrupt officials looking to conceal dirty money.

Paradise for arms smugglers

Among the most alarming exploiters of corporate opacity are international arms traffickers. As highlighted by Responsible Statecraft, one of the most infamous is Victor Bout — the former Soviet military officer widely known as the “merchant of death.” Extradited to the United States in 2010 on terrorism charges, Bout orchestrated a vast weapons smuggling network, relying on a web of shell companies — including a dozen registered in Delaware, Florida, and Texas — to funnel arms into war zones across Africa, Colombia, Afghanistan, and the Middle East.

“Victor Bout may be the poster boy for US shell companies engaged in black market arms sales, but he is only the tip of the iceberg,” said Kathi Austin, Executive Director of the Conflict Awareness Project, in a statement to Responsible Statecraft. She cited additional cases, such as a Maine-based firm linked to weapons deals in Mauritius, and convicted traffickers like Sarkis Soghanalian and Charles Acelor, who allegedly funneled arms to Colombia’s FARC rebels. “The shell game is what they were banking on — however unsuccessful in these instances — to hide from investigators’ eyes.”

The pattern is well established. As Austin notes, even when traffickers are caught, the complexity of their networks — including hidden accounts in places like Arizona used to conceal profits from Angola-bound arms shipments — only becomes clear after extensive investigation.

Defrauding the Defense Department

Shell companies have also been instrumental in gaming US military procurement. Reports from the Government Accountability Office (GAO) reveal that defense contractors have used domestic front companies to obscure the fact that they were manufacturing equipment abroad — at times compromising quality, violating export controls, and siphoning taxpayer funds.

One example involved a supplier producing safety gear for F-15 fighter jets in India while covertly exporting sensitive technical data, including submarine and helicopter schematics.

In another, Pentagon official Lt. Col. David Young provided insider information to American International Security Corporation (AISC) president Michael Taylor and Afghanistan contractor Christopher Harris, enabling the group to win $54 million in Army contracts between 2007 and 2011. More than $20 million in inflated profits was funneled through US-based shell companies.

'Self-inflicted wound'

Experts say reversing course on BOI disclosure is not only a gift to criminals but a dereliction of duty.

“It is a basic principle that US law enforcement and intelligence agencies should be able to check who is using US shell companies to move money within and across our own borders,” warned Nate Sibley, director of the Hudson Institute’s Kleptocracy Initiative.

“America’s retreat from leading efforts to uncover these shadowy financial networks is an unforced error that enriches and empowers our worst enemies,” Sibley stressed.

Austin, who has spent decades tracking illicit arms networks, argues that the threat is urgent and systemic. “Shell companies… defy responsible arms control measures and have too much blood on their hands unaccounted for,” she said.

If the Trump administration is serious about putting “America First", critics insist Treasury Secretary Bessent must reinstate the transparency mandate — before another Victor Bout slips through the cracks.