UN Panel Calls for Major Reforms in Fight Against Illicit Finance
Washington, DC — The Financial Accountability and Corporate Transparency (FACT) Coalition welcomed the final report from a UN panel shining a spotlight on the need to fight illicit financial flows and raise government revenues through global tax reform. The report launched today by the United Nations High-Level Panel on International Financial Accountability, Transparency and Integrity for Achieving the 2030 Agenda (FACTI Panel) — an international group of former world leaders, central bank heads, business executives, and civil society representatives — outlines key reforms to fix gaps in the global framework to combat tax abuse, corruption, and money laundering.
“The ambitious reform agenda outlined by the UN FACTI report would close gaps that allow criminals, tax cheats, and kleptocrats to abuse and exploit the financial system – costing the global economy billions of dollars needed for the COVID-19 public health response and economic recovery,” said Ian Gary, executive director of the FACT Coalition. “Governments should move quickly to implement these reforms.”
The FACTI report included the following recommendations, aligning with recommendations that the FACT Coalition submitted in November:
- Initiate an international process for a UN Tax Convention (Recommendation 2);
- Curb the use of anonymous shell companies by establishing “beneficial ownership” disclosure structures globally, with an emphasis on public availability, especially in cases of public contracting (Recommendation 3A);
- Increase tax transparency by requiring multinational companies to publish accounting and financial data on a public country-by-country basis (Recommendation 3B);
- Set a global minimum corporate income tax rate between 20-30 percent to avoid a global race to the bottom on taxes (Recommendation 4B); and
- Require increased anti-money laundering due diligence standards for “enablers,” better known as gatekeepers, who provide services – legal, accounting, real estate – prone to financial abuse (Recommendation 6A/B).
The FACTI Panel’s report found that money launderers move at least $1.6 trillion, or 2.7 percent of global GDP, annually. The findings further reveal at least $7 trillion in private wealth — a staggering 10 percent of global GDP — is held in secrecy jurisdictions and tax havens, while international governments lose an additional $500-$650 billion annually from multinational profit-shifting plans.
“As the largest economy in the world, the United States and the Biden Administration must show leadership in advancing the recommended reforms,” Gary said. “The United States has already taken important steps to increase transparency in corporate formation and public contracting – passing two bipartisan provisions in January that will end the abuse of anonymous shell companies fueling financial crimes and require federal contract awardees disclose their beneficial owners publicly. These new laws present the biggest opportunity in decades to combat illicit finance, and demand the U.S. Treasury Department’s prioritization.”
While some multinationals have reaped large profits during the pandemic, developed and developing country economies alike are facing large resource constraints and the need for increased tax revenues. The FACT panel recommendations on requiring country-by-country financial disclosures for multinational corporations, exchanging tax information between jurisdictions, and requiring a global minimum tax rate would help end the race to the bottom on international tax.
“The Biden Administration must play an active and constructive role in reforming the global tax system and the FACTI report provides a solid agenda for improving transparency and fairness,” Gary said. “As Wally Adeyemo, the nominee for Deputy Secretary of the US Treasury said this week, it is important to fight the global race to the bottom on corporate taxes.”
FACT also welcomes the recommendations to include global civil society organizations as important stakeholders to engage in the development of policy solutions. “By recommending minimum standards to protect human rights defenders, anti-corruption advocates, investigative journalists, and whistleblowers, the FACTI Panel recognizes the value of these groups in the fight against illicit finance and the dangers posed to them by authoritarian regimes and other actors,” Gary said.
Note to the Editor:
- Click here to read the final recommendations FACT sent to FACTI.
- Click here for an online version of FACTI’s press release.
- Click here to read the FACTI Panel’s final report.
Executive Director, The FACT Coalition