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How easy it is to set up untraceable companies (economist.com)
92 points by JumpCrisscross 954 days ago | 33 comments



NPRs Planet Money has an excellent series on this now. http://www.npr.org/blogs/money/2012/07/27/157499893/episode-... and http://www.npr.org/blogs/money/2012/09/18/161358307/episode-...

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Forming corporation is just very first step. Corporation needed because you need to open bank account for it to do money transfers for whatever reasons you have. And here where you will get stuck. In USA you need physical presence and ID on you to open bank account for your corporation. For offshore banking it even worse - most banks will ask for a reference. And even if they will not ask for reference, they still do whole KYC thing on you.

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When I moved from college to New York I managed to lose all my identification save for a foreign passport over a decade expired with a 2-year old picture of me in it. It took a bit of sweet talking, but I was able to open bank accounts (and fly domestically) with that alone. Note, too, that thanks to silly drinking laws in the U.S. there is a thriving industry in creating fake identity cards.

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> Note, too, that thanks to silly drinking laws in the U.S. there is a thriving industry in creating fake identity cards

Does this not happen much outside the US? In the US, the drinking age is 21. In most of the rest of the world it is 18, with a few scattered others (Japan 20, Iceland 20, 18-25 or illegal in India depending on region). From this, I'd expect demand for fake IDs for buying booze to be higher than average in the US because of the 19-21 year old market, but I'd expect the under 18 market to support fake IDs everywhere.

Even in the US, the impression I've gotten is that the under 18 market is where the majority of the fake ID for booze market lies, as that covers high school. Once you are out of high school and in college or in the full time work force, you can readily get booze regardless of age. In college, there will be 21 year olds among the juniors and seniors who can bring in the drinks, and in the work force there will be co-workers 21 and over to do that favor for you.

On the other hand, much of the rest of the world has been more accepting of technology to make IDs harder to fake. Could the US have a bigger fake ID market simply because it is easier to fake an ID here?

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>> Could the US have a bigger fake ID market simply because it is easier to fake an ID here?

It probably has more to do with the increasingly harsh cleavage that exists between the underage seeking novelty and the overage acting in ways they view as being protective. The stigma associated with it makes both more fun and more connected with risky behavior.

I don't really see the point of going through the trouble of procuring illegal falsified documentation just to drink in the central European countries I'm familiar with. "Sure, let the 15 year old have a beer, what's the harm?" is the reaction you may encounter in several places outside the US.

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> "Sure, let the 15 year old have a beer, what's the harm?" is the reaction you may encounter in several places outside the US.

And, in fact, in multiple places inside the US, at least in private gatherings.

(Not to beat on this too hard, but in many ways the whole of the US is more akin to the whole of Europe than any single European country. Lots of cultures, lots of demographics, lots of regional variation.)

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I guess the question is, what happens if you make a fake ID card with all your legitimate/correct information.

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It depends on the bank. Some will open accounts for LLCs, some require ID cards for signers and corporate records to show that the person is authorized. It also depends on who is behind the desk, as someone who needs to meet their quotas for the day will be a lot more amenable.

I know this because my sister is a prominent ex-scientologist and they've been harassing her to the point that everything she owns needs to be in a separate LLC.

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Well.. I have to agree that it might work in particular bank with particular rep. Although still - you will visit them in person, meaning you will get on all cameras..

What I am trying to bring - is that whole "untraceble" companies is not that easy. Although I bet having right people in a right departments might allow you to make one.

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You can buy a bank in a number of island nations for a few thousand dollars, as of a few years ago anyway. The book Dirty Dealing contains a lot of interesting details.

http://www.amazon.com/Dirty-Dealing-Laundering-International...

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Buying a bank - may be. There are many countries and I assume there will be couple places where you can open "bank".

Getting SWIFT to do transfers - I do not think so.

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Well, that depends. I think scammers targeting the Bitcoin community have found some really useful purposes for untraceable corporations that don't actually require bank accounts.

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Going overboard in the other direction is pretty bad too. Setting up a company in Italy is a nightmare.

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Can't wait to read this study.

The simple and unpleasant truth, as past research has shown, is that so much business, irrespective of its legality, is conducted using shells, so much wealth moves through them and into tax havens, it is unthinkable to shut the system down; doing so would probably hurt our economies more than help them. No one dares to mess with this beast. At least not in my lifetime.

And guess who needs untraceable shell companies? Patent trolls.

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My sister also uses "shell" companies. She is a prominent ex-scientologist and scientology has an established history of using litigation to punish and silence critics and exmembers. So when her car gets rammed, and she gets sued, by being broke she can't pay damages, and the car is owned by an LLC that only owns the car, so the plaintiff is limited in the amount of money they can extort.

She has more than a dozen LLCs just to protect what little she owns.

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> And guess who needs untraceable shell companies? Patent trolls.

Why is that?

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1. Limit liability. Each threatened action is made by a separate LLC created just for that purpose. The troll's company is not put at risk every time they want to threaten someone with litigation. The LLC does the dirty work.

2. Make it difficult for the target to assert any sort of leverage. If they do not know who is behind the shell, they do not know what resources the troll may have. If the troll is a practicing entity, they won't know if they have any claims they could assert against the troll. All they see is a recently formed LLC that has certain patent rights, and nothing else.

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> Limit liability.

IANAL but I don't think a company needs to be "untraceable" to limit liability of its owners.

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3. Control bad PR. Warrantless threats of litigation are attributed to the shell not the troll. As far as the press can see the troll is not involved.

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A shell limits the liability to $thousands instead of potentially $millions.

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One of the big oil companies snatched up long-term leases for potential oil-shale land in Michigan. They made deals with hundreds of parties, locking up the land in exchange for a payment due a year later. Of course the payments were never made. It was all done through a shell that was dissolved when the oil company decided against the idea.

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It's a great way to perform GDDOS (geographically distributed denial of service) - set up a chain of shell companies, each in a different jurisdiction, with 100% ownership down a chain of 100 companies. Cost will probably be in the small hundreds of thousands of dollars (for a chain length in the tens to hundreds; much cheaper for shorter chains)

There is no chance anyone is ever going to "pierce the veil" on this, or figure it out - anyone who wants to do that will have a cost 10 to 100 times higher than setting it up -- because to get to the owner, you will have to piece the veil for every link in the chain, meaning you'll have to employ competent lawyers in every jurisdiction.

(Consider: in any single jurisdiction, veil piercing is 10-100 times more expensive than incorporating in the first place; so just amplify this by setting up multiple layers)

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That makes me wonder.

What if there was a law that any "company" whose incorporation cannot be demonstrated to actually satisfy certain legal guidelines could automatically lose any legal suit that it was involved in? How many of these shells would disappear?

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They would disappear briefly, only to reappear as a new shell corporation. That's the whole point for many of them, no real liability. They hide behind false information, then disappear when it's convenient and start over. So I doubt the threat of an automatic negative outcome during litigation would be a deterrent. The law really only intimidates the people playing by the rules, or trying to.

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The thing is that if you sold your patent to a shell corporation, then sued someone, the person can counter-sue saying, "You're not a real corporation, you lose, I get your assets." And now you no longer have that patent to sue with.

This would make shell corporations utterly useless for patent trolls.

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"The law really only intimidates the people playing by the rules, or trying to."

A seemingly simple yet profound statement. Thanks for this.

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There is nothing to say these individuals/organizations would have followed up on their promises to set up these shell companies.

They could have been stings, or even scams.

In the case of the American provider who acknowledged the purpose of the shell company might have been a front for funding terrorism, they could have just requested an upfront payment (e.g. 6 months at $5,000 per month), taken the money and ran.

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Would you steal from a terrorist?

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That worked wonders for Doc Brown....

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These people were incorporation agents - they had shopfronts and tend not to run (much)

But it is possible they are running honeypots; but rather unlikely

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I've actually been thinking about how to set up a shell corporation for a completely different reason. If the U.S. (where I currently live) fails, how do I operate a legitimate business? If I'm still living here, I should pay taxes here but if I choose to relocate, why should my entire financial infrastructure have to change?

On the other hand, if the economy fails it could very well take me with it ... I guess if I have to start over it doesn't matter where those accounts were.

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> If the U.S. (where I currently live) fails, how do I operate a legitimate business?

I think if the US failed as a nation you'd have a lot more to worry about.

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If the US fails, the world economy is basically toast anyways.

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