Jacob Wills

Last April, the world’s attention was captured by a global investigation revealing more than 11 million documents from a Panamanian law firm documenting a secret financial network reserved for the wealthy and corrupt.  Now, one year later, the “Panama Papers” was just awarded the prestigious Pulitzer Prize for Explanatory Reporting, while experts are reflecting on how far we’ve come and how much farther we really need to go.  There is no doubt that the “Panama Papers” release reverberated throughout the world, but—with the extent of the problem the information exposed—it’s clear not enough has been done.

In a statement marking the the anniversary, FACT’s Gary Kalman graded the global response to the Panama Papers a “C-”, calling the progress “more scattershot than comprehensive.”  Though some real progress has been made, more must be done, especially when it comes to ending the abuse of anonymous companies.  In a blog that followed, he further reflected on this past year and made a prediction for the future—saying he is optimistic that, by the next anniversary, our grade will improve.

The use of tax haven loopholes by multinational companies costs American taxpayers more than $130 billion per year.  Outright tax evasion by wealthy individuals drains an additional $35 billion annually.  At a time when budgets are being slashed and taxpayers are being asked to forgo much-needed services, Congress should be working to protect taxpayers with real tax reform that addresses the real problem.  Unfortunately, the proposed House tax reform blueprint doubles down on loopholes that facilitate the gaming of the tax code.

Even if the proposed House tax reform package were effective at ending the gaming — it isn’t — its effects on many would still be devastating.  According to the architect of the plan, Alan Auerbach, the blueprint’s currency adjustment will cause U.S. investments in foreign assets to plummet by 20%, at a cost of nearly $2 trillion.  Other researchers estimate the cost at nearly $5 trillion.

Anonymous companies have opened the U.S. real estate market to the corrupt and criminal.  Towers of Secrecy, a series in the New York Times, started highlighting the abuse of these companies through opaque real estate deals back in 2015.  What they found was shocking: a Malaysian kleptocrat allegedly using US real estate to launder over $1 billion in stolen funds, a developer shielded from accountability while ignoring zoning laws, and people being defrauded from their homes with no hope for recourse.

Partially inspired by the series, last January, the Financial Crimes Enforcement Network (FinCEN), a branch of the U.S. Treasury Department, announced Geographic Targeting Orders (GTOs) aimed at uncovering these secret deals. The GTOs required U.S. title insurance companies to identify the natural persons, or beneficial owners, behind shell companies used to pay “all cash” for luxury real estate in the Miami and New York metropolitan areas for a six-month period. The GTOs were extended and expanded to the Los Angeles, San Antonio, San Diego, and San Francisco areas in July.

Somewhere on a long list of plagues caused by corruption is terrorism.  Yet, congress and the president just used a controversial resolution to void an important bi-partisan anti-corruption safeguard, known as Cardin-Lugar. The provision—sponsored by former Sen. Richard Lugar (R-IN) and Sen. Ben Cardin (D-MD)—protects U.S. national security and combats corruption in developing countries (particularly those plagued by extremist violence and conflict) by requiring oil, gas, and mining companies which report to the Securities and Exchange Commission to publicly report all payments made to host-governments.  Nullifying the safeguard has been met with bipartisan opposition from anti-corruption experts.

FACT, issued a statements and blog posts defending the landmark anti-corruption measure, which included a letter sent to members of Congress. The letter targeted one of the major arguments for repeal—the suggestions that it disadvantages U.S. companies—by explaining that 30 other countries—including Norway, Canada, and all 28 members of the European Union—have instituted the same disclosure requirements on extractive companies.  This means that over 90 percent of internationally operating companies in the extractives sector are covered by these transparency measures.

2016 is coming to an end.  This year has certainly been an eventful one—we have witnessed  several document leaks revealing the closely guarded secrets of the offshore world, and a divisive election where the issue of tax avoidance and offshore loopholes were highlighted by both campaigns.

In April, the Panama Papers gave us 14.5 million documents exposing the offshore dealings of the ultra-wealthy, transnational criminals, multinational companies, and even world leaders.  One question often asked when the documents were released “where are the Americans?” the answer simply is that Americans don’t need to go abroad to set up anonymous shell companies.  It is, unfortunately, much easier for Americans to set them up onshore—in states like Nevada, Wyoming, and Delaware.