“Just the FACTs” is a round-up of news stories and information regarding efforts to combat corrupt financial practices, including offshore tax haven abuses, corporate secrecy, and the laundering of money through the financial system.
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Here’s the State of Play
Fighting Illicit Financial Flows
December Marks Historic Progress for Anti-corruption Reform
December 2021 will go down as a historical month in the fight against corruption and illicit finance in the U.S. financial system. On December 6, the White House unveiled the first-ever U.S. Strategy to Counter Corruption that sets its sights on tackling some of the biggest gaps in U.S. anti-money laundering law, which will help mitigate the U.S. role in fueling corruption. In a press release from the FACT Coalition, Executive Director Ian Gary says the strategy to combat corruption is “an important sign of the Biden Administration’s commitment to tackle global corruption that corrodes democracies at home and abroad.”
On the same day, Treasury’s FinCEN launched the regulatory process necessary to implement reporting requirements that can help to curb illicit finance in the real estate sector.– a FACT Coalition priority. FACT Coalition member Global Financial Integrity’s recently released report on money laundering in the U.S. real estate sector, “Acres of Money Laundering: Why U.S. Real Estate is a Kleptocrat’s Dream” finds that, at a minimum, $2.3 billion was laundered through real estate over the last five years. Earlier this fall, a FACT Coalition event brought together anti-corruption advocates and housing rights activists to show how money laundering through real estate makes it more difficult for ordinary Americans to rent and buy homes.
The document published this month by FinCEN demonstrates a historic move to implement permanent, nationwide reforms that disallow the anonymous purchase of U.S. residential and commercial real estate, and examine the role that real estate industry actors play in advancing U.S. anti-money laundering priorities. The advance notice of proposed rulemaking (ANPRM) is open to public comment for sixty days.
In the same week, FinCEN released a strong and expansive proposed draft rule to implement the Corporate Transparency Act (the “CTA”) enacted last January. The FACT Coalition has previously provided an extensive 157-page blueprint for the implementation of the CTA, urging the Administration to – among other things – finalize a robust definition of “beneficial owner”, be expansive in its inclusion of which entities would be required to report under the law, and cabin exemptions that were passed in the law to mitigate abuse by bad actors. Early FACT analysis of the first draft rule shows meaningful efforts by the Administration on each count.
The White House’s Strategy on Countering Corruption and subsequent rollout of FinCEN action on the Corporate Transparency Act and real estate anti-money laundering rules demonstrates the Administration’s commitment to combat global corruption, which undermines democratic governance both at home and abroad.
FACT Calls on Ways and Means Subcommittee to Deny Safe Haven To Tax Evaders and Kleptocrats by Taking on U.S. Trust Industry
Following a landmark week of anti-corruption reforms announced by the Administration, FACT Government Affairs Director Erica Hanichak testified before the Ways and Means Oversight Subcommittee in a hearing on the Pandora Papers, in which lawmakers searched for ways to mitigate abuse of the US trust industry implicated in the exposé. FACT’s testimony welcomed FinCEN’s inclusion of certain trusts in its new draft rule on beneficial ownership and called for congressional action to address further risks of financial secrecy from US trusts.
The testimony also drew upon the funding issue for FinCEN, responsible for implementing the Corporate Transparency Act. Ms. Hanichak stressed that FinCEN will need additional resources and staff to finalize a rulemaking and stand up a database that meets modern standards in security and data quality, and urged Congress to approve a budget that would give FinCEN the necessary funding to fulfill its role in safeguarding the U.S. financial system.
Tax Loopholes and Tax Transparency
Updates to International Tax Provisions in Build Back Better
As December draws to a close, the necessary work to close improper incentives that encourage large multinational corporations to shift profits and investment offshore has encountered new challenges and opportunities. At the international level, the OECD continues the difficult technical task of making progress in implementing its two-pillar approach to end the global corporate tax race to the bottom. An expected directive from the EU parliament on December 22, will require its 27 member countries to implement the “minimum corporate tax” comprising Pillar 2 of the OECD’s framework by 2022, furthering the OECD agreement.
Meanwhile, efforts to reform U.S. taxation of multinational corporations consistent with the OECD agreement, as well as principles of fairness to working families and domestic businesses, are facing some additional uncertainty heading into 2022. The FACT Coalition will continue to work with allies on the Hill, in Treasury, and in civil society to timely advance reforms that close the tax loopholes that encourage multinational corporations to shift profits and erode the U.S. (and global) tax base. Building off of prior fact thought leadership and a strong basis for these reforms, we will work to help ensure that the U.S. remains a leader against global tax evasion and a competitive destination for transparent investment as various paths to implement these reforms continue to unfold.
Recent announcements at the SEC and the ongoing advancement of country-by-country global minimum corporate taxes are also adding to the momentum for greater tax transparency from large multinational corporations. When D.C. returns in January, the FACT Coalition will continue its advocacy for public country-by-country tax reporting that can and should be implemented by Congress, the SEC or the Financial Accounting Standards Board (FASB) to further growing investor demands and calls for greater public accountability.
Latest from FACT
|In the News: Before W&M Oversight Subcommittee, FACT Government Affairs Director Erica Hanichak Calls on Congress to Deny Safe Haven to Tax Evasion and Illicit Finance |
December 8: Government Affairs Director Erica Hanichak testified before the Ways and Means Oversight Subcommittee on the important role Congress must play to ensure that the U.S. financial system is not a vehicle for illicit finance.
|End of Year Message: Our Banner Year at the FACT Coalition |
December 16: FACT Executive Director Ian Gary reflects on the past year of success and policy wins for the Coalition and the impacts these have made in the fight to combat tax avoidance and corruption.
|PRESS RELEASE: FACT Coalition Applauds First-Ever U.S. “Strategy on Countering Corruption” |
December 6: The FACT Coalition warmly welcomed the Biden Administration’s publication of a first-ever U.S. national strategy to combat corruption.
|PRESS RELEASE: FACT Coalition Welcomes Treasury Move to Implement Corporate Transparency Act |
December 7: The FACT Coalition is encouraged by the release of the first set of proposed regulations intended to implement the Corporate Transparency Act (the “CTA”) enacted last January, and recognizes its role in the progress towards eliminating U.S. anonymous shell companies.
FACT in the News
|LETTERS TO THE EDITOR: Opinion: Congress can help in the anti-corruption fight |
December 20: FACT Government Affairs Director Erica Hanichak wrote a letter to the editor in response to the December 13th editorial “Pursuing kleptocrats”.
| QUOTED IN: Biden calls for sweeping new push to expose and punish financial corruption|
December 7: FACT Executive Director Ian Gary is quoted in the Washington Post on how the U.S. Strategy to Countering Corruption will help industries open to exploitation, including the U.S. trust industry.
|QUOTED IN: Post-Pandora Papers, a Big Week of Federal Activity Examines Hidden Wealth|
December 14: PBS Frontline quotes FACT’s Ian Gary and Erica Hanichak on the Biden Administration’s new U.S. Strategy on Countering Corruption and what this strategy means for anti-money laundering reform.
|CITED IN: Summit for Democracy will follow the money|
December 6: Senator Whitehouse (D-RI) refers to FACT’s new report, “Private Investments, Public Harm” in his op-ed in the Boston Globe to highlight the trillions of dollars that is managed in the trust industry without any anti-money laundering safeguards.
|QUOTED IN: American lawmakers denounce South Dakota, other US states as hubs for financial secrecy|
December 8: The ICIJ quotes the testimony from FACT’s Government Affairs Director Erica Hanichak to lawmakers on the harmful effects of U.S financial secrecy on the American public.
|QUOTED IN: Treasury takes aim at shell companies, corruption in real estate |
December 10: The Miami Herald quotes FACT’s response to FinCEN’s proposed rule for beneficial ownership reporting to counter illicit finance and increase transparency, including what the expectation of the new rule is.
|QUOTED IN: House committee wants trust secrecy cut after Pandora Papers|
December 8: An Associated Press article quotes the testimony of FACT’s Government Affairs Director Erica Hanichak on the role of Congress and the Administration in denying financial safe haven to bad actors.
Recent and Upcoming Events
|(RECENT) Combating corruption to drive democratic renewal: A kickoff event for the Summit for Democracy |
December 6: On December 6, the Brookings Institution, the German Marshall Fund of the United States the Center for European Policy Analysis, the Transatlantic Democracy Working Group, the FACT Coalition, and the Leveraging Transparency to Reduce Corruption initiative co-hosted a seminar on the fight against corruption and its relationship to advancing democracy and addressing democratic backsliding globally. The event included an address by U.S. Deputy Secretary of the Treasury Wally Adeyemo on the Treasury’s anti-corruption agenda.
Social Media Shoutouts
@SenWhitehouse, I’m pleased the Treasury process is under way to require that corporations report their true owners. This rulemaking implements my bipartisan legislation to crack down on American “shell” corporations. We need a strong rule to curb money laundering, corruption & other mischief.
@BillPascrell, Our hearing yesterday found the same thing. Forget Switzerland: the US has become the top tax haven for rich cheats in places like the Grand Cayman of the Great Plains: South Dakota. We must start cracking down.
@RepLloydDoggett, As called for in my Stop Tax Haven Abuse Act, I have long advocated that anti-money laundering provisions be extended to those who form corporations and trusts. We cannot allow the US to be the preferred destination for those laundering ill-gotten gains.
About the FACT Coalition