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Curtailing Unlawful Use of Corporate Entities Is Focus of Best Practices Study
Nevada, Delaware and Wyoming Secretaries of State jointly created white paper to benefit state filing offices
Posted Date: 7/25/2013

Contact: Catherine Lu, Public Information Officer 
             (702) 486-6982 / 334-7953 

(Carson City, Nev.; July 25, 2013) — In response to intense federal and international scrutiny for their business formation practices, Nevada, Delaware and Wyoming Secretaries of State jointly created a white paper that details the rise of the unlawful use of corporate entities and recommendations for preventing future crimes, while encouraging business formation and growth.

Entitled “Encouraging Business While Fighting Fraud: States Focus on Changes Made and Changes to Consider,” the white paper highlights new developments in state company formation laws in Delaware, Nevada and Wyoming and sets forth best practices of “company registries” in the United States, which may help other states reduce their susceptibility to the formation of fraudulent businesses.

Nevada Secretary of State Ross Miller, along with representatives from the offices of Delaware Secretary of State Jeffrey Bullock and Wyoming Secretary of State Max Maxfield, presented the white paper to their colleagues last week at the National Association of Secretaries of State (NASS) 2013 Summer Conference in Anchorage, Alaska.

“When it comes to state law and filing practices, there is a delicate balance between being business-friendly and fraud-susceptible,” said Secretary Miller. “This paper details measures Nevada, Delaware and Wyoming have taken to combat fraud while continuing to provide the incentives that companies seek when deciding where to do business.”

Delaware, Wyoming and Nevada have been singled out in recent years as states where requirements and practices may encourage those wishing to perpetrate fraud or conduct illicit activities. Critics point to their ease of filing, minimal filing requirements and registered agent practices.

Although these three jurisdictions have been identified as states where the misuse of corporate entities may occur, the issue persists to some degree in all jurisdictions. As Delaware, Wyoming and Nevada take steps to crack down on unlawful activity, individuals involved with fraudulent business formation filings could migrate to other jurisdictions that have not taken action.

The white paper outlines measures that every state could consider that would go a long way toward deterring money laundering and assisting law enforcement, while not creating undue burdens for states or legitimate businesses.

In 2007, NASS created a national Company Formation Task Force dedicated to examining state company formation processes and developing meaningful recommendations for state and federal consideration. Its mission includes identifying sound policies regarding the collection of corporate entity ownership information and sharing state perspectives with federal officials. The task force works closely with other stakeholder organizations, including the American Bar Association, National Conference of State Legislatures, and the National Conference of Commissioners of Uniform State Laws.

NASS has consistently opposed federal legislation that would place expensive and unworkable requirements on state filing offices and their consumers.

To download a copy of the white paper, click “Encouraging Business While Fighting Fraud: States Focus on Changes Made and Changes to Consider.”

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