Just the FACTs: June 12, 2019

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.

Send feedback or items for future newsletters to Jacob Wills at jwills@nullthefactcoalition.org.


State of Play

Yesterday the Corporate Transparency Act (H.R. 2513) a bill to end the abuses of anonymous companies, went before the House Financial Services Committee for markup. FACT voiced its support for the bill in a letter to the House Financial Services Subcommittee on National Security earlier this year. Over 100 other organizations signed a letter in support of the bill, more than double the number that sent a similar letter last year. In addition to the broad support collected of a decade, new letters came from the National Sheriffs’ Association (NSA), the Anti-Insurance Fraud Coalition, the American Land Title Association, over 60 national security experts and others.

In the run-up to markup, evidence continued to demonstrate that beneficial ownership disclosure is good policy. In a joint briefing sponsored by the Helsinki Commission, transparency champion and Member of the UK Parliament John Penrose kicked off a panel discussion on the UK’s model of beneficial ownership disclosure.  The panel of experts then spoke about how this information benefits law enforcement. The assembled experts explained that the UK’s beneficial ownership, the first of its kind, led to a huge drop in the formation of corporate vehicles previously used for illicit activities. Paul Massaro, US policy advisor to the Helsinki Commission noted that as tensions between the US and economic rivals mount, “The number one thing we can do to strengthen US sanctions” is to put in place infrastructure for a beneficial ownership registry.

Following a hearing in the Senate Banking Committee on transparency, the FACT Coalition also submitted comments for the record to address questions raised and comments by Senators on the need for legislation and how bills have minimized concerns for legitimate businesses. Recent editorials by Clay Fuller of the American Enterprise Institute provided new evidence of how shell companies have been used by authoritarian regimes to avoid sanctions in Venezuela and by terrorists the world over. In addition to the national security and foreign policy implications of passing CTA, recent articles have highlighted how anonymous companies can undermine the integrity of the press, and enable human trafficking and the sex trade.

In the Senate, the Removing Incentives for Outsourcing Act (S.1610) sponsored by Senators Amy Klobuchar (D-MN), Tammy Duckworth (D-IL), and Chris Van Hollen (D-MD) and the Disclosure of Tax Havens and Offshoring Act (S.1609) sponsored by Sens. Van Hollen, Duckworth, Klobuchar, and Sheldon Whitehouse (D-RI), were introduced. These bills would increase transparency of tax and employment practices among multinational companies. The bills are a response to continued news coverage of multinational companies’ efforts to avoid corporate taxes—be it in the tech, financial, or even fashion industries.

Transparency measures like these are part of a larger trend. FACT’s recent report, Trending Toward Transparency: The Rise of Public Country-by-Country Reporting, shows the global shift towards requiring greater transparency of corporate tax practices.

On May 7th and 8th FACT co-hosted an educational webinar with AFSCME, the Emerging Markets Investors Alliance, Oxfam, and the Transparency & Accountability Initiative on proposed FASB disclosure requirements. Our Executive Director, Gary Kalman, moderated the panel of experts who discussed financial impacts of opaque profit shifting and aggressive tax avoidance practices. Following the webinar, several of the investors signed onto a letter to the Financial Accounting Standards Board (FASB) calling for the adoption of country-by-country reporting of income and tax information. The FACT Coalition sent its own letter to FASB supporting country-by-country reporting. A recently announced IRS investigation into Uber, fresh off its IPO, highlights how important this information can be to investors.


From the FACT Coalition and Its Partners

Incorporation Transparency

Joint Letter from 127 Groups Supporting Corporate Transparency Act of 2019 (H.R. 2513)

June 10, 2019

A diverse collection of more than 125 organizations sent a letter to the sponsors of the Corporate Transparency Act of 2019 (H.R.2513) supporting their legislation to end the abuse of anonymous companies.

Read the letter here.


India: Potential Revenue Losses Associated with Trade Misinvoicing

Global Financial Integrity, June 03, 2019  

In a comprehensive study on the level of trade misinvoicing in India in 2016, GFI found that the estimated potential tax revenue losses to the Indian Government that year is US$13.0 billion, equivalent to 5.5 percent of the value of India’s total government revenue collections in 2016.

Using a trade gap analysis, GFI was able to break down the estimated potential tax revenue losses to misinvoicing by measuring illicit financial inflows and outflows for both import and export under- and over-invoicing. GFI estimates that the value of the trade gap for misinvoiced goods equals US$74 billion, or 12 percent of the country’s total trade of US$617 billion in 2016.

Read the full report here.


FACT Submitted Comments for the Record to the Senate Committee on Banking, Housing, and Urban Affairs

FACT Coalition, June 03, 2019

The Financial Accountability and Corporate Transparency Coalition (FACT Coalition) submitted comments for the record to the Senate Committee on Banking, Housing, and Urban Affairs on their recent hearing on fighting illicit finance.

Read the full letter here.


Beyond Anecdotes: Data Demonstrate Anonymous Companies Are Dangerous and Prevalent

FACT Coalition, May 14, 2019

Numerous stories have been written exposing how anonymous companies are used around the world for criminal purposes, including in media reports stemming from the Panama Papers, Paradise Papers, and Lux Leaks; the Russian and Troika Laundromat episodes; Global Witness reports, The Great Rip Off  and Hidden Menace; and many more.

In addition to the examples, there is mounting evidence showing the widespread use of anonymous companies to launder money and allow dangerous actors to escape accountability and that the United States is a prime secrecy jurisdiction.

Read the full text here.


New Study: Anonymous Companies Fuel Illicit Trade in Counterfeit and Pirated Goods

FACT Coalition, May 6, 2019

The formation and use of anonymous companies undermine the economic and financial interests of U.S. companies and markets according to a new report published Monday by the Financial Accountability and Corporate Transparency (FACT) Coalition.  The author, former Chair of the OECD Task Force on Countering Illicit Trade David M. Luna, found that criminals and counterfeiters are expanding their market share with fake products in storefront and on-line markets, contributing to a growing global illegal economy valued at between $500 billion and $3 trillion.  Criminally-derived profits (or dirty money) related to corruption and money laundering constitute several trillion dollars more that further finances insecurity and instability around the world.

Read the full report here.


Corporate Transparency Act of 2019 a Critical Measure to Combat Corruption, Sanctions Evasion, Money Laundering, and Human Trafficking

FACT Coalition, May 3, 2019

A bipartisan group of lawmakers introduced legislation on Friday addressing the largest vulnerability in the nation’s anti-money laundering framework, according to the Financial Accountability and Corporate Transparency (FACT) Coalition, a non-partisan alliance of more than 100 state, national, and international organizations promoting policies to combat the harmful impacts of corrupt financial practices.

Sponsored by Representatives Carolyn B. Maloney (D-NY), Peter King (R-NY), and Tom Malinowski (D-NJ), the Corporate Transparency Act of 2019 (H.R. 2513) would require that the true owners of U.S. companies be disclosed at the time of formation and the information be updated whenever it changes.

Read the full release.


CEOs, Multinationals, and Small Businesses to Congress: End Anonymous Companies

FACT Coalition, May 1, 2019

A group of CEOs from major companies, a trade association of major multinational enterprises, and a small business trade group each called on Congress over the past week to end the abuse of anonymous shell companies, adding to the momentum to enact corporate ownership transparency legislation.

Read the full blog.


FACT Submitted Comments for the Record to the House Financial Services National Security Subcommittee

FACT Coalition, March 27, 2019

The Financial Accountability and Corporate Transparency Coalition (FACT Coalition) submitted comments for the record to the House Financial Services Committee’s Subcommittee on National Security, International Development and Monetary Policy on their hearing recent hearing on corporate transparency.  

Read the full letter here.


Tax

New ranking reveals corporate tax havens behind breakdown of global corporate tax system; toll of UK’s tax war exposed

Tax Justice Network, May 28, 2019

Decades of tax wars among the world’s richest countries are unravelling the century-old global corporate tax system, new research finds. Forty per cent of today’s cross-border direct investments reported by the IMF – $18 trillion in value – are being booked in just 10 countries that offer corporate tax rates of 3 per cent or less.

The Corporate Tax Haven Index, published today by the Tax Justice Network, has identified the UK and a handful of OECD countries as the jurisdictions most responsible for the breakdown of the global corporate tax system – with the UK bearing the lion’s share of responsibility through its controlled network of satellite jurisdictions. These countries have aggressively undermined the ability of governments across the world to meaningfully tax multinational corporations.

Read the full article here.


Senators Introduce Bills to Plug Offshore Tax Loopholes, Reduce Outsourcing Incentives, and Boost Transparency

FACT Coalition, May 22, 2019

Senate lawmakers introduced two pieces of legislation on Wednesday that would boost transparency of multinational corporations’ tax and employment practices while making it harder for companies to game the international tax system.  The measures were welcomed by the Financial Accountability and Corporate Transparency (FACT) Coalition, a non-partisan alliance of more than 100 state, national, and international organizations working toward a fair tax system that addresses the challenges of a global economy and promoting policies to combat the harmful impacts of corrupt financial practices.

The two pieces of legislation are the Removing Incentives for Outsourcing Act (S. 1610) sponsored by Senators Amy Klobuchar (D-MN), Tammy Duckworth (D-IL), and Chris Van Hollen (D-MD), and the Disclosure of Tax Havens and Offshoring Act (S.1609) sponsored by Sens. Van Hollen, Duckworth, Klobuchar, and Sheldon Whitehouse (D-RI).

Read the press release here.
Read the press release from Senators Klobuchar, Van Hollen, and Duckworth


Tax Day Highlights Broken Promises and a Need for Transparency

FACT Coalition, Gary Kalman, April 15, 2019

On Tax Day 2019, the first year of data on corporate taxes under the Tax Cuts and Jobs Act (TCJA) are coming in.  Those who championed the corporate reforms promised, among other benefits, that the changes would end the offshore shell games by multinationals, profits stashed in tax havens would return to the U.S., and the new competitive rate would attract a flood of foreign direct investment.

Read the press release here.


Country-by-Country Reporting

Letter to FASB on Proposed Accounting Standards Update for Income Taxes

FACT Coalition, May 31, 2019

The FACT Coalition filed a comment on May 31, 2019 with the Financial Accounting Standards Board (FASB) on Proposed Accounting Standards Update for Income Taxes, File Reference No. 2019-500.

Read the full letter here.


Video: The Startling Impact on Governments and Companies of Inadequate Disclosures of Corporate Tax Practices

Oxfam, Investors Webinar on Tax Transparency, May 7-8, 2019

Washington, DC – On May 7 and 8, 2019, Oxfam hosted the Investors Webinar on Tax Transparency. It was moderated by Gary Kalman, Executive Director of FACT Coalition. The webinar featured an expert panel that included Ty Gellasch, founder of Myrtle Makena and former Senior Counsel to the Senate Permanent Subcommittee on Investigations, Nicholas Lusiani, Senior Advisor at Oxfam America, Robert M. Wilson, Jr., investment officer and research analyst at MFS Investment Management, and Richard Phillips, former senior policy analyst at the Institute on Taxation and Economic Policy. The panel addressed how governments and companies are impacted by inadequate disclosures of corporate tax practices.

Watch the full video here.


New Report: Corporate Tax Transparency Becoming the Global Norm

FACT Coalition, April 23, 2019

Public disclosure of multinational corporations’ disaggregated profits and taxes is steadily progressing toward a global norm as investors, businesses, and policymakers have increasingly taken steps toward transparency, according to a new study published Tuesday by the Financial Accountability and Corporate Transparency (FACT) Coalition.

Read the full release.


Issues in the News

Incorporation Transparency

House Committee on Financial Services to Mark Up Corporate Transparency Act (H.R. 2513)

House Committee on Financial Services, June 11, 2019

The House Committee on Financial Services reviewed the Corporate Transparency Act of 2019 (H.R. 2513) on June 11, 2019 in Room 2128 of the Rayburn House Office Building. The Corporate Transparency Act would require companies to disclose their beneficial ownership to FinCEN.

See the announcement here.
See the text of the Corporate Transparency Act here.
Watch the webcast of the markup here.


Bipartisan Group of Senators Unveil Draft Anti-Money Laundering, Ownership Transparency Bill

FACT Coalition, June 10, 2019

WASHINGTON, D.C. — A bipartisan group of four U.S. senators unveiled draft legislation to update federal anti-money laundering laws and end the incorporation of anonymous companies in the U.S. on Monday, as House lawmakers prepare to vote on their own bipartisan proposal to address the abuse of anonymous companies on Tuesday.

Titled the Improving Laundering Laws and Increasing Comprehensive Information Tracking of Criminal Activity in Shell Holdings (ILLICIT CASH) Act, the Senate discussion draft is co-sponsored by Senators Mark Warner (D-VA), Tom Cotton (R-AR), Doug Jones (D-AL), and Mike Rounds (R-SD), who all sit on the key Senate Committee on Banking, Housing, and Urban Affairs.

Read the press release from the Senators here. 
Read the press release from FACT here. 


Bipartisan Letter from 91 National Security Experts Urging Lawmakers to End Anonymous Companies

June 10, 2019

More than 90 national security experts sent a letter to the U.S. House of Representatives’ Committee on Financial Services, urging members to end the incorporation of anonymous shell companies.

Read the full letter here.


The Business of Funding Terrorism Threats

AEI, June 03, 2019

By Clay R. Fuller

There’s a house on Harley Street in London—a street best known for its tony doctors—that reportedly houses 2,159 companies. Tight quarters, you might think, but these are shell companies, and Harley Street is an address of convenience, similar to thousands, probably millions more around the world. This gaping regulatory loophole is facilitating crime, corruption, terrorism and dictatorship. It’s time to fix it.

Read the full blog here.


Do You Know Which Nations Own Your Data? The U.S. Government Doesn’t

Bloomberg, May 23, 2019

By Joshua Kirschenbaum and David Murray

Washington knows shockingly little about foreign money flowing through the financial system, especially via private fund structures like hedge funds, venture capital and private equity, allowing foreign actors to make opaque investments that pose national security risks. Because the U.S. doesn’t track these flows effectively, we don’t know who owns government-issued debt, let alone who holds the trillions in outstanding corporate stocks and bonds or even which foreign actors invest directly in U.S. businesses.

Read the full op-ed here.


ICBA Sends Letter to House Financial Services Committee in Support of Corporate Transparency Act

Independent Community Bankers of America, May 8, 2019

Rebecca Romero Rainey, President and CEO of the Independent Community Bankers of America, sent a letter to the chairpeople of the House Financial Services Committee affirming the ICBA’s support of the Corporate Transparency Act  (H.R. 2513), sponsored by Representative Carolyn Maloney.

Read the full letter here.


Letter from NAFCU to House Supporting Corporate Transparency Act of 2019

National Association of Federally-Insured Credit Unions, May 7, 2019

The National Association of Federally Insured Credit Unions sent a letter to the U.S. House of Representatives’ Committee on Financial Services, urging members to end the incorporation of anonymous shell companies.

Read the full letter here.


Letter From the National Sheriffs’ Association to Congress in Support of Beneficial Ownership Collection

National Sheriffs’ Association, May 7, 2019

The National Sheriffs’ Association sent a letter to the U.S. House of Representatives’ Committee on Financial Services, urging members to support the collection of beneficial ownership information to help law enforcement combat criminal activities.

Read the full letter here.


To Help Venezuela, America Must Help Itself First

AEI, May 06, 2019

By Clay R. Fuller

Some familiar guidance from flight attendants: “always put your oxygen mask on first before assisting others.” It’s a healthy dose of reality, clarifying the fact that not helping yourself first in an emergency puts others in danger. This maxim also applies to a brewing face-off between the Trump Administration and Maduro’s Venezuela. What’s needed is a Congressional exercise in self-reflective pragmatism: pass legislation that will end anonymous shell companies and dismantle the trade-based money laundering empires hiding in plain sight.

Read the full blog here.


Criminals and Kleptocrats Will Find it Harder to Launder Money in U.S. if Bill Passes

Washington Post, May 6, 2019

By Jeanne Whalen

The United States could join a growing list of countries cracking down on anonymous shell companies if a bill gathering support in the House continues gaining steam.

The bill, set for discussion as early as Wednesday in the House Financial Services Committee, would require companies established in the United States to disclose their real owners to the Treasury Department, making it harder for criminals, terrorists and kleptocrats to anonymously launder money or evade taxes.

Read the full release here.


Stop Sex Trafficking by Ending Shell Companies

Dallas Morning News, April 19, 2019

By Vanessa Bouché and Michael Findley

In February, Dallas police busted a ring of illicit massage parlors. Four people were arrested on charges of aggravated promotion of prostitution at three locations in Dallas, Lewisville and Commerce. While the case is ongoing, detectives reported that many of the women working at the parlors may have been victims of human trafficking.

Read the full op-ed here.


Anti-Insurance Fraud Coalition Sends Letter to Congress in Support of Corporate Transparency Act

Coalition Against Insurance Fraud, April 15, 2019

The Coalition Against Insurance Fraud sent a letter to Congress in support of the Corporate Transparency Act.

Read the full letter here.


Tax

Companies, Investors Pan Planned Income Tax Disclosures

Bloomberg Tax, June 10, 2019

By Nicola M. White

Multinational companies from the Walt Disney Co. to Microsoft Corp. say the information requested by the Financial Accounting Standards Board will be a pain to compile and misleading to the public.

Investors and analysts say the proposal doesn’t go far enough. A central piece of the plan—breaking down income taxes between domestic and foreign without going country by country—would keep details about company income taxes concealed in something akin to a black box.

Read the full story here.


Uber Examined by IRS, Foreign Authorities for Tax Charges

Bloomberg BusinessWeek, June 04, 2019

By Giles Turner

Uber is being examined by U.S. tax authorities and said its potential tax charges in a number of key markets could change. The recently-listed ride-hailing company said that the IRS is examining the tax years for 2013 and 2014. Uber also added that it is under examination by other state and foreign tax authorities, and that its tax benefits are to be cut due to the company’s “transfer pricing positions.”

Read the full story here.


Investors Representing More Than $1 Trillion in Assets Under Management Sent A Letter to FASB Supporting Country-by-Country Reporting

May 31, 2019

A group of investors representing more than $1 trillion assets under management signed a letter to the Financial Accounting Standards Board, urging FASB to reconsider the Exposure Draft and support country-by-country reporting.

Read the full letter here.


The Wealth Detective Who Finds the Hidden Money of the Super Rich

Bloomberg BusinessWeek, May 23, 2019

By Ben Steverman

Thirty-two-year-old French economist Gabriel Zucman scours spreadsheets to find secret offshore accounts. His latest estimates show that the top 0.1% of taxpayers—about 170,000 families in a country of 330 million people—control 20% of American wealth, the highest share since 1929. The top 1% control 39% of U.S. wealth, and the bottom 90% have only 26%. The bottom half of Americans combined have a negative net worth.

Read the full story here.


German Tax Investigation Widens Beyond Deutsche Bank

The New York Times, May 15, 2019

By Jack Ewing and Amie Tsang

FRANKFURT — The authorities in Germany raided homes and banks around the country on Wednesday in a tax evasion investigation that originated with Deutsche Bank but has widened to involve other lenders.

The raids targeted 11 financial offices in Bonn, Cologne, Düsseldorf, Frankfurt and other cities, prosecutors said. They did not name the banks, but said that some were local public-sector savings banks known as sparkassen, indicating that Deutsche Bank is not the only institution involved.

Read the full article here.


Anti-Corruption

Austria’s Strache Affair and the Undue Influence Toolkit

Transparency International, May 24, 2019

A week ago, German newspapers Süddeutsche Zeitung and Der Spiegel published evidence of the former Vice-Chancellor of Austria, Heinz-Christian Strache and a colleague apparently negotiating corrupt deals with the purported niece of a Russian oligarch close to President Vladimir Putin.

Strache and Gudenus were caught on hidden cameras meeting with a woman and her associate on Ibiza in 2017. She claimed to be in the process of buying a controlling stake in Kronen Zeitung, Austria’s biggest-selling tabloid, and said she would use the paper to promote the FPÖ in elections in Austria later that year.

Read the full article here.


Anti-Money Laundering

Combating Trade-Based Money Laundering and Other Forms of Threat Finance that Fuel Illicit Commerce: Harms to the American Economy, Businesses, and Citizens

David M. Luna (Luna Global Networks & Convergence Strategies LLC, President and CEO), May 24, 2019

Prepared Statement before the Joint Briefing of the Commission on Security and Cooperation in Europe (U.S. Helsinki Commission), in partnership with the U.S. House Financial Services Committee, on “Shady Shipping: Understanding Trade-Based Money Laundering”

Washington, D.C.—In testimony given during a joint briefing before the U.S. Helsinki Commission and U.S. House Financial Services committee on Friday May 24th, President and CEO of Luna Global Networks & Convergence Strategies highlighted the need for financial transparency to fight trade-based money laundering and other illicit financial flows.

Read the full testimony here.
Watch the briefing here.