Global Shell Games Book Launch Presentation

8/11/2019 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


Outcome Measures


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Intl: Private & Public Standards

0

.2

.4

.6

Proportion


Outcome Measures

Placebo FATF ACAMS ACAMS+FATF

-.2

-.1

0

.1

.2

Difference

fromP

lacebo


Outcome Measures


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U.S.: Corruption & Terrorism

0

.2

.4

.6

.8

Proportion


Outcome Measures

Placebo Corrupt Terror

-.1

-.05

0

.05

.1

.15

Difference

fromP

lacebo


Outcome Measures


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U.S.: FATF & IRS

0

.2

.4

.6

.8

Proportion


Outcome Measures

Placebo FATF IRS

-.05

0

.05

.1

.15

Difference

fromP

lacebo


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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Documents

Global Shell Games Book Launch Presentation