News & Events

Just the FACTs: July 18, 2018

Welcome to our “Just the FACTs” newsletter, a round up of news stories and information on combating corrupt financial practices covering offshore tax haven abuses, corporate secrecy, and curbing the laundering of illicit money through the financial system.

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State of Play

After 2 years of bipartisan negotiations, without warning or fanfare, the leadership of the U.S. House Financial Services Committee stripped beneficial ownership provisions out of a bipartisan anti-money laundering bill and planned a Committee vote.

A decision was made to drop beneficial ownership because it was thought to be controversial and a stripped down bill would “pass easily.” However, as FACT’s executive director describes in this op-ed in the American Banker, that was simply not the case.

The backlash was significant.   The Fraternal Order of Police withdrew support for the stripped down version of the bill as did the National District Attorneys Association.  Scholars at the American Enterprise Institute and the Hudson Institute wrote critically of the new version. Four CEOs of multinational corporations — Allianz, Salesforce, Unilever, and Virgin — sent a letter to the Committee expressing their disappointment.  Thirty six former military and civilian national security leaders sent letters to both the House Financial Services Committee and the Senate Banking Committee, urging them to end anonymous shell companies in the interest of national security. And, in a significant boost to transparency efforts, Delaware’s top government official overseeing company formation wrote a timely letter to Congress in favor of a national standard to collect beneficial ownership.

Prior to the committee vote, the bill was pulled and members recommitted to a bipartisan process.  Over in the Senate Banking Committee, there is renewed interest in a bipartisan bill to update anti-money laundering laws that would include collection of beneficial ownership information.  Stay tuned.

The new tax law marked its six month anniversary in June.  Ongoing concerns about new incentives for companies to offshore operations and profits led Rep. Lloyd Doggett  (D-TX) and Sen. Sheldon Whitehouse (D-RI) to propose legislation, the No Tax Breaks for Outsourcing Act, that will essentially equalize both the foreign and domestic rates, eliminating the financial incentive to offshore. FACT, along with 53 other organizations, sent a letter urging members of Congress to co-sponsor the legislation.  Last week, Rep. Peter DeFazio (D-OR) introduced the Per Country Minimum Act,  As this blog by ITEP explains, the legislation will close certain offshore tax loopholes.

From the FACT Coalition and Its Partners

Incorporation Transparency

Delaware Endorses Bill to Tackle Anonymous Companies

FACT Coalition, June 12, 2018

Delaware’s top government official overseeing company formation in the state endorsed a bipartisan federal proposal to require companies to disclose their true owners at the time of formation in new a new letter to Congress.  The correspondence from the Delaware Secretary of State comes as the U.S. House of Representatives Committee on Financial Services risks derailing a bipartisan effort to counter illicit finance by dropping the key transparency proposal from a package of reforms that will be voted upon in committee this week.

Read the full press release

House AML Bill Is a Missed Opportunity

American Banker, June 13, 2018

By Gary Kalman

At first look, the banking community should be pleased with a bill scheduled for a vote this week in the House Financial Services Committee. Several provisions aim to reduce the compliance costs of financial institutions when trying to meet the requirements of anti-money-laundering rules.

Read the full press release

36 Former Military and Civilian National Security Leaders Urge Congress to End Anonymous Shell Companies

FACT Coalition, June 1, 2018

36 former military and civilian national security leaders sent a letter to the House Financial Services Committee and the Senate Banking Committee, urging members to end anonymous shell companies.

Read the full letter

Dubai real estate: A money launderer’s paradise

Transparency International, June 21, 2018

With its luxury hotels, skyscrapers and man-made islands, Dubai projects an image to the world of an ultra-modern luxury paradise. Behind the shimmering cityscape lies one of the most secretive — and cash-friendly — money-laundering hubs in the world.

Read the full article


New Bill Would Plug an Offshore Loophole in Tax Overhaul

FACT Coalition, June 6, 2018

House lawmakers introduced legislation Wednesday that would make it harder for multinational corporations to game the offshore provisions in the newly adopted tax overhaul.  Sponsored by Rep. Peter DeFazio (D-OR), the Per-Country Minimum Act would ensure that tax rates for profits booked offshore are applied on a per-country basis, rather than on a worldwide average basis — reducing the chance of gaming.

Read the full press release
Read ITEP’s press release

The Immediate Economic Impact of the Tax Cuts and Jobs Act Could be Even Less Than Expected

ITEP, July 11, 2018

By Richard Phillips

Before the recent tax law passed, multiple economists across the political spectrum warned it was an ill-timed fiscal stimulus that could leave policymakers in a quandary should the country face another economic recession in the near future.

Now, new research from the Federal Reserve Bank of San Francisco finds that the Tax Cuts and Jobs Act may not be so much of a stimulus after all. In other words, lawmakers have left themselves with few options should the country face an economic recession, and the country may not receive a substantive economic benefit in the short term.

Read the full blog

The New International Corporate Tax Rules: Problems and Solutions

ITEP, June 6, 2018

The nation’s corporate tax system has been dysfunctional for decades. Unfortunately, the recently enacted Tax Cuts and Jobs Act (TCJA) fails to solve fundamental problems facing the corporate tax and, in some ways, makes these problems even worse.

Read the full report

Issues in the News

Incorporation Transparency

Mnuchin Seeks Shell Company Changes Within Six Months

The Wall Street Journal, July 12, 2018

By Samuel Rubenfeld

Treasury Secretary Steven Mnuchin told lawmakers that he wants to make corporate ownership information available to law enforcement within the next six months.

Mr. Mnuchin on Thursday said he supports legislative changes that would deter money laundering and the financing of terrorism through the use of shell companies. Anonymous or shell companies are legal but they can be easily abused to hide or move illicit funds into the U.S., cleansing the money for potential use.

Read the full article

HMRC unit hunts for ‘hidden’ offshore assets of the wealthy

Financial Times, July 6, 2018

By Lucy Warwick-Ching

The net is tightening on UK taxpayers hiding their assets offshore as HM Revenue & Customs focuses more of its powers on cracking down on tax crimes.

HMRC’s specialist investigation department, the offshore, corporate and wealthy unit, has opened 839 investigations into UK taxpayers, with assets in offshore tax havens over the past year, according to figures obtained by a Freedom of Information request by Pinsent Masons, the international law firm.

Read the full article

Anonymous Companies and Dirty Money: What Congress Can Do

Hudson Institute, June 12, 2018

By Nate Sibley

The anonymous ownership of shell companies might sound like a problem for accountants—but in fact it underpins and exacerbates many of the most serious threats to U.S. national security. As key states, law enforcement, military leaders, the financial industry, and small businesses all call for urgent action, Congress has a chance to close this dangerous loophole for good—but a new anti-money laundering bill is looking more like a missed opportunity.

Read the full press release

The Morning Risk Report: A Shell-Company Haven Backs Overhaul of Rules

The Wall Street Journal, June 26, 2018

By Henry Cutter

Anonymous companies won’t be able to call Delaware home if Congress passes legal changes the state now backs, reports Risk & Compliance Journal’s Samuel Rubenfeld. Federal lawmakers have sought a role for years in overseeing the process of incorporation, now handled at the state level, but states including Delaware have balked at that, stalling the proposals even as the U.S. has gained a reputation as a tax haven.

Read the full article  

One in ten dollars of US housing were anonymous

Financial Times, June 15, 2018

By Dan McCrum

Until 2016, the US property market was one of the last places to move large amounts of money into the country anonymously, with no questions asked. A shell corporation would be listed as the buyer, and if there was no mortgage involved, cash could simply arrive in the seller’s bank account via money order or wire transfer with no troublesome “know your customer” questions asked.

Read the full article.


Five Countries’ Tax Offices Join Forces to Fight Financial Crime

Bloomberg, June 28, 2018

By Siri Bulusu

Tax authorities from the U.S., the U.K., Canada, Australia, and the Netherlands have created an international enforcement group to fight crime and speed up responses to financial data dumps like the Panama Papers.

The formation of the group comes after the Organization for Economic Cooperation and Development’s call for countries to share technology and data to crack down on criminals and get ahead of cyber crime. The group, the Joint Chiefs of Global Tax Enforcement, was announced June 28 in a press call.

Read the full article

The tax bill rewards offshoring – here’s what we can do to stop it

The Hill, July 10, 2018

By Rep. Lloyd Doggett (D-Texas) and Christ Shelton

As a candidate, President Trump promised that the “Trump administration will stop the jobs from leaving America” and put American workers first. But the Republicans’ “Tax Cuts and Jobs Act” shows he’s abandoned that promise.

Read the full blog

Tax cut triggers $437 billion explosion of stock buybacks

CNN Money, July 10, 2018

By Matt Egan

Flooded with cash from the Republican tax cut, US public companies announced a whopping $436.6 billion worth of stock buybacks, according to research firm TrimTabs.

Read the full article

The World’s Largest Tax Haven? Guess Who

The American Interest, June 18, 2018

By James S. Henry

Q: “So where else do you advise clients to set up their offshore companies and trusts?”

A: “We think Delaware is pretty good. They have over a million companies and trusts there, and no beneficial ownership registration. No one can find you.”

—Senior partner, leading Panama law firm, money laundering conference, 2008

Read the full article

The Tax Act Actually Promotes Off-Shore Tax Tricks

The American Prospect, June 28, 2018

By Reuven Avi-Yonah

The 2017 Republican Tax Act, as passed by Congress and signed into law on December 22, 2017, represents the most far-reaching reform of the U.S. international tax rules since 1962. Most importantly, for the first time since the income tax was enacted in 1913, it changes the rule that U.S. resident taxpayers have to pay tax on all income “from whatever source derived.” Under the Tax Act, dividends paid to U.S. corporate shareholders from their foreign subsidiaries are exempt from U.S. tax. That remains true even if the dividend was paid out of earnings that were not subject to foreign tax in the country where the subsidiary is incorporated.

Read the full article

‘Not what we expected’: Trump’s tax bill is losing popularity

The Washington Post, June 29, 2018

By Heather Long

American families are unsure whether they are benefiting from the tax cut, and small businesses say they are confused by the complex changes affecting them. A recent poll from Monmouth University found 34 percent of adults approve of the tax cut now, a slide from January when adults were about evenly split between approving and disapproving. And about a third of families say they are better off because of the cuts, according to polls by Politico and the New York Times.

Read the full article