January 14, 2021

“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 Jacob Wills at [email protected].

State of Play

Corporate Ownership Transparency

Anonymous shell companies in the US will soon be extinct. After more than a decade of debate, the House and Senate have both passed the Corporate Transparency Act as part of the recently enacted bipartisan, National Defense Authorization Act for Fiscal Year 2021 (NDAA, H.R. 6395). The legislation counters financial secrecy by requiring companies to report their true, “beneficial” owners to a secure directory at the Treasury Department. Both chambers reaffirmed their commitment on January 1st, overriding the President’s earlier veto, making the historic anti-corruption legislation law.

This is a watershed moment modernizing the US anti-money laundering framework, and marks the biggest victory for transparency advocates in 20 years. After being spearheaded by Congresswoman Carolyn Maloney’s office, the bill garnered the support of an unprecedentedly broad and bipartisan coalition of support—largely due to near universal acknowledgement of the importance of this anti-money laundering reform from key sectors like financial services, law enforcement, real estate, and even the US Chamber of Commerce, which was once opposed. Even in a deeply divided Congress, Republicans and Democrats have given cause for hope in agreeing on ownership transparency, as underscored in a recent op-ed by Scott Greytak of Transparency International. The “groundbreaking” and “hard-fought victory” has since been highlighted in both the Washington Post and Politico, with considerable attention for FACT’s role in the coalition-building process. See NBC News for FACT executive director Ian Gary’s reflections on the importance of this historic vote to end financial secrecy.

Tax

As President-elect Joe Biden sets his eye on inauguration day and with his cabinet taking shape, the prospects for movement on international tax reform are becoming clearer. The former Vice President ran on an agenda promising domestic and international tax reform, and tax justice advocates view the next four years as an historic opportunity for change. This opportunity has only widened with the Democratic sweep of Georgia’s Senate run-offs, opening previously closed legislative pathways. Whether through legislation or regulation, President-elect Biden and the Senate can take on multinational corporate tax avoidance by instituting stronger disclosure requirements. Tax justice advocates see opportunities based on previous support from industry experts for country-by-country reporting and buttressed by a recent report detailing lessons highlighting the benefits of country-by-country reporting.

As the pandemic continues, governments will likely scrutinize their tax postures to face the double threat of public health crises and budget shortfalls. A recently released report by the Global Alliance for Tax Justice linked the tax avoidance issue to public health, assessing losses to international corporate tax abuse in terms of public health resources. The report was not the only call for tax transparency, as FACT hosted a panel at the International Anti-Corruption Conference on December 1st. The panel, titled “Trending Toward Transparency: The First Global Standard on Corporate Tax Disclosures,” previewed the 2021 launch of Global Reporting Initiative’s Tax Standard, by which companies would voluntarily disclose key financial information on a country-by-country basis.

Only the Beginning

The passage of the Corporate Transparency Act and the initial possibilities offered by the incoming administration are only the start of what FACT is aiming to do in the coming years. The strength of the bipartisan coalition assembled to fight anonymous shell companies demonstrates the broad appetite for financial accountability and corporate transparency. Looking to the future, FACT’s strategic retreat, which started in November and finished this week will outline new priorities for 2021 and possible projects in the pipeline.

—Jacob

From the FACT Coalition and Its Partners

Issues in the News

Incorporation Transparency & Anti-Money Laundering

Morning Consult: Congress Just Took Rare Bipartisan Action to Protect Human Rights by Banning Anonymous Shell Companies

Washington Free Beacon: Defense Bill Targets Wallets of Rogue States, Terrorists

The Hill: Opinion: Anonymous Shell Companies Fund Crime And Terror; It's Time To Crack Down

Politico: Lawmakers Clinch Deal On Decades Long Fight Against Shell Companies

Esquire: The United States Congress Is Set to Do Something...Good and Useful? On a Bipartisan Basis?

The Hill: Opinion: A divided Congress finds common ground in fighting foreign corruption

ICIJ: US Lawmakers Move to End Anonymous Shell Companies in National Defense Spending Bill

ICIJ: US poised to overhaul the country’s anti-money laundering legislation

The Wall Street Journal: Anti-Money-Laundering Measure Poised to Clear Congress

The Economist: Congress Edges Closer to Cracking-down on Anonymous Shell Corporations

JCK: A New Transparency Law Could Change the Jewelry Business

Bloomberg News: U.S. Dirty-Money Law Seeks to Expose Owners of Shell Companies

OCCRP: U.S. Poised to End Anonymous Companies, UN Urged to Follow Suit

The Hill: Sweeping Financial Crimes Bill to Hitch a Ride on Defense Measure

Miami Herald: Anti-corruption bill requiring shell companies to disclose owners poised to become law

ICIJ: Advocates celebrate major US anti-money laundering victory

The Washington Post: Congress bans anonymous shell companies after long campaign by anti-corruption groups

Buzzfeed: A New Law Will Close The Loophole That Lets Criminals Launder Money Through US Banks

Portland Business Journal: Congress bans anonymous shell companies

The Wall Street Journal: Congress Approves Anti-Money-Laundering Measure

MarketWatch: Shell companies to lose anonymity under defense bill cleared by Congress

Roll Call: After 12 years of work, Congress is set to disclose hidden corporate owners

Tax

Tax Notes: 5 Lessons on Profit Shifting From U.S. Country-by-Country Data

Accounting Today: Global tax avoidance costs countries $427B each year: Report

Social Shoutout

@RepMaloney: My #CorporateTransparencyAct will crack down on anonymous shell companies and therefore money laundering here in the US. This is a national security issue that must be addressed.

Thanks to @RepMaloney, @MikeCrapo, @RepMaxineWatersCongress, @MacTXPress, @PatrickMcHenry, @JimInhofe, @SenSherrodBrown, @RepAdamSmith and @SenJackReed for supporting the inclusion of the CTA in the NDAA to hold anonymous companies accountable.

@SenSherrodBrown: The NDAA includes my bill to END the Chinese military's abuse of anonymous shell companies - which they've used to commit cyber-attacks, intellectual property theft, and other crimes. A veto would be doing the Chinese Communist Party a huge favor.

@marcorubio: My “Corporate Transparency Act”, the most significant anti-corruption & money laundering law in decades & which forces anonymous shell companies to disclose their true owners is going to pass as part of the end of year defense bill.

@RepMaloney: My Corporate Transparency Act, which cracks down on anonymous shell companies & prevents bad actors from laundering their $, is set to become law this month. 650 5th Avenue, once owned by Iran, is a prime example of why we need this legislation.

@RepCleaver: Happy to see the COUNTER Act—a bill I introduced last year—pass as an amendment to the NDAA. The COUNTER Act is the most significant anti-money laundering reform since 2001, & will give financial institutions the tools necessary to protect American consumers from modern threats.

@RepMalinowski: I've been working for years to ban the shell companies that kleptocrats and criminals use to hide their tracks. Congress has finally acted, giving the incoming Biden admin a powerful tool to fight corruption in our own country and around the world -TM

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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