September 7, 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:
FASB Advances Increased Tax Transparency Requirements for U.S. Businesses

Last week, the U.S. accounting standard-setter, the Financial Accounting Standards Board (FASB), unanimously approved improved tax reporting requirements for U.S. businesses, including a requirement for public businesses with foreign operations to disclose more information about the effect of particular jurisdictions on their overall tax liability for a given year.

FASB's proposed revisions to Topic 740, which governs income tax accounting, have been in the works for more than half a decade.

As outlined in FACT's most recent report, "A Material Concern: The Investor Case for Public Country-by-Country Tax Reporting," existing tax disclosure requirements provide little useful information for investors seeking to assess risks and opportunities facing companies in their portfolios, with foreign taxes paid and tax effects aggregated into a single line item. Under the standard approved last Wednesday, all U.S. businesses will be required to disclose their taxes paid in each foreign jurisdiction that constitutes at least 5% of their total tax burden, and public companies will have to detail the impact of particular tax effects on their total taxes paid, disaggregated by jurisdiction.

While FASB's upcoming changes to Topic 740 do not constitute full public country-by-country reporting - which is currently being considered in Australia and advanced in a limited form in the European Union - they nevertheless dramatically improve tax transparency for U.S. multinational businesses.

The need for further U.S. action to mandate additional disclosures remains, however. In a statement following Wednesday's board meeting, FACT policy director Zorka Milin noted that, "It is clear that investors need more information...than can be provided by FASB alone. In line with growing investor demand, it's time for the Securities and Exchange Commission (SEC) to start the rulemaking process to require public country-by-country reporting for large U.S. multinational filers."

FinCEN Announces Draft Rule to Delay Beneficial Ownership Reporting for Some Entities

The Treasury Department intends to propose a rule which may delay beneficial ownership reporting under the Corporate Transparency Act (CTA) for entities formed on or after January 1, 2024, per an announcement made through the Office of Information and Regulatory Affairs. Under the current implementation timeline, entities formed in 2024 would have begun reporting 30 days after formation, with reporting for pre-existing entities beginning in 2025. There has been no indication that reporting for entities formed before January 1, 2024 will be delayed.

Implementation of the CTA by the Treasury's Financial Crimes Enforcement Network (FinCEN) has been marked by delays and setbacks since the law's passage in early 2021, owing in part to chronic underfunding of the bureau.

Beyond simply avoiding delays, however, FinCEN is also in desperate need of additional funding to ensure the ultimate efficacy of its nascent beneficial ownership database, including by establishing effective verification mechanisms for collected information.

During testimony before the House Financial Services Committee in July, Transparency International U.S. executive director Gary Kalman noted that "One of the most important things about getting (CTA implementation) right and making sure it is effective is that the data is verified... That takes a lot of money, and that is not currently in FinCEN's budget...If these rules are going to work, they need that targeted funding."

Switzerland Proposes Beneficial Ownership Database, New Regulations on Enablers of Financial Crime

Swiss officials announced plans last month to implement a national beneficial ownership database, as well as new measures establishing additional customer due diligence obligations for lawyers, accountants and other service providers often used by illicit actors to launder funds. Formal legislation implementing the proposed measures is expected next year, following consultations with stakeholders and potential revisions. Switzerland, long considered a global financial secrecy hub, is the only European nation without a centralized beneficial ownership register.

These new measures make a strong case for further U.S. anti-money laundering action. If Switzerland passes mandatory due diligence requirements for lawyers, accountants, and other non-bank financial service providers, the U.S. will be left virtually alone among developed economies in having no such requirements. A law that would do just that, the ENABLERS Act, passed in the House last year after garnering widespread bipartisan support, but failed to pass the Senate.

Latest from FACT

Press Release: U.S. Accounting Standard-Setters Unanimously Approve New Tax Transparency Measures

FACT applauded the approval of stronger tax transparency standards by FASB, and called upon the SEC to begin the rulemaking process to require complementary public disclosures of country-by-country data for large U.S. filers.

In a statement, FACT executive director Ian Gary said that "after years of deliberations and revisions, FASB is finally delivering some of these much-needed reforms for investors and the public."

"This move from FASB only reinforces the need, however, for the Securities and Exchange Commission to mandate full, public country-by-country reporting to complement FASB's updated income tax disclosure standards and provide investors with the complete, comparable data that they have been asking for."

Interview: In Conversation - Talking Gender and U.S. Tax with Amy Matsui

FACT Policy Fellow Sofia Gonzalez interviewed Amy Matsui, Director of Income Security and Senior Counsel at the National Women's Law Center, on the connection between gender and U.S. tax policy following a public panel discussion held by FACT, the Nawi Collective, and the Global Alliance for Tax Justice (GATJ) in March.

From the conversation: "Tax policy communicates our values and our priorities as a society. Unfortunately, those priorities and values were set by people who succeeded in and continued to benefit from an inequitable and discriminatory economy. They've continued to reinforce those norms in the tax code over time."

FACT in the News

Quoted In: The U.S. Is Finally Trying to Fix Its Money-Laundering Problem

FACT Executive Director Ian Gary is quoted alongside Scott Greytak of Transparency International U.S. in columnist Peter Coy's newsletter for the New York Times.

Gary notes the opportunity presented by the upcoming UN Convention Against Corruption COSP in Atlanta for the Administration to tout its achievements on various anti-money laundering initiatives, including implementation of the CTA and long-awaited new rules tackling money laundering through real estate. "If the U.S. hasn't made progress by then," he says, "it would be potentially embarrassing."

Quoted In: US Set to Unveil Long-Awaited Crackdown on Real Estate Money Laundering

FACT Government Affairs Director Erica Hanichak is quoted in Reuters' coverage of Treasury's upcoming rule on money laundering through U.S. real estate.

"FinCEN is taking this important step to put something officially on the books that would root out money laundering through the sector once

Recent and Upcoming Events

September 14: Building Trust in Tax for a Sustainable Future - The Role of Tax in Fighting Corruption and Promoting Sustainable Development

Join the International Federation of Accountants (IFAC), the Association of Chartered Certified Accountants (ACCA), and the Chartered Accountants Australia and New Zealand (CA ANZ) for a virtual roundtable discussion of the connection between tax and corruption and the role of tax in sustainable development.

September 19: Combatting Green Corruption: Fighting Financial Crime as a Driver of Environmental Degradation

FinCEN Director Andrea Gacki, former Acting Director Himamauli Das, and State Department Coordinator on Global Anti-Corruption Richard Nephew, among others, will be speaking during an upcoming event on the intersection of financial and environmental crime at the Wilson Center.

September 20: UN High-level Dialogue on Financing for Development

The UN High-level Dialogue on Financing for Development will be held on September 20 as a part of the UN General Assembly. The Dialogue will bring together heads of state, senior government officials, private sector and civil society, international financial institutions, and other stakeholders to discuss and review implementation of the 2030 Agenda for Sustainable Development. A full Dialogue agenda will be published in the coming days.

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

Find us on social media below:

** This is email id #329806 sent by Financial Accountability and Corporate Transparency (FACT) Coalition. To unsubscribe from this list, please reply to this email. **