“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 money laundering through the financial system.
Send feedback or items for future newsletters to Thomas Georges at tgeorges@thefactcoalition.org
Here is the State of Play
FACT Files Petition Calling for Public Country-by-Country Reporting on Behalf of Investors with $2.3 Trillion in Assets
A petition filed Wednesday by the FACT Coalition on behalf of 87 investors with more than $2.3 trillion in assets under management calls on the U.S. Securities and Exchange Commission (SEC) to issue new rules requiring U.S.-listed companies to publicly report their profits, revenues, and other key tax information for each jurisdiction of operation, also known as public country-by-country reporting (CbCR).
Public CbCR has long been recognized as a valuable tool for investors to assess highly material tax enforcement, supply chain, geopolitical, and other risks. Since 2022, major U.S. multinationals across the tech and extractives industries have faced a wave of shareholder resolutions calling for expanded, country-level tax disclosures in line with FACT’s recommendations. Other jurisdictions have already moved to improve public tax disclosures, with reporting under limited public CbCR regimes in the EU and Australia expected to begin in late 2025.
Unlike those nascent regimes, however, Wednesday’s petition calls on the SEC to require public CbCR for all jurisdictions in which a given multinational operates, raising the bar for public tax transparency. In a statement, FACT executive director Ian Gary noted that “When multinational companies gamble on risky tax-planning strategies, it’s their investors that ultimately pay the price.”
“The SEC must act to give investors the information they need to determine whether these companies are building sustainable, long term earnings based on genuine competitive advantage, or prioritizing short-term profits through aggressive tax avoidance,” said Gary.
New Initiative to Combat Financing of Environmental Crimes in the Amazon Aligns with Longstanding FACT Goals
In an important step for the global fight against environmental crimes, last week U.S. Treasury Secretary Janet Yellen announced a new initiative to target the proceeds of crimes such as illegal logging and mining through increased collaboration with countries in the Amazon region.
The announcement promises progress on several of the key recommendations from FACT’s latest report, Dirty Money and the Destruction of the Amazon, including increased technical assistance and improved information sharing between the U.S. and partner countries. Ramped-up collaboration with source countries represents a welcome complement to domestic anti-money laundering reforms currently being finalized by Treasury, which will help to address the role of U.S. financial secrecy in enabling transnational criminal profiteering.
In a statement, FACT program director for environmental crimes and illicit finance Julia Yansura hailed the initiative as “a groundbreaking announcement,” while noting that “the U.S. needs to follow through on its promise.”
“These crimes are transnational, and therefore require transnational cooperation to investigate and prosecute. To truly curb nature crime, law enforcement must follow the money that fuels environmental destruction. We hope the U.S. plays a constructive role in that effort,” said Yansura.
Treasury Expects to Finalize Anti-Money Laundering Regulations on Real Estate Transactions, Investment Advisers in August 2024
Critical anti-money laundering regulations for residential real estate transactions and certain investment advisers are expected to be finalized in August, according to the latest semiannual update to the Office of Information and Regulatory Affairs (OIRA) dashboard. Both regulations – initially proposed in February – have been praised by FACT and its allies as massive leaps forward for the U.S. anti-money laundering regime, representing the culmination of years of effort by the Treasury and advocates alike.
Despite well documented risks, the $50 trillion U.S. real estate and $130 trillion investment fund sectors have for decades been the beneficiaries of a broad exemption from basic anti-money laundering requirements, though they dwarf the commercial banking sector and other types of financial institutions regulated under the Bank Secrecy Act. These sectors represent perhaps the largest remaining vulnerabilities in the U.S. anti-money laundering framework following the Treasury’s launch of the nation’s first federal entity ownership database in January. Treasury is also expected to take action to address money laundering risks through commercial real estate purchases later this year.
FACT, Allies Praise Move by Federal Regulators to Tighten Money Laundering Safeguards for Investment Advisers
In July, FACT and its allies submitted formal public comments in support of a joint proposed rule issued by the Securities and Exchange Commission (SEC) and the Financial Crimes Enforcement Network (FinCEN) requiring certain investment advisers to follow basic anti-money laundering obligations. This proposed rule builds upon a separate Treasury proposal by requiring covered advisers to identify their clients, whether those clients be individuals or legal entities.
While FACT and its allies – including the Anti-Corruption Data Collective (ACDC) and Transparency International U.S. (TI-US) – largely praised the proposed rule, all three groups reinforced the need for additional action by Treasury to require covered investment advisers to determine the true “beneficial” owners of their legal entity clients.
In a statement, FACT executive director Ian Gary said that “This proposal brings the U.S. one crucial step closer toward closing loopholes that have for decades allowed U.S. adversaries and criminal networks to launder money through the massive and opaque U.S. private investment sector… However, as a next step, FinCEN must ensure that investment advisers are also responsible for knowing their client – not just the business itself, but the person that runs the show behind the scenes. Other comparable financial institutions already take this step. There’s no reason to require any less of investment advisers.”
Latest From FACT
FACT applauded the introduction of groundbreaking public country-by-country reporting (CbCR) legislation in Australia last month, which would dramatically improve tax transparency for major multinational corporations and potentially cover a majority of major U.S.-headquartered multinationals, according to recent analysis by the EU Tax Observatory.
From FACT’s submission: “Parliament should not delay advancing this world-leading measure to shed light on the tax practices of major multinational corporations. As introduced, Australia’s public CbCR regime would provide government decision makers, investors, watchdog groups, journalists, and other stakeholders with much-needed new information, setting a new global standard for tax transparency.”
FACT Submits Comments Ahead of House Hearing with Treasury Secretary Yellen
Read FACT’s official statement for the record calling for effective implementation of critical domestic anti-money laundering measures ahead of Treasury Secretary Janet Yellen’s recent congressional testimony on the state of the international financial system.
From the comments: “Any U.S. investment in the IMF requires equal attention to policies to prevent leakage that perpetuates cycles of debt crisis. This includes support for financial transparency reforms in the United States, such as the Corporate Transparency Act and efforts to bring anti-money laundering safeguards to key U.S. markets.”
FACT in the News
SEC Asked For Public Tax Reporting By Group With $2.3T
FACT policy director Zorka Milin was quoted in coverage of the recently-filed SEC public CbCR petition in coverage by Law360’s Kevin Pinner.
“Decisive action by the SEC to require public tax disclosures will not only help to protect investors, but also promote a fairer, more robust global market where success is based on innovation, not tax dodging and accounting gimmicks,” Milin said.
How Robust is International Cooperation Against Financial Scams?
FACT program director for environmental crimes and illicit finance Julia Yansura was quoted in The Dialogue’s bi-weekly Financial Services Advisor on the ongoing delays faced by Latin American governments in receiving requested information from the U.S. Department of Justice.
“To strengthen regional efforts against scams and other financial crimes, the United States should invest more resources in responding to information requests from its neighbors in the Western Hemisphere,” said Yansura.
Big Oil Companies Reject Tax Transparency Push
FACT executive director Ian Gary was quoted in the ICIJ’s recent coverage of ongoing shareholder pressure for increased tax transparency from major U.S. extractives companies.
“It’s clear that investors are eager to see exactly where and how their portfolio companies are doing business, and whether those companies are earning their profits through innovation and competitive advantage, or risky and irresponsible tax practices,” said Gary.
The most recent round of shareholder proposals on tax transparency were brought against oil giants Chevron and Kosmos Energy by FACT-member Oxfam America.
Oxfam America’s Aubrey Menard was also quoted in the coverage, noting that “Like any other shareholder, we are invested in the financial health and performance of the companies we own…Country-by-country reporting doesn’t only make sense because it is good for oil and gas companies to get involved in tax transparency as a best practice, but it is also better for business.”
Recent and Upcoming Event
On July 23, FACT program director for environmental crimes and illicit finance Julia Yansura presented on illegal mining at an event in Buenos Aires, Argentina organized by OAS/DTOC in partnership with GAFILAT and State/INL. Yansura’s presentation outlined the need for a regional focus on illegal mining in Latin America, including increased cooperation between source and destination countries.
The workshop – attended by prosecutors, law enforcement agency officials, and analysts from the financial intelligence units of a number of Latin American countries – was aimed at fostering a better understanding of the challenges that illegal mining presents in the region, as well as strengthening the capacity of partner countries to share information, collaborate on investigations, and recover assets derived from illegal mining.
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