Essentially, financial transparency and anti-corruption measures are all about taxes. Around the world there are a number of countries that permit you to hold assets in the equivalent of an anonymous corporation – where you would park your money and earn income and try not to get taxed on it anywhere.
Years ago the U.S. administration introduced rules under bilateral treaties that forced financial institutions everywhere in the world to start disclosing information in order to collect U.S. tax, while the U.S. itself houses a number of states that permit the most anonymous corporate jurisdictions in the world – think Nevada or Delaware. These corporations are exploited by criminals and arms dealers and a whole range of nefarious people to hide their assets to avoid taxes and affect corruption.
It took the release of the Panama Papers – where a company whose sole purpose was helping people to exploit anonymous jurisdictions – for the U.S. government to step forward and realize that the requirements they were imposing on everybody else, should also apply to them. That scandal is bringing the U.S. in line in many of ways, as noted by Tanya Somanader who outlined “President Obama’s Efforts on Financial Transparency and Anti-Corruption: What You Need to Know” .
The rest of the world has been subjected to rules and scrutiny around the idea of signing conventions against corruption, signing treaties to exchange tax information, but there are 8 financial crimes deterrents treaties that the U.S. hasn’t yet signed. Whether President Obama can can them through their governing system and make them part of his presidential legacy will be something to watch.
Beneficial ownership measures have been adopted by most of the world because they are part of international recommendations – the rules we all agreed on – about how we would ask financial institutions and other professions to find out who is behind the corporations they are dealing with.
In Canada, like in most jurisdictions in the world, financial institutions are required, when they open an account – to delve into who’s behind it – who owns and controls that entity – who is essentially calling the shots. Some jurisdictions have a light touch on it, where they just ask basic questions, but most jurisdictions, like Canada, are saying, no, we need certifications, attestations, and documentation to get behind the story. In fact, Securefact developed the Attestanet Know You Customer Regulatory Compliance solution to address these requirements.
In the case of the U.S., their model rule to do this has been around for years and years without being actioned – it sat on the shelf. Now they are invigorating it and it looks very much like the Canadian rule. The difficulty in implementing practically will be that they have 50 some odd jurisdictions that each have their own corporate registers and collect information in different ways, much like Canada with many provinces and territories that each have their own standards for collecting information.
So, the difficulty of the job of the financial institution will be impacted by the extent to which the government helps provide a backbone for the information. And that has yet to be determined.
For more on the hypocrisy of the U.S. position and anti-money laundering regulations, this panel discussion from the OffShore Alert Conference held in Miami in May highlights some of the issues and their international impact.
Hypocrisy USA – The Country’s Role as a Money Laundering Center and Offshore Tax Haven
00:00:00 – 00:03:00 Introduction of topic and session moderator Ed Davis, Partner, Astigarraga Davis
00:03:00 – 00:12:00 Introduction of panelists and and definition of hypocrisy
00:12:00 – 00:21:00 Shauna Leven, Director of Anticorruption for Global Witness [Twitter] talks about the 60 Minutes pieces called “Anonymous Inc” during which Global Witness uses hidden cameras to explore moving money into the New York area with various law firms and the results of that investigation. “…the US legal system is open to exploitation by people with something to hide.”
00:24:00 – 00:37:00 Jesse Drucker, Investigative Journalist, Bloomberg News [Twitter] talks about some of the changes that are going on around the world that have had the effect of making the US appealing as a secrecy jurisdiction. “…in the last year a number of significant financial institutions, banks and trust companies and law firms are now actively marketing the US as a secrecy jurisdiction…”
00:39:00 – 00:56:00 Peter Cotorceanu, a lawyer with Swiss firm Anaford [Twitter] and author of Hiding in plain sight: how non-US persons can legally avoid reporting under both FATCA and GATCA, talks on the differences between secrecy and privacy around the world and the holes in the current financial transparency legislation (FATCA and GATCA)
00:57:30 – 01:18:00 James Barnacle, Unit Chief, Money Laundering with the Federal Bureau of Investigation (FBI) talks to the challenges facing law enforcement agencies around the world to trace and prosecute offenders
01:19:00 – 01:37:00 Q & A with audience and all panelists
The following sound bite is Matt McGuire’s take on the efforts that President Obama is taking on financial transparency and anti-corruption.
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