June 20, 2023

"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's the State of Play:
Biden Administration Updates Timeline for Critical Rulemakings on Beneficial Ownership and Real Estate Money Laundering

The Biden Administration's updated Spring 2023 Regulatory Agenda provided new information regarding the timing of upcoming rulemakings central to FACT's anti-money laundering agenda, including the second final rule to implement the Corporate Transparency Act (CTA) and a long-awaited draft rule cracking down on money laundering through U.S. real estate markets.

Specifically, the second final rule for the CTA - which governs access protocols for authorized users of beneficial ownership information collected under the law - is now expected to be released in September 2023, just months before reporting is set to begin on January 1, 2024. The upcoming real estate rule, which had previously been expected to be released as early as April, is now slated to be released and open for comment from August through October.

Inadequate Funding for Regulators has Contributed to Delays, Missteps in CTA Implementation

Despite the fact that the implementation of the CTA and the release of new rules for real estate transactions were named as top priorities in the Administration's 2021 Strategy on Countering Corruption, frequent delays in the rulemaking processes for both measures have frustrated anti-corruption advocates.

One factor contributing to this sluggish regulatory pace is the chronic under-resourcing of the Financial Crimes Enforcement Network (FinCEN), the bureau of the Treasury tasked with drafting new anti-money laundering regulations. Though the efforts of congressional champions, alongside support from FACT and its allies, have succeeded in securing regular funding increases for the Bureau in recent years, FinCEN has still struggled under the weight of its substantial regulatory agenda.

The final access rule to implement the CTA remains particularly important to the Administration's broader anti-corruption agenda. In comments submitted earlier this year, FACT identified multiple critical deficiencies in Treasury's initial draft of the rule, noting that failure to ensure uncomplicated access to the CTA's beneficial ownership database "could seriously impact the efficacy of the law as a whole." FinCEN is also in the process of reissuing a fatally-flawed beneficial ownership information collection form that, in its draft form, would have rendered multiple statutorily-mandated reporting requirements under the law functionally optional.

Long Overdue Regulations on Real Estate Transactions Remain a "High Priority" for FinCEN

As explained in FACT-member Global Financial Integrity's recent report, Acres of Money Laundering: Why U.S. Real Estate is a Kleptocrat's Dream, U.S. real estate markets have long been a favorite vehicle for international bad actors seeking to launder their ill-gotten gains through stable assets. FACT has repeatedly stressed the importance of FinCEN's upcoming real estate rule, arguing that a truly effective regime would cover both commercial and residential real estate transactions nationwide. FinCEN itself has acknowledged a particular risk to the U.S. financial system stemming from illicit investment in commercial real estate, though whether a final rule will cover such transactions remains unclear.

In testimony this week before the House Financial Services Committee, Secretary Yellen reaffirmed that "FinCEN is very actively working on those rules... I can't give you exact timing, but it is a very high priority item for FinCEN." Secretary Yellen also addressed concerns from Representative Emanuel Cleaver regarding the efficacy of current Geographic Targeting Orders (GTOs), which apply beneficial ownership reporting requirements on all-cash real estate transactions in certain counties determined to be prominent money laundering markets.

In her response, the Secretary confirmed that the upcoming real estate rule would apply nationwide, addressing a key limitation of existing GTOs. Yellen did not provide further clarification on whether the rule would cover commercial real estate transactions, as prompted by Representative Cleaver.

Latest from FACT

Rising Tide of Support for Tax Transparency at Major U.S. Multinational Extractive, Tech Companies Demonstrated Through Shareholder Votes

Shareholder resolutions calling on major U.S. multinationals to begin publishing information on their global tax practices garnered support from investors representing $346 billion last month. In a statement, FACT executive director Ian Gary noted that growing investor momentum for public reporting should be met with government action.

"While investors lead the push for greater transparency at the corporate level... It's time for the SEC to listen to investors, lawmakers, and other stakeholders and advance strong public country-by-country reporting requirements for large multinational filers."

FACT in the News

Cited In: FASB Gets Mixed Reviews from Groups on Proposed Tax Disclosure Rules, Including Strong Concerns

Thomson Reuters' Denise Lugo cited FACT's comment letter to the Financial Accounting Standards Board (FASB) in coverage of the board's proposed update to income tax disclosures.

"The FACT Coalition, for example, favors the proposal but said it falls short of providing a clear, complete picture of a given multinational enterprise's (MNEs) tax activities and potential exposures...Among other things, the group has asked for additional, supplementary disclosure requirements of country-by-country data for multinational filers."

Quoted In: Rejected Brookfield Tax Transparency Proposal Not Without Support

FACT executive director Ian Gary was quoted in Tax Notes' coverage of recent shareholder resolutions calling for public country-by-country reporting from major multinationals.
"Brookfield shareholders voting in favor of the tax transparency proposal understand that public country-by-country reports are needed to inform investors about material tax risks," said Gary. "Brookfield can either inform investors now or be forced to inform them once new reporting regimes in Australia and other jurisdictions come into force."

Quoted In: New Australia, EU Rules Set to Force Companies to Publish Global Tax Data

Ian Gary was quoted in coverage of upcoming tax transparency reforms in Australia, which are expected to apply public country-by-country reporting requirements on U.S.-headquartered multinationals doing business in the country.

"The question is not whether large corporations are going to have to start reporting this information, but when," said Gary. "By adopting a regime like the one currently being advanced in Australia, the U.S. could help set a standard of tax transparency capable of addressing the challenges facing today's digital global economy."

Cited In: FinCEN's Beneficial Ownership Access Proposal: Plugging the Gaps

FACT's concerns surrounding the second draft rule to implement the CTA were cited in commentary by Bruce Zagaris for Tax Notes.

"According to the FACT Coalition, the proposed rule is ambiguous about what levels of protocol activity are required concerning each applicable request for access. FinCEN should clarify that some requirements apply to participating in information access generally, which the BOI directory may confirm automatically... and not necessarily in connection with each information request."

Recent and Upcoming Events

June 23: NGO Registration Deadline for UNCAC COSP 10

NGOs interested in participating at the 10th session of the Conference of the States Parties (COSP) to the United Nations Convention against Corruption (UNCAC) are encouraged to apply by June 23. The UNCAC COSP will be held this December in Atlanta, GA, and will focus on building States parties' capacity and cooperation to achieve the convention's anti-corruption objectives.

June 27: GI-ACE Report Launch: "Financial Secrets & Shell Companies: Evidence for Anti-Corruption Policies"

Join a report launch hosted by Global Integrity's Anti-Corruption Evidence (GI-ACE) research program. The newly generated research uses big data analytics to provide an important evidence base for anti-corruption policy-making in the future. FACT's government affairs director, Erica Hanichak, will join the discussion to weigh in on the U.S. implications of the reports findings.

June 27-29: Global Coalition Conference to Coordinate Anti-Corruption Advocacy For COSP10

Join the FACT Coalition, Open Ownership, the OCCRP, and Transparency International for a virtual roundtable discussion of global best-practices surrounding beneficial ownership transparency on June 29 at 8:00pm, EST. The discussion will be held as a part of the UNCAC Coalition's Global Conference on Anti-Corruption Advocacy, running from June 27-29. Registration is open to civil society organizations that are part of the UNCAC Coalition.

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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