Newsletter

Now is the Time to Modernize FinCEN: Just the FACTs: April 8

“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 the laundering of money through the financial system.

Send feedback or items for future newsletters to Patricia Ainembabazi at [email protected]

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Here’s the State of Play

Fighting Illicit Financial Flows

US budget proposal seeks to modernize FinCEN and sanctions policy

The Kremlin’s continued, barbaric invasion of Ukraine has shone a light on the paramount importance of providing support for sanctions enforcement and closing the blindspots to corrupt and illicit flows in our financial system. Underfunding and understaffing threaten to take the bite out of sanctions and give Putin cover from the West’s best financial tools to counter Russia’s illegal aggression. The administration, however, is rising to the challenge. In the White House’s Proposed 2023 Budget released last week, President Biden has urged Congress to increase funding for two critical Treasury Department teams tasked with policing financial crimes and implementing sanctions.

Biden is calling for a 30 percent increase in funding for the Financial Crimes Enforcement Network, or FinCEN, to $210 million in his fiscal year 2023 budget plan, and another $212 million for the Office of Terrorism and Financial Intelligence to modernize the US sanctions process. The timely and ambitious budget plans, if accepted, would “improve oversight of the financial sector, promote corporate responsibility, and give necessary assistance to law enforcement and investigative bodies,” as well as streamline the sanctions procedure, according to the request. Under the president’s plan, the size of FinCEN’s overburdened workforce would soar to 420 personnel–a number which is far closer to being in line with international financial intelligence units, including for those of much smaller economies.

For FinCEN, the support is long overdue. Beyond the Ukraine crisis, the agency is faced with setting up a historic beneficial ownership agency mandated by the Corporate Transparency Act. The U.S. Strategy on Countering Corruption, released by the administration in December, also calls for FinCEN to take up a key role in advancing and implementing the strategy’s “whole-of-government” approach to combating corruption. FACT applauded the administration’s plans, with Executive Director Ian Gary telling the Wall Street Journal that financial crime fighting agencies need resources “especially at a time when Russia’s invasion of Ukraine has exposed the ease with which criminals move ill-gotten gains around the globe.”

Congress calls on regulators to plug $11 trillion private investment money laundering hole

As the administration ramps up sanctions against Putin and his cronies, oligarchs have scrambled to move their torrents of cash out of view of the authorities. The massive shuffling of funds has drawn attention to a gaping hole in U.S. anti-money laundering protections: the $11 trillion private funds market. While know-your-customer requirements are standard across much of the U.S. banking and financial sector to keep bad actors, including criminals and sanctioned kleptocrats like the oligarchs, out of American markets, they are notably absent in the private funds market.

FACT drew attention to this critical gap in our December 2021 report, “Private Investments, Public Harm” and now lawmakers and the media are paying attention. Amid the ongoing Ukraine crisis, the threat posed has only increased. U.S. hedge funds, private equity funds, venture capital funds, and other types of private placement funds are being utilized to shield, protect and grow the wealth of Russian oligarchs and the wealth of other potential U.S. adversaries or corrupt foreign officials. FACT told the New York Times that disclosures are needed to track the potential “presence of illicit financial flows in private markets.”

Now, lawmakers are taking note and moving to act. Senators Whitehouse and Warren wrote to the Treasury Department and the Securities and Exchange Commission calling on them to close the loophole by requiring basic anti-money laundering checks throughout the industry. Many of the recommendations put forth by the Senators tracked FACT recommendations, including those set forth in the Private Investments, Public Harm report, and FACT’s recent comment letter to the SEC, outlining clear steps that the body could take in amending their Form PF to require private fund advisers to conduct basic customer due diligence and to appropriately report select information resulting from such due diligence. Separately, Senators Reed, Wyden, Durbin, Menendez, Brown, and Warner also wrote to both agencies, and called for similar reforms to permanently address the gaping private fund loophole. This move could greatly stem abuse of the U.S. financial system by criminals, terrorists, corrupt politically exposed persons (PEPs), and other financial wrongdoers.

Latest from FACT

BLOG: Investors Score Huge Win at the SEC in the Fight for Greater Tax Transparency from Amazon
April 7: FACT’s Christopher Boose reviews investors’ huge win at Amazon and what it means for the growing movement for tax transparency. 
PRESS RELEASE: SEC Stands with Investors
April 6: The Financial Accountability and Corporate Transparency (FACT) Coalition applauds the Securities and Exchange Commission (SEC) for standing with investors and advancing an Amazon.com, Inc. shareholder proposal asking the company to voluntarily engage in public country-by-country reporting (PCbCR).
PRESS RELEASE: Biden’s Budget Would Strengthen the Foundation of the U.S. Tax System
March 29: The FACT Coalition welcomed international and administrative tax reforms in the President’s proposed 2023 Budget that would continue the Administration’s efforts to discourage tax dodging by multinational corporations, and once again make the U.S. a leader in global tax transparency.
PRESS RELEASE: Biden’s Budget Proposes Spending Boost To Counter Financial Crime and Corruption
March 28: In response to President Biden’s 2023 proposed budget, the FACT Coalition welcomed substantial increases in funding for the Financial Crimes Enforcement Network (FinCEN) and Office of Terrorism and Financial Intelligence (TFI).
BLOG: The U.K. is Taking a Major Step to Curb Money Laundering Through Real Estate. To be Effective Against Russia, the U.S. Must Do the Same.
March 22: FACT’s Patricia Ainembabazi discusses how advancements in U.K. money laundering law have left the United States behind the competition 
PRESS RELEASE: SEC Should Lead Reforms to Private Investment Fund Reporting in Wake of US Sanctions on Russian Oligarchs
March 22: The Financial Accountability and Corporate Transparency (FACT) Coalition is calling on the Securities and Exchange Commission (SEC) to address the undisclosed presence of possible illicit financial flows in private investment markets. Without further action from the SEC, these flows may enrich and embolden potential adversaries, such as Putin’s regime, and eventually destabilize U.S. and global financial markets.

FACT in the News

QUOTED IN: SEC Backs Amazon Holders On Global Tax Transparency Vote
April 6: FACT’s Ryan Gurule is quoted in Law360’s coverage of the SEC’s support for a shareholder proposal at Amazon. 
QUOTED IN: Sanctioned LPs Complicate Private-Equity Fund Dynamics
April 5: The Wall Street Journal quotes FACT’s Ryan Gurule for his comments on how private funds open a “black hole” in U.S. anti-money laundering requirements.  
QUOTED IN: US budget proposal seeks to modernize FinCEN and sanctions policy
March 30: FACT is quoted by the International Consortium of Investigative Journalists underscoring the need for greater investment in our financial crimes enforcement agency. 
QUOTED IN: Lawmakers Join Calls to Close a Loophole Shielding Oligarchs’ Investments
March 30: FACT offers thoughts on the importance of closing the private funds loophole in the U.S. anti-money laundering regime as lawmaker interest grows.
MENTIONED IN: Corrupt Financial Systems Help Russian Oligarchs and Hurt Ordinary People. Philanthropy Must Do More to Support Change.
March 29: FACT is referenced in the Chronicle of Philanthropy as a leader on advancing policy against illicit financial flows
QUOTED IN: New Federal Budget Seeks Increases for Financial Intelligence and Sanctions Units
March 28: In the Wall Street Journal, FACT underscores the need to support the United States’ financial crimes unit–FinCEN–to see sanctions success and defend U.S. financial markets. 
QUOTED IN: Canada To Create Public Beneficial Ownership Registry
March 23: Law360 quotes FACT’s Executive Director Ian Gary as Canada moves towards creating a landmark public beneficial ownership registry. 

Recent and Upcoming Events

(UPCOMING) Oversight of the Financial Crimes Enforcement Network Hearing
April 28: Later this month, Acting Director Him Das of the Financial Crimes Enforcement Network (FinCEN) will testify before Congress, detailing the agency’s policy successes and potential challenges.

Social Media Shoutouts

@ChrisVanHollen, Americans have a right to know when big corps are abusing tax havens or offshoring jobs. This SEC move to hold Amazon accountable is an impt step, but we must do more. Congress should act on my Disclosure of Tax Havens & Offshoring Act, to require companies to disclose this info.

@SenWhitehouse, The president’s budget makes the investments we need to crack down on corruption and keep criminals out of our financial system. Strengthening @USTreasury’s FinCEN is a win for national security and bad news for oligarchs.


About the FACT Coalition

The Financial Accountability and Corporate Transparency (FACT) Coalition is a non-partisan coalition of more than 100 state, national, and international organizations working toward a fair and honest tax system that addresses the challenges of a global economy and promotes policies to combat the harmful impacts of corrupt financial practices.
For more information, visit www.thefactcoalition.org.
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