Corporate Secrecy Fuels Human Trafficking in United States
New report spotlights how masking corporate profiteers makes it challenging to disrupt, prosecute illicit massage parlor trafficking network
WASHINGTON, D.C. (April 19, 2018) – The laws governing business registration in the United States are enabling illicit massage parlors to flourish in secrecy, shielding traffickers from law enforcement and prosecution, according to a report released today by Polaris. Currently, neither states nor the federal government require people setting up companies to include the names of the actual owners of the business in registration paperwork. Shielding the “beneficial ownership” information on individual massage parlor business records makes it much harder, and sometimes impossible, for law enforcement to piece together that illicit massage parlors are often part of much larger organized crime networks.
Polaris examined open-source data on over 9,000 illicit massage parlors and their networks in the United States in a report on illicit massage parlor trafficking released in January. Through that analysis, Polaris found only about 6,000 illicit massage parlors had business records. Of those 6,000 parlors, only 28 percent had an actual person listed on the business records. Furthermore, only 21 percent of the 6,000 business records specified the name of the owner—and even in those cases, there is no way to know if the information provided is legitimate.
“Law enforcement can’t effectively combat human trafficking if they don’t have all the information they need, and the current laws are helping traffickers cover their tracks,” said Rochelle Keyhan, Polaris’s Director of Disruption Strategies. “Policymakers must pass corporate transparency legislation that gives law enforcement the tools they require to shut down massage parlor trafficking.”
“The U.S. is now the easiest place in the world for criminals to set up anonymous companies to hide their identities and launder money,” said Gary Kalman, the Executive Director of the Financial Accountability and Corporate Transparency (FACT) Coalition. “Polaris’s report provides clear and convincing evidence that this anonymity is being used to shield traffickers. It’s time we removed the veil of corporate secrecy and hold these criminals to account for their crimes.”
Polaris urges changes to federal laws to require businesses to disclose owners and to make that information available to law enforcement. Congress is currently considering a number of bipartisan pieces of legislation that meet these standards.
Additional takeaways from the report include:
- What is required on business registration paperwork can be different for each local jurisdiction. Depending on the requirements, owners’ names could be left blank, the name could be filled with a registered agent or someone else paid to be the front person or point of contact, or an anonymous shell company could be used. All of this obfuscation is perfectly legal.
- Typical law enforcement activity around illicit massage parlors has, historically, involved raids in which officers sweep into the facility and arrest everyone on the premises, including victims. These raids are highly unlikely to net the actual owners of the businesses, as they are rarely on site or even necessarily involved in the day-to-day operations of the massage venues. The frequent arrests of victims—not owners—is not effective in ending trafficking; in fact, it only strengthens the traffickers hold on victims as the threat of arrest is often used to keep victims trapped in their situations.
- To effectively and sustainably target massage parlor trafficking, law enforcement must undertake organized crime investigations, which focus on ownership by looking into money laundering or tax evasion. This would shut down entire networks, meaning that the victims could not simply be moved around until the police interest had calmed down. Unfortunately, the ability of businesses to obscure ownership and therefore network ties, makes it incredibly time-consuming, and sometimes impossible, for law enforcement to undertake such investigations.
For more information on beneficial ownership and incorporation transparency, click here to access the Fact Coalition’s resources.
People can be connected to help or report a tip of suspected human trafficking by calling the National Human Trafficking Hotline at 1-888-373-7888, texting "BeFree" (233733), or chatting at www.humantraffickinghotline.org.
Polaris is a leader in the global fight to eradicate modern slavery. Named after the North Star that guided slaves to freedom in the U.S., Polaris acts as a catalyst to systemically disrupt the human trafficking networks that rob human beings of their lives and their freedom. By working with government leaders, the world's leading technology corporations, and local partners, Polaris equips communities to identify, report, and prevent human trafficking. Our comprehensive model puts victims at the center of what we do – helping survivors restore their freedom, preventing more victims, and leveraging data and technology to pursue traffickers wherever they operate. Learn more at www.polarisproject.org.