News & Events

Just the FACTS: July 27, 2017

Welcome to our “Just the FACTs” newsletter, which aims to highlight pertinent news stories and information related to our goals of curtailing offshore tax haven abuses, increasing the transparency of company ownership, and curbing the laundering of illicit money through the financial system.

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State of Play

Anonymous shell companies are at the heart of numerous heinous crimes, including cases of grand corruption, human trafficking, and even the facilitation of the opioid epidemic. Didier Jacobs of Oxfam America highlighted some of the blights of anonymous companies in a recent blog.  In it, he describes how drug lords, corrupt politicians, and human traffickers are able to perform illegal acts while hidden from justice by a veil of anonymity. With shielded identities, criminals can effectively function above the law.

Thankfully, these state sanctioned protections for the criminal and corrupt might soon disappear.  As FACT’s Gary Kalman recently mentioned at a panel hosted by the Hudson Institute, there’s growing momentum for action to tackle anonymous companies.  Just a few weeks earlier, two new bills were introduced that target anonymous shell companies. Representatives Maloney (D-NY), Royce (R-CA), King (R-NY), Waters (D-CA), and Moore (D-WI) introduced the Corporate Transparency Act, H.R.3089. Senators Whitehouse (D-RI), Grassley (R-IA), and Feinstein (D-CA) introduced their own plan for action on shell companies with the True Incorporation Transparency for Law Enforcement (TITLE) Act, S. 1454. Since then, Reps. Lobiando (R-NJ), Donovan (R-NY), and Lynch (D-MA) have all added their support to the House bill.  As a testament to growing momentum the bills have received widespread support from business leaders, law enforcement, financial institutions, as well as anti-corruption advocates.  Kendall Day, a Deputy Assistant Attorney General with the Department of Justice who also spoke at the Hudson event concluded his statements by saying that both the Treasury and Justice Departments are eager to work with Congress to address the problem of anonymous companies.

Unfortunately, the administration is being less helpful when it comes to cracking down on offshore tax avoidance.  Last week, the Treasury Department announced plans to review the previous Administration’s measures to combat tax dodging. One rule potentially on the chopping block is an essential safeguard to prevent earnings stripping, a tactic common in abusive offshore tax avoidance. This rule plays a large role in curbing incentives for offshore profit shifting by requiring corporations to document loans, and effectively making it more difficult for multinationals to avoid taxes. If the Treasury were to curtail the rules that have been set against earning stripping, the loophole would be re-opened. This will give multinational conglomerates a way to permanently shift their offshore profits to low-tax jurisdictions through loans..  It will also make it more attractive for companies to “invert” — to abandon U.S. citizenship by claiming foreign residence simply to dodge taxes.

While the Treasury reviews regulations, the Senate is considering plans for tax reform. In response to their inquiry for public comments, the FACT Coalition sent a letter to Senator Orrin Hatch, chair on the Senate Committee for Finance, with recommendations on how to improve America’s tax system.

One of those recommendations is to ensure that multinational companies publicly reporting their profits and taxes paid on a country-by-country basis.  While it seems unlikely that this Congress will move on this recommendation, another body — the Financial Accounting Standards Board (FASB) — is considering requiring multinationals to increase disclosure around income taxes.  Earlier this month, the SEC’s Investor Advisory Committee sent a letter to FASB encouraging the body to protect investors by ensuring that multinationals are more transparent with their tax practices.  Similarly, 16 members of the House of Representatives sent a letter to FASB last week pushing them to require full, public country-by-country reporting.

From the FACT Coalition and Its Partners

Incorporation Transparency

Encouraging Signs for a Possible U.S. Legislative Crackdown on Anonymous Companies 

The Global Anticorruption Blog (FACT Coalition), June 28, 2017

By Gary Kalman, FACT Coalition

A little over a year ago, the International Consortium of Investigative Journalists (ICIJ) released the Panama Papers, a treasure trove of information and a window into the world of financial secrecy. In some ways, much of what the Panama Papers revealed was already well known. Previous estimates put the amount of money hidden in offshore secrecy havens somewhere between $8 trillion and $32 trillion. In 2015, The New York Times published an impressive five-part series on the use of anonymous shell companies to purchase prime real estate in New York City. Prior to that, the U.S. Justice Department filed a lawsuit (which they just won on June 29th) to force the forfeiture of New York property secretly owned by the government of Iran in direct violation of economic sanctions. And so on. Yet it is hard to deny the captivating intrigue of the specific stories in the Panama Papers involving Russian kleptocrats, world leaders, athletes, movie stars, and others.

Read the full article

A Simple Step to Address a Far-Reaching Problem

FACT Coalition, June 28, 2017

By Gary Kalman

Today, Senators Whitehouse, Grassley, and Feinstein and Representatives Maloney, King, Royce, Waters, and Moore introduced a bipartisan bill to end the use of anonymous shell companies.  If passed by Congress and signed by the President, the measure would disrupt the global system for money laundering used by corrupt public officials, terrorists, drug cartels, human trafficking operations, and others and provide leadership to the international move toward transparency.

Our laws have proven to be so porous that, a few years ago, it was discovered that Iran was evading economic sanctions by stashing money in the U.S.  That’s right; the Iranians did not hide their money in North Korea or Russia or China.  They set up an anonymous shell company and bought condos in New York City.  More on that below.

Read the full blog
Read FACT’s news release
Read the GFI press release
Read the ITEP blog
Read the NRGI blog
Read the U.S. PIRG press release
Read the Jubilee USA blog
Read the blog from Main Street Alliance

Why The US Needs To Put An End To Anonymously-Owned Companies

Global Witness, July 6, 2017

By Julie Anne Miranda-Brobeck

What’s lurking behind the opioid crisis, Iran’s terrorist financing and the allegations of potential collusion between Russia and the Trump campaign? Anonymous companies.

While the US is busy focused on healthcare reform and the investigation into Russia’s interference in the 2016 US election, the shady and pernicious practice of using anonymous companies to hide companies’ real owners remains one of the most pressing and dangerous problems of our time. These companies are often used by the corrupt and other criminals to get, hide and move dirty money.  And they’re doing it right now in the US.

Read the full blog

Shine The Light On Corruption And Tax Evasion

Oxfam America, June 30, 2017

By Didier Jacobs

The US should adopt the global norm of ending shell companies to fight corruption and other financial crimes.

Some good news for a change. In a rare display of bipartisanship, a bill was introduced in Congress this week to fight financial crimes by mandating companies incorporated in the United States to identify the physical persons who own and control them.

Corruption, tax evasion, arms trafficking, human trafficking, terrorism financing, sanctions busting, fraud, you name it: the trail of investigations into financial crimes often ends with an anonymous company. Nobody goes to jail because law enforcement officials cannot identify the people reaping the spoils behind the veil of shell companies.

Read the full blog

Stemming the Rise in Opioid Deaths

Fair Share and The New York Times, June 18, 2017

By Nathan Proctor, Fair Share

The scale of the opioid crisis is staggering and deserves an all-hands-on-deck response.

We know why cartels traffic these drugs. They do it for the money. There is a simple bipartisan solution we can enact right now that would help go after that money. We should get rid of anonymous shell companies — companies formed with no way of knowing who owns or controls them. These companies help drug traffickers launder profits and hide dirty money.

Read the full op-ed

Raising the Corporate Veil

Kleptocracy Initiative, June 13, 2017

By Casey Michel and Susan Pace Hamill

For actors looking to take advantage of the U.S.’s transformation into a global offshore haven, there are few tools more popular than limited liability companies (LLCs). From states like Nevada and Wyoming to high-rises in Miami and New York, LLCs have become one of the most prominent features of the U.S.’s shell company industry. And due to the U.S.’s lack of a beneficial ownership registry, actors both foreign and domestic continue to use LLCs to mask their identity – and their wealth.

The Kleptocracy Initiative’s Casey Michel spoke with Susan Hamill, a professor at the University of Alabama’s Law School and leading expert on LLCs, about how LLCs first originated – a topic on which she’s written extensively – as well as why they’ve grown in such prominence for those looking to stash their wealth offshore.

Read the full Article

Why Miami Matters

Kleptocracy Initiative, June 26, 2017

By Belinda Li

Miami’s tropical weather, white sand beaches, and vibrant communities are almost enough to distract from the city’s darker reputation as a safe haven for criminals. But even though the days of the Cocaine Cowboys and Miami Vice are now in the past, the government’s crackdown on drugs has not staunched the flow of dirty money entirely. Any void left by the drug lords is easily filled by another group of criminals—foreign kleptocrats who have stolen vast sums from the public budgets of their home countries.

When the Panama Papers were released in 2016, they opened up a small window into how corrupt officials and businessmen are able to hide their assets overseas. The Panamanian law firm whose documents were leaked, Mossack Fonseca, helped many of these kleptocrats and their relatives register companies in jurisdictions with lax beneficial ownership disclosure laws. These anonymously-owned companies were then used to funnel money around the world which often ended up in luxury Western real estate.

Read the full blog
Ending Secret Companies videos
Kleptocracy Initiative youtube videos


Statement on Speaker Ryan’s Tax Announcement at the National Association of Manufacturers

FACT Coalition, June 20, 2017

By Gary Kalman

Speaker Paul Ryan gave a speech on tax reform before the National Association of Manufacturers.  In the speech, he restated his position that corporate tax cuts will create jobs and that the United States should move to a territorial tax system.

In response, FACT Coalition Executive Director Gary Kalman issued the following statement:

Today, Speaker Ryan said that tax cuts and reform are about: “…jobs, jobs, jobs. Good, high-paying jobs.”

In the current environment, there is scant evidence to support his theory.  Corporate reserves are at historically high levels.  Interest rates are still comparatively low so companies can borrow cheaply.  Slow growth would appear to be less about access to capital and more about the uncertainty of markets and buyers.

Read the full news release

European Union Votes on Corporate Transparency Regulations; U.S. Anti-Corruption ‎Rules Under Attack

Jubilee USA, July 3, 2017

By Abby Wilhelm

The European Parliament is set to vote on landmark corporate transparency rules known as “country-by-country” reporting. Under the new law all major multinational corporations, including US businesses that work in Europe, will publicly disclose taxes and other payments made to governments in countries where they operate. The European Union (EU) Parliament likely will vote in favor of the regulations before Wednesday and then the EU Council will make the final decision. ‎

“This is exciting news. Europe is moving forward the most comprehensive rules to date to stop bribery and encourage corporations to pay taxes where they operate,” noted Eric LeCompte, Executive Director of the religious development group Jubilee USA. LeCompte served on United Nations expert groups that focused on these new rules. “Unfortunately as we are making progress in Europe less comprehensive transparency regulations are threatened with repeal in the United States.”

Read the full press release

The Desperate Rear-Guard Battle of Corporations Against Transparency

Oxfam America, June 15, 2017

By Didier Jacobs

The global tax justice movement must stay mobilized after this week’s important vote of the European Parliament on public country-by-country reporting.

In Europe, like in the United States and the rest of the world, voters increasingly feel they’re being given a rotten choice: either back mainstream candidates who will do little else than manage the status quo and let the global financial system rule, or back populist candidates who rhetorically attack global finance and its ills but may unleash chaos.

Europe faced a test earlier this week. It had a chance to demonstrate that it is possible to take concrete steps to tame the global financial system in a responsible manner. It flunked it. And that is a missed opportunity for America, too.

Read the full blog

Issues in the News

Incorporation Transparency

Pearce Statement On The Corporate Transparency Act

Los Alamos Daily Post, July 1, 2017

By Rep. Steve Pearce

U.S. Rep. Steve Pearce, Chairman of the House Financial Services Subcommittee on Terrorism and Illicit Finance, Thursday released the following statement after Representative Maloney (NY-12) introduced the Corporate Transparency Act:

“Too often, funding for national and international crime is facilitated through anonymous businesses and corporations. The United States must do more to cut off the ability of criminal enterprises to launder money through anonymous shell companies.”

Read the full press release

Why Iran Got Away With Using A $500 Million New York Skyscraper As A Secret Slush Fund For 22 Years

Quartz, June 30, 2017

By Max de Haldevang

The skyscraper in the heart of Manhattan had been violating US sanctions since 1995. Its tenants—who have included Juicy Couture, Godiva Chocolate, and Starwood Hotels—have been paying millions of dollars a year to, ultimately, the Iranian government.

“Through all the efforts to sanction and isolate Iran, a state sponsor of terrorism, the owners of 650 Fifth Avenue gave the Iranian government a critical foothold in the very heart of Manhattan,” acting US attorney Joon H. Kim said yesterday in a statement.

Read the full article

US Lawmakers’ New Tactic To Finally Crack Down On Secretive Shell Companies: Link Them To Russia

Quartz, June 28, 2017

By Max de Haldevang

Today US lawmakers will try once more to bring their country in line with the rest of the Western world on an age-old problem: money-laundering. Five members of Congress from both parties will announce bills in the House and Senate that would force American firms to disclose who actually owns them. This, the theory goes, would give the authorities a much easier time tracking down the drug kingpins, terrorist financiers, and kleptocrats who love using anonymous shell companies to hide their illicit money.

This will be New York representative Carolyn Maloney’s fifth attempt at passing such a law. The last bill, in 2016, was on the table as the explosive Panama Papers revelations unfolded to reveal how secretive offshore companies enable a global web of corruption. Yet neither the House nor the Senate bill made it out of committee hearings, despite having bipartisan support. “[They] failed because of opposition from trade organizations that at least in part support the participants in the dark economy that we’re trying to bring a little sunlight into,” says Democratic senator Sheldon Whitehouse, co-sponsor of the latest Senate bill.

Read the full article

U.S. Tries to Outlaw Shell Companies

The American Interest, June 19, 2017

The United States is going to try to outlaw shell companies once more, the Financial Times reports:

Charles Grassley, Senate judiciary committee chairman, and Sheldon Whitehouse, a Democratic colleague, are early next week set to introduce legislation that would require all US states to track the true owners of corporations. Though similar proposals failed last year, growing evidence of Moscow’s use of corporate vehicles that obscure their owners’ identity has revived prospects for action.

Read the full article


U.S. Treasury Targets Eight Tax Regulations for Possible Changes

The Wall Street Journal, July 7, 2017

By Richard Rubin

Corporate debt rules issued under Obama administration may be altered, including those used for corporate inversions

The U.S. Treasury Department on Friday announced plans to alter the Obama administration’s high-profile rule aimed at stemming cross-border corporate tax avoidance, marking the latest attempt from the Trump administration to be more business-friendly.

A rule limiting the tax benefits of intercompany loans was among the Obama administration’s most controversial, and tax experts had expected it to appear on the Treasury’s target list. Changes to that rule and seven others appeared on a list released by the Internal Revenue Service in response to an April executive order from President Donald Trump.

Read the full article

U.S. Government Seeks To Intervene In Apple’s EU Tax Appeal: Source

Reuters, July 5, 2017

By Diane Bartz

The U.S. government has sought to intervene in Apple’s (AAPL.O) appeal against an EU order to pay back up to 13 billion euros ($14.8 billion) in Irish taxes, a source familiar with the matter said on Tuesday.

iPhone maker Apple took its case to the Luxembourg-based General Court, Europe’s second-highest, in December after the European Commission issued the record tax demand saying the U.S. company won sweetheart tax deals from the Irish government which amounted to illegal subsidies.

Read the full article
Silicon Valley Business Journal article

Major Progress Reported Towards A Fairer And More Effective International Tax System

OECD, July 5, 2017

Countries are making major progress towards the goal of creating a fairer and more effective international tax system, including increasing efforts to close down loopholes, improve transparency and ensure that multinational enterprises pay tax where they carry out their activities, according to a new OECD report.

The latest Report from OECD Secretary-General Angel Gurría to G20 Leaders  describes the continuing fight against tax avoidance and tax evasion as one of the major success stories of the G20, founded on enhanced international co-operation.  The report, released today, updates progress in key areas of OECD-G20 tax work, including movement towards automatic exchange of information between tax authorities and implementation of key measures to address tax avoidance by multinationals.

Read the full news release

Moving to Territoriality? Implications for the United States and the Rest of the World

IMF, June, 2006

By Peter Mullins

This paper reviews the tax policy debate in the United States on the move of the corporation tax from its present worldwide basis to a territorial basis, and considers the implications for the United States and the rest of the world. It finds that there is no clear view on whether the move would significantly benefit the United States. Such a move, however, could have significant implications for the rest of the world in terms foreign direct investment (FDI) from the United States, the intensity of tax competition, and tax revenues.

Read the full research paper

A Fair Global Tax System is Imperative for Development, Experts Say

Devex, June 15,  2017

By Sophie Edwards

The need to clamp down on tax evasion and illicit financial flows was high on the agenda at a key European development summit last week — with campaigners saying that current efforts do not go far enough.

Speakers at the European Development Days summit in Brussels said that a just tax system should be “at the heart” of the development debate, and that more transparency is needed to ensure that companies pay their fair share.

Tax avoidance schemes used by multinational companies, such as moving profits to tax havens, result in global losses of around $650 billion a year in tax receipts — with developing countries losing $200 billion, according to a study from the International Monetary Fund. The figures also show that such losses represent a higher percentage of gross national product for developing than developed countries, and are thus felt more deeply. Africa alone is thought to lose more than $50 billion per year through such activities.

Read the full article