Global She!

Games:
Experiments in
Transnational Relations,
Crime, & Terrorism
www.globalshe!games.com
www.globalshe!games.com

Michael Findley !UT"Austin#
Daniel Nielson !BYU#
Jason Sharman !Gri%th#

16 May 2014
Meet Lu Zhang
Chinese National in New Zealand Lu Zhang worked at:
Lu Zhangs part"time job:
Shipping arms from North Korea to Iran. In this case,
the arms were intercepted in Bangkok.
Wyoming Corporate Services Inc.
2710 Thomes Ave.
Cheyenne, Wyoming
Pavlo Lazarenko
Former Prime Minister
of Ukraine
Wyoming Corporate Services Inc.
! Main room in house has 2,000
mailboxes, oor 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 poker
winnings
! Route earnings from banned sub"
prime credit cards
! Shelter Pavlo Lazarenkos real
estate assets
...&F'or an extra (25... we
dont require any documents
from you at all.
! Canadian company in response to a request from a Papua
New 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 that
for an extra (25. If we are just setting up a Corporation for
you and thats it we dont require any documents from you
at all.
How Its Supposed to Be
! Hard and soft intl. law
! Incorporation services
should demand:
! Notarized identication
! Proof of residence
Study Design
Field Experiment or
Randomized Control Trial !RCT#
!
Need subjects to behave normally
without detection
!
Field experiments can help
through
!
Employing intervention/
treatment
!
Randomly assigned to a
relatively large group of subjects
!
Where randomization balances
observable and unobservable
confounding factors
!
High internal validity to reveal
causal e"ects
Basic Study Design
! Get Institutional Review Board
ethics clearance.
! Generate aliases hailing from a 21
countries.
! Pose as consultants seeking
condential incorporation.
! Send emails to roughly 3,800
incorporation services and business
law rms in 181 countries.
! Randomly vary the information
provided to the subjects.
! Learn if any conditions cause greater
compliance with international law.
Outcomes of Interest
! 1. No Response
! 2. Non"Compliance: no ID
! 3. Part"Compliance: ID but
not notarized
! 4. Compliance: notarized ID
! 5. Refusal of Service
Bait and Switch?
! Do services promise anonymity
then later demand documents?
! In prior audit study, co"author
Jason Sharman followed up 45
times, pursuing incorporation
until last step.
! In three cases, Jason actually
incorporated using his own name
!in Seychelles, UK & Nevada#.
! In all cases, no incorporation
service rst promised anonymity
& later required ID.
Subject Pool
! 3,756 corporate service providers !CSPs,
businesses or law rms that specialize in
forming 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 rm
! Treatments randomized within blocking
strata
Experimental Conditions
Placebo Condition:
Norstralia
! Email alias claims to hail from one
of eight countries:
! Australia, Austria, Denmark,
Finland, the Netherlands, New
Zealand, Norway, Sweden.
! Purports to be consultant seeking
condential incorporation for tax
and liability reasons.
! Asks what documents are needed
for incorporation.
FATF Treatment
!
Email references the
Financial Action Task
Force.
!
Notes that the FATF
requires disclosure of
identifying information.
!
But I would rather not
provide any detailed
personal information if
possible.
Law or Priming Treatment?
! The ideal: Randomly assign
changes in international law.
! If subjects already know the
law, the treatment is a prime.
! If they dont, treatment
provides info. about law.
! Do they know?
Probably not in U.S.
Probably yes in tax havens.
Premium Treatment
! I am willing to pay a
premium to retain
condentiality.
IRS Treatment
! For the 1,400 services and rms
in U.S. sample only.
! My internet searches show that
United States law, enforced by
the Internal Revenue Service,
requires disclosure of identifying
information when forming a
company.
! But I would like to avoid
providing any detailed personal
information if possible.
Anglo Fleecing
! In 2002, Kenyan Govt. invited
bids to upgrade passport system.
! French company bid )6m.
! U.K. rm, Anglo Leasing, bid
)30m & won.
! Anglo Leasing recontracted job
w/French company & pocketed
remainder.
! Leaked to press, but
investigation stopped at p.o. box
in Liverpool.
Corruption Treatment:
Guineastan
! Alias hails from one of
eight Guineastan
countries:
! Guinea, Guinea Bissau,
Equatorial Guinea, Papua
New Guinea, Kyrgyzstan,
Tajikistan, Turkmenistan,
and Uzbekistan.
! Claims to work in
government
procurement.
Meet Musab al"Zarqawi
! Notorious al"Qaida terrorist
! Linked to 700 deaths
! Beheaded Nicholas Berg in viral
YouTube video
! Killed by U.S. in Iraq in 2006 air
strike.
! Henchman Shaqwi Omar nanced al"
Zarqawis operations through
brothers and nephews in U.S.
! Bassam Omar used Utah shell
company, Wasatch Front
Construction Services, to swindle
(121k from mortgage title business.
Terrorism Treatment
! Alias hails from one of four
nations:
! Lebanon, Palestine,
Pakistan, Yemen
! Resides in Saudi Arabia
! Claims to consult for Islamic
charities
Field Experiment: Results
Cross"Country
Compliance
! At the top:
! Cayman Islands
! Jersey
! At the bottom
! US Inc Services
! Costa Rica
U.S.: Compliance
By States
! The usual suspects
! Delaware, Wyoming,
Nevada
! Additions
! Montana, Alabama,
Missouri
0 .2 .4 .6 .8 1
Compliance Rate
DE
MT
AL
NV
WY
MO
IN
NY
GA
MA
NC
PA
TX
CA
AZ
KS
KY
LA
OH
NH
MD
FL
AR
WA
OR
ID
IL
WI
CT
VA
HI
NJ
CO
IA
UT
MN
ME
MI
Compliance Rates of US States
Outcome Measure:
Dodgy Shopping Count !DSC#
! Dodgy Shopping
Count !DSC# is based on
non"compliance rate.
! Measures average number of
contacts needed to get an
anonymous shell.
! Example: 5 percent non"
compliance = DSC of 20.
! Lower DSCs mean shell
companies are easier to get.
Dodgy Shopping Counts
by Country Group
OECD Tax Havens Developing
DSC by Treatment Internationally
Placebo
FATF
Premium
Corruption
Terrorism
Bold = statistically signicant
DSC by Treatment in United States
Placebo
FATF
IRS
Corruption
Terrorism
Bold = statistically signicant
Outcomes Across Country Groups
0
.
2
.
4
.
6
P
r
o
p
o
r
t
i
o
n
Non-Compliant Part-Compliant Compliant Refusal No Response
Outcome Measures
OECD Tax Havens Developing
-
.
2
-
.
1
0
.
1
.
2
.
3
D
i
f
f
e
r
e
n
c
e

f
r
o
m

O
E
C
D
Non-Compliant Part-Compliant Compliant Refusal No Response
Outcome Measures
Intl: Premium, Corrupt, Terror
0
.
2
.
4
.
6
P
r
o
p
o
r
t
i
o
n
Non-Compliant Part-Compliant Compliant Refusal No Response
Outcome Measures
Placebo Premium Corrupt Terror
-
.
1
0
.
1
.
2
D
i
f
f
e
r
e
n
c
e

f
r
o
m

P
l
a
c
e
b
o
Non-Compliant Part-Compliant Compliant Refusal No Response
Outcome Measures
Intl: Private & Public Standards
0
.
2
.
4
.
6
P
r
o
p
o
r
t
i
o
n
Non-Compliant Part-Compliant Compliant Refusal No Response
Outcome Measures
Placebo FATF ACAMS ACAMS+FATF
-
.
2
-
.
1
0
.
1
.
2
D
i
f
f
e
r
e
n
c
e

f
r
o
m

P
l
a
c
e
b
o
Non-Compliant Part-Compliant Compliant Refusal No Response
Outcome Measures
U.S.: Corruption & Terrorism
0
.
2
.
4
.
6
.
8
P
r
o
p
o
r
t
i
o
n
Non-Compliant Part-Compliant Compliant Refusal No Response
Outcome Measures
Placebo Corrupt Terror
-
.
1
-
.
0
5
0
.
0
5
.
1
.
1
5
D
i
f
f
e
r
e
n
c
e

f
r
o
m

P
l
a
c
e
b
o
Non-Compliant Part-Compliant Compliant Refusal No Response
Outcome Measures
U.S.: FATF & IRS
0
.
2
.
4
.
6
.
8
P
r
o
p
o
r
t
i
o
n
Non-Compliant Part-Compliant Compliant Refusal No Response
Outcome Measures
Placebo FATF IRS
-
.
0
5
0
.
0
5
.
1
.
1
5
D
i
f
f
e
r
e
n
c
e

f
r
o
m

P
l
a
c
e
b
o
Non-Compliant Part-Compliant Compliant Refusal No Response
Outcome Measures
A Survey Experiment
International Sample
0
15
30
45
60
Non"Compliant Part"Compliant Compliant Refusal
Field Survey
*Survey non-responders excluded; some survey responders did not respond to
the eld experiment.
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
Discussion
...could well be a front for
funding terrorism...
! Response to the Terrorism condition from a Florida"based
corporate service provider:
! &Y'our stated purpose could well be a front for funding
terrorism.... I wouldnt even consider doing that for less that
5k a month....
Conclusions
! Anonymous shell corporations are
relatively easy to acquire.
! Tax havens signicantly more compliant
than OECD; OECD sometimes less
compliant than poor countries.
! Risk treatments did not make anonymous
shells much harder to get.
! Risk reduced response rates.
! Risk also reduced compliance rates.
! Probably a collusion e*ect.
Global She! Games:
Experiments in
Transnational Relations,
Crime, & Terrorism
www.globalshe!games.com
www.globalshe!games.com

Michael Findley !UT"Austin#
Daniel Nielson !BYU#
Jason Sharman !Gri%th#

16 May 2014