June 29, 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.

Send feedback or items for future newsletters to Thomas Georges at [email protected]

Here's the State of Play:
New York State Legislature Passes Bill to Create Nation's First Public Beneficial Ownership Registry

New York is poised to implement the nation's first state-level public beneficial ownership registry after both the State Assembly and Senate passed the LLC Transparency Act this month. The bill is now bound for the desk of Governor Kathy Hochul.

The LLC Transparency Act would require limited liability companies owned, formed, or operating in New York to disclose their beneficial owners - the real people that own and control the company - in a manner consistent with the federal Corporate Transparency Act (CTA). While the CTA's beneficial ownership registry will only be accessible to law enforcement, financial institutions, and other authorized users, the LLC Transparency Act establishes a state-administered registry that will be searchable by the public - the first such public registry in the nation.

New York State has long been a favorite destination for foreign and domestic bad actors seeking to park their fortunes in the United States. The multi-billion dollar New York City real estate market, in particular, has been a lodestone for illicit finance, with LLCs and other incorporated entities owning a substantial percentage of all residential and commercial properties throughout the city. Those same companies may soon be forced to disclose - publicly - the natural person or persons that own their properties, supercharging the ability of investigators, journalists, and others to detect and identify dirty investments.

Australia Delays Vote on Public Country-by-Country Reporting

The Australian Labor Party did not introduce final legislation to implement public country-by-country (PCbCR) reporting this month - as had previously been anticipated - instead putting forward a tranche of related tax fairness measures. Explanatory materials accompanying the related provisions contained updates on the government's proposed PCbCR measure, which would be subject to minor revisions and an implementation delay.

While the Australian Treasury reconfirmed that "the government's election commitment [to enact PCbCR]" remains "the preferred option," its updated implementation outline removed certain elements contained in previously-released draft legislation, including the requirement for large multinationals to publish disaggregated information on their effective tax rates, intangible assets, and related-party transactions. According to the Treasury, these additional disclosures were removed in order to ease compliance burdens for affected entities, as such metrics are not currently required under public reporting standards set by the Global Reporting Initiative (GRI) or European Union. The start date for public reporting would be delayed by one year, now set to begin in July 2024.

FACT submitted comments praising the government's draft legislation in April, alongside allies including Transparency International Australia, the Center for International Corporate Tax Accountability and Research (CICTAR), Tax Justice Network Australia, and Publish What You Pay Australia. A number of prominent investor voices, including Norges Bank Investment Management and Principles for Responsible Investment (PRI), also publicly supported the PCbCR proposal.

The legislation was broadly opposed by business groups - among them, the embattled professional service provider PwC, which is currently under fire for reportedly using confidential government data to help clients skirt government tax enforcement efforts.

While the core of the government's PCbCR measure remains intact in its current iteration, the Australian Treasury notes in its explanatory memorandum that "further consultation with industry may be beneficial on [the measure]." FACT is once again urging the government to swiftly advance final legislation in line with its current implementation outline, without further changes that may impact the effectiveness of the law in curbing multinational tax dodging.

World Bank, Paris Events Highlight Need for Effective Policy to Counter Illicit Financial Flows

Last week, France hosted international heads of state, civil society representatives, academics, and private sector groups for the Summit for a New Global Financing Pact, which sought to identify effective policy measures to address the twin global crises of climate change and national debt. Few heads of state from the Global North were in attendance, however, despite the central role that developed economies play in providing safe haven for illicit financial flows (IFFs) that systematically rob Global South governments of needed revenues.

Not a week after the Paris Summit, the World Bank held a global forum in Washington on the development impacts of corruption, including through IFFs and the secrecy jurisdictions that enable them. While the U.S. is the World Bank's largest shareholder, its status as a top financial secrecy jurisdiction undermines World Bank efforts to combat corruption and accompanying illicit financial flows.

FACT has long argued that combatting IFFs must be a central element of the broader fight for increased development finance and against global sovereign debt growth. FACT-member Global Financial Integrity estimates that IFFs costed emerging and developing economies as much as $970 billion in 2014 alone, with current annual figures likely much higher. Last year, global groups representing more than 100 civil society organizations penned a letter to Treasury Secretary Janet Yellen urging the Biden Administration to take meaningful policy steps to address the United States' position as the world's top provider of financial secrecy. Secretary Yellen - who acted as the Administration's representative at the Paris Summit - has herself called the United States "perhaps the best place to hide and launder ill gotten gains."

For more information on last week's Summit, read FACT policy fellow Seamus Love's recent blog.

Latest from FACT

Press Release: Proposed Cuts to Financial Crime Fighters Threaten to Undermine U.S. Anti-Money Laundering Goals, National Security

A proposed spending bill for FY2024 introduced in the House this month would cut funding for the Financial Crimes Enforcement Network (FinCEN), by more than $24 million, while also slashing $10 million in funding for Treasury's Office of Terrorism and Financial Intelligence (TFI), which oversees federal sanctions enforcement through the Office of Foreign Assets Control (OFAC).

In a statement, FACT government affairs director Erica Hanichak urged congressional appropriators "to rethink any cuts to Treasury's budget that would impact the broader fight against dirty money in the U.S."

Blog: Any New "Global Financing Pact" on Debt and Climate Must Address Illicit Financial Flows

In his blog, FACT policy fellow Seamus Love argues that Global North nations must strengthen their domestic anti-money laundering frameworks in order to address the illicit outflow of needed revenues from developing economies.

"Global North leaders must not dodge their own governments' responsibilities in enabling the scourge of illicit financial flows... If they do, the problem will continue to fester, and substantial public funds needed to address the multiple crises facing the Global South will continue to find their way back to Global North secrecy jurisdictions."

FACT Sheet: Catching Corporate Tax Dodgers and Informing Investors: The Disclosure of Tax Havens and Offshoring Act

Read the latest FACT sheet on the Disclosure of Tax Havens and Offshoring Act, which directs the Securities and Exchange Commission (SEC) to require public country-by-country reporting of tax and operational data from major multinationals.

While critical to ensuring that large multinational corporations are paying appropriate levels of tax, PCbCR is also useful to investors seeking to understand the risks associated with the tax and operational practices of the companies in their portfolios, as well as to developing governments frozen out of existing information sharing networks.

Recent and Upcoming Events

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

FACT government affairs director Erica Hanichak took part in a discussion with the author of Global Integrity's new report, Financial Secrets & Shell Companies: Evidence for Anti-Corruption, which explores patterns of global shell company formation and regulations governing offshore financial secrecy.

In her remarks, Hanichak noted the "laggard" position of the United States - the world's foremost supplier of financial secrecy - with regard to various elements of anti-money laundering law, including beneficial ownership transparency, regulations on real estate and private investment markets, and rules for lawyers, accountants and other professional enablers of money laundering.

If you are interested in obtaining a recording of the discussion, please reach out to FACT communications officer Thomas Georges at [email protected].

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 8:00am, 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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