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Our 2016 report, Anonymity Overdose, charted the connection between the opioid epidemic and the problem of anonymous shell companies. 

As Congress ramps up funding for the national response to this crisis (though not at the levels some had hoped for), we wanted to provide an update on how the opioid trafficking operations are changing, and why ending anonymous shell companies is still an incredibly low-cost, bipartisan approach to help take on the opioid crisis. 

Our findings from 2016

Our report, featured on CBS Money Watch, the Hill, the New York Times, the Wall Street Journal and elsewhere, made the case that ineffective money laundering controls make it easier and cheaper to traffic opioids. 

We recommended closing loopholes that allow companies to be formed with no record of who owns them, which would help law enforcement seize money from drug trafficking operations, and trace street level crime up to kingpins. 

The report featured 10 case studies of how anonymous shell companies -- companies formed with no record of who owns them -- were used as money laundering instruments or front operations for opioid traffickers, sometimes as part of larger more diverse criminal operations. 

In the case of Kingsley Iyare Osemwengie, who used sold oxycodone across many states through prostitutes and couriers, profits were shifted through an anonymous shell company aptly named High Profit Investments LLC.

In an example of how anonymous companies can used to front as legitimate businesses, Owen Hanson allegedly lead a violent international narcotics trafficking and gambling ring based in San Diego, California. He used a U.S. based anonymous shell company called Big Dog Memorabilia Inc., to disguise his activities.

From prescription abuse to more powerful street drugs 

Opioids are highly addictive, and users develop tolerances which can push them into higher and higher dosages to get the same “high.” An increasing body of research is showing that prescription drug abuse can lead people to move to more powerful -- and much cheaper -- street drugs like heroin. 

The National Institute on Drug Abuse, reports that “[n]early half of young people who inject heroin surveyed in three recent studies reported abusing prescription opioids before starting to use heroin.” 

While a prescription drug like oxycodone might have a street value of $80 per pill, in most states, a dose of heroin costs less than a pack of cigarettes.

The rise of fentanyl, carfentanil and other synthetic opioids

Heroin isn’t the end of this chain. Synthetic opioids, which have dramatically increased in availability and popularity, can be far more powerful than heroin -- and therefore easier to move without detection. 

Fentanyl, a synthetic opioid which can be 100 times more powerful than heroin, was detected in more than 50% of opioid overdose deaths in 2016, according to the CDC. The New York Times estimated that fentanyl deaths were up 540% over the last 3 years. Some synthetics, like carfentanil, are so potent that first responders risk overdose by physical contact with an addicts clothing. Carfentanil has been used as a chemical weapon. 

Fentanyl poses new challenges to law enforcement, in addition to first responders and health care workers. New production techniques have spawned new distributions systems, which our law enforcement officials are working to confront.  

Fentanyl by mail

Because fentanyl and other synthetics are so much stronger, they take up a lot less space and can be much more easily hidden in other products. For example, it can be hidden in fake “Silica Gel” packets and included with another product, and was uncovered by the Globe and Mail. And because these drugs are synthetics, they can be produced in factories without leaving much of a supply chain to tip off investigators. 

Earlier this year, the Senate Subcommittee on Investigations did a study of how easy it was to order fentanyl through the mail -- essentially googling “buy fentanyl online” and then tracking the most responsive vendors. Researchers logged 500 online transactions with a street value of approximately $766 million. Those examples were on the standard web, there are additional portals to buy these products on the dark web, where traffic is much harder to track and trace. 

The result of pressure on China by the U.S. and other countries to take more action against synthetic opioids by expanding their controlled substance bans has show some progress, but law enforcement is hoping for more action.

Last year China banned several synthetics, including carfentanil. There are indications that this has cut down on the number of sellers. Yet, while reduced, there are still open drug markets on Chinese websites. Compared to the U.S., China has loose regulation of chemical companies and fewer requirements for transparency. And while last year the U.S. Department of Justice announced the first-ever indictments of Chinese nationals accused of shipping large quantities of fentanyl through the mail to international customers, China has been reluctant to take their own enforcement actions.

Anonymous companies help ship synthetic opioids

As drug enforcement agencies catch up to some of the new methods, anonymous companies remain a gap that aids the illegal trafficking of opioids. For example, agents in Southern California intercepted a commercial pill press being sent to “Beyond Your Dreams” a shell company set up in California. The shipper was Capsulcn International, a company set up in abroad. Both are, as far as I can tell, anonymous companies. 

While there is more direct to customer traffic through the mail, many order synthetic opioids to distribute. One of the reason that pill presses are an item to watch for port authorities is that a small amount of fentanyl can be pressed with other filler ingredients and made to look like oxycodone tablets, which have a greater street value. These fake prescription drugs can have very unpredictable strength and pose significant overdose risks to would-be users. 

Cartels are placing their orders, too

Similar to methamphetamine, the illicit manufacture and distribution of fentanyl is lucrative for the Mexican cartels. They manufacture it in their own Mexican-based labs using precursor chemicals imported from China. Fentanyl's potency allows the cartels to deal in smaller shipments. This boosts the efficiency of its operations and results in enormous criminal proceeds. 

Money laundering reforms would aid targeted new distributors

For tackling these emerging dealers, money laundering tools are critical. As was reported in “Anonymity Overdose,” following the money up from a street deal to the supplier is a time-tested investigative tool for law enforcement. Anonymous shell companies make this work all-the-more difficult by providing essentially a getaway car for drug profits. 

With no record of who owns them, anonymous companies are an ideal vehicle for hiding drug proceeds. A string of shell companies can launder the money back into a usable form, which is often difficult or impossible for law enforcement to trace. 

Mexican drug lords and traffickers based in China, armed with new distribution techniques frequently avail themselves of offshore shell companies. The fact that we continue to provide free harbor for illicit money increases the profit margins. 

As the opioid epidemic evolves and finds new cracks in armor, getting rid of anonymous companies is one straight-forward move that would get rid of one those cracks.

Below is a statement from Nathan Proctor, our National Campaign Director on tax and corporate transparency. On Sunday, the ICIJ announced the release of millions of documents which expose a number of tax avoidance schemes used by the wealthy and multinational corporations to avoid taxes. These revalations raise questions about the tax reform plans being debated by the U.S. House, in part because some of the influential policy voices are named in the leak, such as Gary Cohn. 

Paradise Papers reveal many of the complicated schemes multinationals use to game the system when it comes to tax. 

The Republicans claim their bill fixes these problems, but now we can see that many of the most influential policy voices on this bill are experts at exploiting offshore shell games. 

We must allow more time to analyze the impact of provisions around offshore tax dodging to be reviewed by the public and public interest advocates. We cannot accept these new provisions, written behind closed doors by the very people we are trying to hold accountable in the tax code, without that analysis. 

Even with just a couple days to review this bill, we have serious issues. Offshore profits will either be taxed at 5% or at most 10%, half the rate of smaller domestic businesses. And many of the provisions impacts have not been fully reviewed -- meaning that offshore rate could end up being lower. 

Our tax code must be a level playing field for business, and this bill fails that test. The Paradise Papers perhaps explain a bit of the reason why. 

Now more than ever, we need to stand up for the Consumer Bureau and keeping Wall Street in check. 

On Tuesday, October 24, Vice President Pence broke a 50-50 deadlock in the Senate, overturning the Consumer Financial Protection Bureau’s rule banning mandatory arbitration clauses. This rule would have prevented financial firms from using small-print in contracts that prevent class action lawsuits, which make it nearly impossible for consumers without the financial resources to take on big banks.

This vote leaves all of us open to being tricked into unfair forced arbitration practices which are designed to favor Wall Street over working Americans. 

At Fair Share, we’re helping people stand up for an economy that works for all of us, and where everyone plays by the same rules. We support the Consumer Bureau because it’s set up to watch out for predatory and deceptive behavior in the financial industry. But the Trump administration and many Senate Republicans are still working to restructure and even disband the Consumer Bureau which would make it more difficult to hold financial bad actors accountable. 

Fair Shair’s Phoenix Trent stated: 

“This vote has left everyday Americans open to financial tricks from Wall Street without the ability to hold them accountable in court. 

But we can’t let this vote defeat us. Now more than ever, we need to defend the Consumer Bureau, and make sure that the American people have the tools they need to take on banks and address dishonesty in the financial system.”

Take action to keep wall street in check and defend the Consumer Financial Protection Bureau today.

As the president declares that the opioid epidemic is a national emergency, our own research shows that we can fight opioid deaths by banning anonymous shell companies, often used to launder drug money. 

Here is a summury from our report "Anonymity Overdose" which was released last year: 

Opioid deaths now exceed those from motor vehicle accidents. It's clear we need to do more. Fair Share Education Fund's latest report, “Anonymity Overdose,” connects opioid trafficking and the subsequent crisis with the activities of anonymous shell companies – companies formed with no way of knowing who is actually in charge. Because they shield the owners from accountability, anonymous shell companies are a common tool for disguising criminal activity and laundering money, and are also at heart of the Panama Papers.

“Anonymity Overdose” found 10 case studies that show the connection between the use of anonymous shell companies and opioid trafficking and related money laundering. In one such example, Kingsley Iyare Osemwengie and his associates were found to use call girls and couriers to transport oxycodone, and then move profits through an anonymous shell company aptly named High Profit Investments LLC.

Meanwhile, the crisis is taking an increasing toll on the nation. According to the Centers for Disease Control (CDC) , in 2014 there were approximately one and a half times more drug overdose deaths in the United States than deaths from motor vehicle crashes. Since 2000, the rate of deaths from opioid related overdoses has increased 200%. The CDC refers to the opioid crisis as an epidemic.

“The opioid problem has been profoundly felt by our communities, health care workers and law enforcement officials,” said Nathan Proctor, co-author of the report and national campaign director with Fair Share Education Fund. “We should be doing everything in our power to address this crisis. We can add to those efforts by ending the use of anonymous shell companies.”

On June 28, Rep. Carolyn Maloney (D-NY) and Peter King (R-NY) introduced legislation to shine a light on dirty money.

The “Corporate Transparency Act” aims to close a loophole which allows companies to be formed anonymously, and gives law enforcement and banks access to who owns and controls a company. This would end the use of anonymous shell companies -- a common tool for money laundering, tax evasion and other crimes.

Meanwhile, the True Incorporation Transparency for Law Enforcement (TITLE) Act will be filed in the Senate by Sens. Sheldon Whitehouse (D-RI) and Charles Grassley (R-IA), which aims at closing the same loopholes.

From Fair Share’s own work tying the use of anonymous shell companies to opioid epidemic, to their connection to human trafficking, and defrauding Medicare and the Pentagon; there is simply no reason to tolerate the continued practice of hiding company ownership from law enforcement.

It’s time that we made sure the rules apply to everyone, and stop providing financial getaway cars for crooks.

Shell companies that can be formed in the shadows with little transparency and no way of finding out who is behind them. The Corporate Transparency Act would require companies to provide information on their beneficial owners to law enforcement, as well as banks to aid in their anti-money laundering requirements.

Similar reforms have been proposed in the past but they are gaining momentum. A diverse coalition of faith, good government and anti-corruption groups have teamed to address the issue of secretive shell companies. They’ve earned support from major law enforcement groups, banks looking to curtail money laundering, and groups invested in ending criminal enterprises like the opioid epidemic, human trafficking, and fraud.

The next step for the bill is to move through the subcommittee on illicit finance, chaired by Rep. Steve Pearce.