WASHINGTON (AP) — Federal law enforcement efforts have been hampered by the absence of information on company ownership, allowing shell companies to be used to launder money and evade taxes, government officials told Congress.US states grant incorporation to nearly 2 million new companies a year without identifying their owners — lenience that allows people to hide their identities and shell companies increasingly to be used for illicit activities, lawmakers and congressional investigators say.

Some $15 million (euro11.7 million) in international aid for improving the safety of nuclear power plants in the former Soviet Union was diverted, according to the Government Accountability Office, Congress’ investigative arm. Shell companies in the United States are used to launder as much as $36 billion (euro28.07 billion) from former Soviet republics. Millions in taxable income are hidden in bank accounts in the Caribbean.

Shell companies exist mainly on paper and lack real operations.

The fees that new companies pay to register bring in hundreds of millions of dollars a year for the states.

“Shell corporations provide an opportunity for criminals or terrorists to engage in criminal activity while concealing the identities of the persons involved in the illegal activity,” Stuart Nash, an associate deputy attorney general at the Justice Department, said in testimony at a hearing of the Senate Homeland Security and Governmental Affairs’ investigative panel on Tuesday.

Law enforcement efforts are impeded, Nash said, “both in our domestic investigations and in our ability to assist our foreign ... counterparts in investigating their case, as a consequence of the exponential increase in the formation of such domestic shell corporations”.

Officials from the Internal Revenue Service and a financial crimes division of the Treasury Department voiced similar concerns.

A report by the Government Accountability Office found that none of the 50 states customarily requires disclosure of the owners of companies that are not publicly traded. Other countries do require ownership information to be provided.

“This lack of transparency not only creates obvious vulnerabilities in our financial system, it also threatens our homeland security,” said Republican Sen. Norm Coleman, the panel’s chairman. “Clearly, our failure to identify the owners of U.S. shell companies is a significant deficiency in our anti-money-laundering and terrorist financing efforts.”

Among examples cited by the GAO report:

[bul] Officials of US Immigration and Customs Enforcement reported that a Nevada-based company received more than 3,700 suspicious wire transfers totalling $81 million (euro63.2 million) over two years, but the case was not prosecuted because the agency could not identify the company’s owners.

[bul] The Justice Department said Russian officials used shell companies incorporated in Pennsylvania and Delaware to illegally divert $15 million (euro11.7 million) in international aid intended for improving the safety of nuclear power plants in the former Soviet Union.

[bul] The FBI found that US shell companies are being used to launder as much as $36 billion (euro28 billion) coming from the former Soviet Union.

[bul] The IRS discovered a scheme in which three individuals established US shell companies to conceal nearly $9 million (euro7 million) in taxable income in secret accounts in the Turks and Caicos Islands and other countries.