Financial Transparency Coalition

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 resolutions from the FTC and some of our Coalition members. These reforms and priorities, if implemented, would help the international community achieve more financial transparency in 2014:

(1) The world should achieve a balance between structural reforms and practice (Thanks to: Transparency International).  In short, over the last few years, the world has achieved a great deal in terms of structural reforms, that is, bolstering the institutions and laws needed to create more transparency. What has been lacking, however, has been in the practice of those reforms, that is, enforcing these laws and punishing the corrupt and criminal.

I love this resolution because it has so many different dimensions, but in the interest of space, I’ll provide it with one illustrative example. In early 2013, the U.S. Department of Justice reported that HSBC “wilfully failed” to apply money laundering controls to $881 million in drug trafficking proceeds. The investigation compelling revealed that senior officials at HSBC were complicit. Despite the magnitude of this crime and the intent behind their actions, no one at HSBC went to jail. While the United States does have strong anti-money laundering structural reforms, in practice, the nation is still behind.

(2) The UK should introduce legislation to give teeth to the beneficial ownership registries (Thanks to: Christian Aid). In October, UK Prime Minister David Cameron promised to make information on the beneficial ownership of companies available on public registries. With public registries, the UK will require companies to gather information about their beneficial owners and publish it in the public domain.  In part this idea is appealing because it allows citizens, journalists, and members of civil society to access this information and hold companies accountable for their actions.

However, providing the information is not sufficient on its own. As Richard Murphy has noted on this issue: the devil is in the details. The companies that seek loopholes in the requirements will be just those which the law targets. It’s important that the UK create an mechanism for holding companies accountable and provide sufficient resources to its enforcement agencies.

 (3) Developing countries should extend the progress made on automatic exchange of tax information (Thanks to: Global Financial Integrity). Over the last year, the United States and European Union have made a great deal of progress, both bilaterally and multilaterally, on automatic tax information exchange. In Lough Ernie, the G8 took these developments a step forward, promising to develop a single truly global model for multilateral and bilateral automatic tax information exchange building on existing systems.” The leaders go on to note that it is “important that all jurisdictions, including developing countries, benefit from this new standard in information exchange.”

For automatic tax information exchange to benefit developing countries, too, they must be included in these new systems. The best way for them to do so would be through the “single truly global model” for multilateral information exchange the G8 described.

(4) The EU should introduce the Anti-Money Laundering Directive with adequate standards on beneficial ownership (Thanks to: Christian Aid and Financial Transparency Coalition). In response to recommendations by the Financial Action Task Force, the European Commission developed the Fourth Anti-Money Laundering Directive (which would replace the Third Directive).

If adopted, the Fourth Directive would enhance due diligence by extending requirements on beneficial owners and politically exposed persons (PEPs). It requires legal persons to “obtain and hold adequate, accurate and current information on their beneficial ownership,” and make this information available to the authorities. The European Parliament should adopt the Fourth Directive before the elections in May of this year.

(5) The G20 should make progress on Multilateral Convention on Mutual Administrative Assistance in Tax Matters, beneficial ownership, and base erosion profit shifting (HT Christian Aid and Financial Transparency Coalition). There are quite a few transparency-related items on the docket for the G20 Leaders Summit in Brisbane, Australia.  In particular, now that all G20 countries have signed the Multilateral Convention on Administrative Assistance in Tax Matters, the G20 has an opportunity to make more progress on oversight and implementation of the Convention. The FTC has also urged the G20 to promise to make public registries for beneficial owners mandatory. On base erosion profit shifting, the OECD has launched an Action Plan, which was fully endorsed in Moscow. FTC Member Christian Aid has made a number of recommendations to the G20 to improve the Action Plan.