Levin-Merkley Amendment Would Shed Light on an Opaque Financial System, Says GFI

May 19th, 2010

Offshore Clearinghouse is Systemic Product of a Lack of Transparency;
Senate Leadership Decision to Prevent Vote on Amendment is Troubling

Senator Carl Levin (D-MI) speaks at the 2009 annual conference of the Task force on Financial Integrity and Economic Development in Washington, DC.

WASHINGTON, DC (GFI) – The fate of a crucial element of financial reform efforts, an amendment proposed to the Financial Stability Reform Act by Senators Carl Levin ((D-MI) and Jeff Merkley (D-OR) is in limbo ahead of a cloture vote scheduled to take place on the Senate floor later today.   The proposed amendment—which will reportedly be prevented from receiving a vote on the Senate floor—will ban banks from proprietary trading, and its omission from the financial reform bill would set back critical efforts to increase transparency in offshore financial markets, said Global Financial Integrity today.

An article published last night in the American Interest by investigative journalist, Lucy Komisar, outlines some of the crucial elements of the amendment, the problem of proprietary trading, and highlights one glaring example of how bankers game the system to evade taxes with the case of ICE Trust.

“Clearinghouses such as ICE Trust U.S. move large sums of money around the world,” writes Komisar.  “ICE Trust is located in the Cayman Islands.  Yet none of the owners of ICE Trust Holding Co. are based in the Caymans.”

Ms. Komisar’s article outlines how an entity such as ICE Trust U.S. is a “blocking company” whose owners benefit from the fact that the IRS and other U.S. financial regulators have differing views of responsibility and jurisdiction when it comes to monitoring and regulating offshore markets.  Ms. Komisar quotes Adam Rosenzweig of Washington University Law School as saying:

“The SEC and the Federal Reserve are treating ICE Trust U.S. as the place the action is going on.  The tax law looks at ICE Trust U.S. and says all the action is happening at the holding company level in the Caymans.  They are exploiting the benefit of being in the United States for regulatory purposes and being a foreign entity in the Caymans for tax purposes.”

According to Ms. Komisar’s piece, without the Levin-Merkley amendment banning proprietary trading, entities like ICE Trust will continue to help American banks conduct credit default swap trades while dodging millions of dollars in taxes.

The cloture vote is scheduled for this afternoon.  Roll Call reports that Senator Levin has expressed reservations about voting for cloture without the proposed amendment.  The rest of the Senate should take note.

To read the full article by Lucy Komisar, visit or click here…


Global Financial Integrity (GFI) promotes national and multilateral policies, safeguards, and agreements aimed at curtailing the cross-border flow of illegal money.  In putting forward solutions, facilitating strategic partnerships, and conducting groundbreaking research, GFI is leading the way in efforts to curtail illicit financial flows and enhance global development and security.

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Written by Clark Gascoigne

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