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Five Achievable Steps for Transparency in 2012

January 5th, 2012

The New Year is a great time for resolutions. Of course most of these resolutions are made on a personal basis. But resolutions can also be made on a national and international level. So in that spirit, here are five realistic resolutions to help theUnited States and the international community achieve more financial transparency in 2012:

  1. The U.S. passes the Incorporation Transparency Act. This bill would require companies to disclose the names of the beneficial owners of corporations and limited liability companies (LLCs) when formed. This would close a major loophole that criminals exploit to launder their funds within U.S. boarders and strengthen law enforcement officials’ ability to keep criminal and tax evading money out of the United States.
  2. FATF lists tax evasion as a predicate offense to money laundering. If FATF implemented this reform banks and financial institutions in member countries would need to examine and evaluate incoming deposits for signs of tax evasion for reporting. As Rebecca Wilkins, senior counsel at Citizens for Tax Justice, put it: “Tax evasion — whether committed by individuals or corporations — is a crime and its victims are honest taxpaying citizens all over the world. The proceeds of those crimes are the funds that should have been paid to the government and are badly needed to fund critical services, especially in these difficult times.”
  3. The U.S. Passes the Stop Tax Haven Abuse Act. This bill would permanently close offshore tax loopholes, which in turn would raise revenue and increase transparency and accountability for multinational businesses. The bill would also require annual country-by-country reporting by SEC-registered corporations related to their employees, sales, purchases, sales, financing arrangements, and taxes. Raymond Baker, director of Global Financial Integrity, has called it a “game changer.”
  4. FATF creates a new government requirement for trusts to be registered with the relevant authorities. The World Bank, the OECD, and the FATF have all observed that money launderers often use trusts to their identities and distance themselves from the proceeds of their crimes. There is no requirement for legal structures like trusts to register with government agencies and as a result there is little information about them, which makes them vulnerable to money laundering. Should the FATF implement this recommendation, trusts would have to provide the same information that other covered institutions collect on their customers. This would aid financial institutions in performing their due diligence.
  5. The U.S. Passes the Combating Money Laundering, Terrorist Financing, and Counterfeiting Act. This bill, proposed by Senators Chuck Grassley (R-IA) and Dianne Feinstein (D-CA), would make all felonies trigger crimes for a money laundering charge, no matter where in the world a person committed the crime. According to current U.S. anti-money laundering laws, there is a difference between what is criminalized if it occurs inside U.S. borders and what is criminalized if it occurs outside them. Which means that it is perfectly legal for U.S. banks to accept the profits from some crimes, provided the original crime occurred in another country, when it would be illegal to do so if the same crime was committed in the United States. The bill would close this large loophole.

As with personal resolutions, these steps would not be easy. But also, like any good goal should be, these steps are achievable. In that spirit, here’s to a happy, healthy, and transparent New Year!

Written by Ann Hollingshead

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