Treasury Releases Second Draft Rule to Implement the Corporate Transparency Act

“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.

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Here is the State of Play

What a couple of weeks it’s been!
This week’s newsletter will be the last of the year. As such, it is a little longer than usual, but we encourage you to stick with us to stay informed on the many critical developments impacting FACT strategies. Let’s get into it…

Treasury Releases Second Draft Rule to Implement the Corporate Transparency Act

Less than a week after the conclusion of the IACC (see below), the Biden Administration took another big step toward meeting its anti-money laundering and anti-corruption commitments with the release of the second draft rule to implement the Corporate Transparency Act (CTA) early today.

The proposed rule – which details how and when various authorized users will be able to access information collated in the federal beneficial ownership directory to be established by Treasury’s Financial Crimes Enforcement Network (FinCEN) – comes on the heels of the release of the landmark anti-money laundering law’s first final rule in September.

Though FACT’s analysis of the proposed rule is ongoing, FACT Executive Director Ian Gary noted the importance of advancing the rulemaking process for the CTA and applauded Treasury for its timely follow up to the release of the law’s first final rule. “For far too long international and domestic criminals, kleptocrats, and human rights abusers have been able to use anonymous shell entities to hide the proceeds of their illicit activities right under the noses of U.S. investigators,” said Gary.

“Full and faithful implementation of the Corporate Transparency Act – brought ever closer by today’s release of the second draft rule – will help to bring an end to the era of impunity-through-secrecy for corrupt actors laundering money through the U.S. financial system.”

Keep an eye on future editions of Just the FACTs, as well as the FACT website for further analysis on the proposed rule.

Anti-Corruption Conference Sees Major Announcements by Biden Administration

A flurry of significant policy and advocacy victories marked the commencement of the annual International Anti-Corruption Conference (IACC), which drew thousands of global anti-corruption advocates and government officials to Washington last week.

National Security Adviser to the President Jake Sullivan set the conference off to a strong start with an announcement of the White House’s “full support” for the ENABLERS Act – a transformative piece of anti-money laundering (AML) legislation that FACT has argued “would represent a sea change in American law.”

Though the ENABLERS Act fell short of inclusion in the annual defense spending package earlier this month, the White House’s announcement of support has buoyed hopes that the legislation might pass through the omnibus spending bill for 2023, currently under negotiation in Congress. FACT is working with allies to secure the inclusion of ENABLERS in this omnibus bill. 

Following Sullivan’s remarks, Administrator Samantha Power of the U.S. Agency for International Development (USAID) announced the agency’s first-ever Anti-Corruption Policy, which establishes the fight against corruption as a core agency priority, in alignment with the Biden Administration’s 2021 Strategy on Countering Corruption.

FACT, Investors, and Academics Urge SEC Investor Advisory Committee to Press Public Tax Reporting

FACT Policy Director Ryan Gurule appeared alongside other experts and allies to make the case to the U.S. Securities and Exchange Commission’s (SEC) Investor Advisory Committee (IAC) – an independent committee formed to advise the SEC on policies that protect investor interests – for the need for greater tax transparency from large U.S.-listed multinationals.

FACT, investors, and other advocates are calling for the SEC to use its current authority to begin a rulemaking process for full public country-by-country reporting (PCbCR) of tax information and key operating metrics for large filers. PCbCR is increasingly seen as a necessary tool to provide investors with relevant data needed to assess investment risks relating to international tax enforcement and reform efforts, as well as geopolitical concerns.

These sentiments account for a flurry of recent shareholder activity pushing large multinationals, like Amazon, Cisco, and Microsoft to adopt PCbCR, with 27 percent of Cisco shareholders supporting PCbCR reporting last week and Microsoft results pending. The Cisco vote – just the second of its kind – represented a marked increase from the earlier Amazon vote and FACT anticipates this trend to continue as investors familiarize themselves with the benefits of PCbCR.

FACT Joins African Civil Society in Underscoring Need for Multilateral Initiatives to Combat Corruption

FACT sent a joint letter with the Africa-based Stop the Bleeding Consortium to top U.S. and African officials urging the prioritization of anti-corruption outcomes from the ongoing U.S.-Africa Leaders Summit. The letter calls on U.S. and African governments to cooperate on efforts to combat illicit financial flows (IFFs) out of the African continent and advance  international tax reform.

IFFs and capital flight rob Africa of an estimated $88 billion annually – much of which ends up in the U.S. financial system through shell entities and opaque investments. By improving the U.S. anti-money laundering framework, the Administration has the tools to help keep these much-needed revenues on the Continent.

Latest from FACT

Joint Letter: FACT and Stop the Bleeding Submit Letter to US, African Leaders Calling For New Partnership to Curb Corruption and Financial Crimes
On December 7, the FACT Coalition and Stop the Bleeding Consortium submitted a letter to U.S. Secretary of State Antony Blinken and African Union Chairperson Macky Sall calling for concrete commitments from both the U.S. and African governments towards new partnerships to curb corruption, illicit financial flows, and tax-avoidance in advance of the Second U.S.-Africa Leaders’ Summit.

From the letter: “Without addressing the broken, inequitable, and unsustainable global financial and taxation system that continues to siphon resources from Africa and the Global South, the goal of African-led economic development embodied in US-Africa engagement will remain a mirage.”

Press Release: European Union Paves the Way on Global Corporate Minimum Tax
Late in the evening on December 12, representatives of the 27 European member-states reached a unanimous agreement to implement Pillar 2 of the OECD-brokered international tax deal, paving the way for an EU-wide 15% global minimum corporate tax. Following the agreement, the FACT Coalition called on Congress to swiftly adopt Pillar 2, with FACT Executive Director Ian Gary remarking that “advancements at the European Union crystallize the case for these reforms.”

“Congress now has to make sure that the United States ditches incentives for profit-shifting and offshoring in favor of a tax code that encourages responsible tax practices that can sustainably fund critical investments in U.S. communities.”

Press Release: Securities and Exchange Commission Should Require Increased Tax Transparency for U.S.-Listed Multinationals, FACT Coalition Tells Investor Committee
The FACT Coalition issued a statement calling for SEC action to mandate public country-by-country reporting of tax data from large U.S.-registered multinationals, following an appearance by FACT Policy Director Ryan Gurule on a panel held during the December 8 meeting of the SEC’s Investor Advisory Committee (IAC).

Gurule’s appearance was preceded by the release of a new FACT sheet on PCbCR, outlining the usefulness of PCbCR data for investors, lawmakers, and other stakeholders.

Press Statement: White House Announces “Full Support” for Critical Bipartisan Anti-Money Laundering Reform Bill at Anti-Corruption Conference
On December 6, the FACT Coalition applauded the Biden Administration’s announcement of support for the ENABLERS Act during remarks made by National Security Advisor Jake Sullivan during the opening ceremony of the IACC.

With its announcement, the White House joins the ranks of more than a hundred national security, law enforcement, environmental, good governance, anti-corruption, and labor groups and individuals that have backed the ground-breaking anti-money laundering legislation.

From the press statement: “With full support from the White House…Congress must now pass the ENABLERS Act by the end of the year to finally shut the door on dirty money moving through the U.S. financial system.”

Blog: One Year Out from the First Summit for Democracy, It’s Time to Put the Pedal to the Metal on Anti-Money Laundering Reforms
In a new blog, FACT Communications and Operations Associate Thomas Georges argues that – despite a number of recent and significant anti-money laundering victories – the Administration still has a ways to go towards meeting its anti-corruption commitments as outlined during the 2021 Summit for Democracy.

Citing the need to complete Treasury’s implementation of the Corporate Transparency Act, introduce new regulations targeting money laundering through U.S. private investment and real estate markets, and ensure the passage of the ENABLERS Act, Georges writes: “Heading into 2023, the Administration should redouble its efforts to affect real progress on AML by committing to advancing (these) priorities within the next 12 months.”

FACT in the News

Quoted In: Corporate Tax Bills Rise Up the ESG Agenda
FACT Policy Director Ryan Gurule was quoted in coverage of ongoing efforts by investors to secure greater tax transparency from large U.S. tech companies by Patrick Temple-West for the Financial Times’ ESG-focused Moral Money section.

“As countries in the OECD push for tech company taxes, investors need to be kept abreast of all the changes… ‘Companies are going to get hit,’ (said Gurule), and it would be helpful to have more corporate tax information to determine ‘what constitutes sustainable tax practices’ that won’t get companies in trouble.”

Quoted In: How Committed Is US to Africa? $55B Worth, White House Says
Voice of America quoted comments by FACT Executive Director Ian Gary calling for US anti-money laundering action to ensure that the roughly $88 billion that leaves Africa through IFFs and capital flight each year remains on the continent.

“If you look at recent figures, U.S. government aid to sub-Saharan Africa has fluctuated between $6.5 and $7.5 billion a year. On the other hand, Africa is losing much more than that every year through illicit financial flows. So, it’s important to recognize that if you want to support African development…we need to do our part as Americans to ensure that African governments have the resources to tackle those challenges.”

Quoted In: Sen. Pat Toomey blocks landmark reform legislation to fight global money laundering
FACT Government Affairs Director Erica Hanichak was quoted by the Pittsburgh Post-Gazette on the importance of passing key reforms to combat money laundering and uphold the integrity of the U.S. financial system.

“By not passing the ENABLERS Act, Congressional leaders send a signal to the rest of the world … that the United States isn’t eager to counter money laundering through our system. That would be the wrong message for Congress to send.” 

Quoted In: US: Experts Urge ENABLERS Act Passage Despite Senate Setback
Erica Hanichak highlighted upcoming negotiations surrounding the omnibus spending bill for FY2023 as an avenue by which Congress can still advance the ENABLERS Act before the end of the year, in coverage of the bill by Henry Pope of the Organized Crime and Corruption Reporting Project. 

“If the Administration is serious about its endorsement of the ENABLERS Act – it will work with congressional leaders to pass this bill before the end of the year and patch this leak that’s allowed dirty money to leach into the U.S. financial system.”

Quoted In: Senate Rejects Bill to Curb Money Laundering in Silicon Valley
In coverage of the ENABLERS Act from the San Francisco Standard, Erica Hanichak emphasized the importance of anti-money laundering policy to Congress’ continued effort to identify and sanction the assets of Russian oligarchs in the wake of Vladimir Putin’s invasion of Ukraine.

“If Congress truly believes in starving Russia’s oligarchs of the funds they use to undermine global democracy, then it must match the White House’s commitment to revamping the U.S. anti-money laundering framework and pass the Enablers Act by the end of the year.”

Recent and Upcoming Events

TODAY: FACT Happy Hour and Holiday Party
Join the FACT Coalition for drinks and hors d’oeuvres at our annual holiday party at the Open Gov Hub, 1100 13th Street, NW, Washington, D.C. Together with partners and allies at the Hub, we’ll be looking back on twelve months of anti-corruption and transparency victories, and looking forward to many more to come. We hope to see you there.

February 14: Public Comments Due on the Second Proposed Rule of the Corporate Transparency Act
FinCEN is accepting public comments on the second draft rule through February 14, before issuing a final rule in the coming months.

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.
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