FASB Advances U.S. Tax Transparency and Treasury Delays Ownership Reporting of Certain Entities: Just the FACTS 9/7/23

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“Just the FACTs” is a roundup of news and information regarding efforts to combat corrupt financial practices, including abuses in offshore tax havens, corporate secrecy and money laundering. money through the financial system.

Send comments or materials for future newsletters to Thomas Georges at tgeorges@thefactcoalition.org

Save the date! October 26: Launch of the report: “Dirty money and the destruction of the Amazon: uncovering the role of the United States in illicit financial flows linked to environmental crimes in Peru and Colombia» – Registration details will be available in the next edition of the Newsletter.

Here is the state of affairs

U.S. Beneficial Ownership Transparency Act Moves Closer to Full Implementation

On Monday, the Financial Crimes Enforcement Network (FinCEN) published guidelines for small businesses regarding compliance with beneficial ownership reporting requirements set to take effect next year under the Corporate Transparency Act (CTA).

These guidelines follow the publication of a official notice by the office for the establishment of a new registration system – with the beneficial ownership database being created to house the data collected under the CTA – as well as a document of accompaniement draft rule exempt the database from certain provisions of the Privacy Act.

These measures, combined, bring FinCEN closer to fully implementing the CTA, touted by FACT and other anti-corruption advocates as perhaps the most consequential federal anti-money laundering measure for a generation. A final rule governing access to data collected under the CTA, expected before due to be released this month, remains the only major hurdle the bureau must clear before reporting begins on January 1, 2024. As FACT reported argued previouslyThe content of the final access rule will prove crucial: if authorized users, including state, local, tribal law enforcement officials and trusted foreign partners, are unable to easily access FinCEN’s beneficial ownership database, the ultimate effectiveness of the CTA as an anti-money laundering tool will be severely reduced.

An additional rule harmonizing existing customer due diligence rules with the CTA law is expected to be published in 2024.

The new FinCEN compliance guide for small businesses comes at a particularly important time. As the January 1, 2025 reporting deadline for pre-existing entities approaches, raising awareness among affected entities of their new requirements will be critical to the timely effectiveness of the CTA. The compliance guide also notably includes the obligation for entities created on or after January 1, 2024 to declare their beneficial ownership information within 30 days of their incorporation, despite recent indications that FinCEN is seeking to extend this reporting window.

IRS announces tax enforcement improvements with new funds

Theirs announced last week this will be significantly scale up enforcement efforts by hiring 3,700 new tax agents to focus on large businesses, complex partnerships and high-income and wealthy individuals. At the same time, the IRS recently announced it will change some racist aspects of how it conducts audits of low-income taxpayers who benefit from tax credits, who tend to be disproportionately black.

According to IRS Commissioner Danny Werfel, the agency “is undertaking extensive efforts to revise compliance efforts in ways that robustly advance our commitment to fair, equitable, and efficient tax administration.”

Latest news from FACT

Blog: A “Prigozhin prophylaxis”: making the US financial system immune to Wagner-style dirty money operations and helping partners in Africa

FACT policy researcher Seamus Love analyzes the Wagner Group’s influence in Africa and says the mercenary group serves as a powerful example of a warning. policymakers are seeking to address gaps in the U.S. anti-money laundering framework.

“As renewed media attention highlights the extent of Prigozhin’s operational and financial networks, it is time for the United States – the world’s leading provider of financial secrecy – to be proactive and ensure that they play no role in facilitating the activities of groups like Wagner around the world.

Blog: Country-by-country public reporting: the big step forward for tax transparency in Africa

Gabriel Aliu, a policy researcher at FACT, writes that public country-by-country reporting (CbCR) requirements could help African countries overcome existing obstacles to effective tax enforcement, even if such requirements were not implemented. than in major market jurisdictions outside the continent.

“African nations adopting and implementing their own public CbCR laws would, however, pose a significant challenge, although the benefits would be considerable. Africa could nevertheless reap benefits if public CbCR schemes are adopted in major market jurisdictions such as Australia and the United States.

FACT in the news

Quoted in: As America’s corporate registry stagnates, New York charts its own path to transparency

FACT Government Affairs Director Erica Hanichak is quoted in ICIJ’s coverage of the LLC Transparency Act, which is expected to be signed by New York Governor Kathy Hochul later this year.

“This decision by the New York legislature is an important sign that the United States no longer wants to welcome dirty money from around the world,” says Hanichak. “Especially in a market as large as New York, it is essential that there is better corporate transparency to prevent fraudsters, oligarchs and terrorists from accessing our financial system to move dirty money. »

Quoted in: FASB Income Tax Disclosure Compliance Will Be No Easy Task

FACT’s comments on the Financial Accounting Standards Board’s (FASB) enhanced tax transparency standard were cited in CFO coverage. The revised FASB standard, in the works since 2016, was unanimously approved by the Board last month.

“Investors need information on the tax practices of companies within their portfolios – particularly multinational companies – to assess various tax enforcement, reform and other risks. »

Recent and upcoming events

Watch: Fighting Green Corruption: Tackling Financial Crime as a Driver of Environmental Degradation

Watch last week’s Wilson Center event on the intersection between financial and environmental crimes, featuring appearances and comments from State Department Anti-Corruption Coordinator Richard Nephew, FinCEN Director Andrea Gacki and former Acting FinCEN Director Himamauli Das, among others.

Former Acting Director Das, in particular, highlighted the commonality between the tools used by criminals to launder the proceeds of environmental crime, such as shell companies, and those used in other illicit financial schemes. “Law enforcement tools are generally common across a range of different crimes,” Das said. “When you look at FinCEN, the analysts involved in tracking shell companies and illicit actors linked to fentanyl precursor trafficking are the same analysts who engage in illegal wildlife trafficking and wildlife crimes in general, because they are basically the shell companies and the channels. through which illicit financial flows pass.

Watch and read: Statements and videos from the United Nations High-Level Dialogue on Financing for Development

On Wednesday, the United Nations General Assembly convened the second high-level dialogue on financing for development, focused on achieving the Sustainable Development Goals set out in the Addis Ababa Action Agenda. Ongoing negotiations on strengthening the role of the United Nations in international tax cooperation, including through the possible establishment of a binding United Nations framework convention on international tax cooperation, were high on the agenda .

Watch the Morning And Afternoon sessions of the High-Level Dialogue and read statements from the UN Secretary-General, Member States and more via the link above.

October 3: 9th regional meeting of the UNCAC Coalition for Europe, the United States and Canada

This online event for civil society organizations will provide an opportunity for civil society actors to share their knowledge and experiences on the expectations and challenges of engaging the private sector in anti-corruption efforts ahead of the 10th Conference of States Parties of the UNCAC (CoSP10).

Speakers will include Tom Cardamone, President and CEO of Coalition member FACT. Global financial integrityLuca Mak, executive director of Transparency International Austriaand Alban Hashani, executive director of Reinvest Institute. If you are part of a civil society organization and would like to participate, please contact Corinna Gilfillan of the UNCAC Coalition for more information at corinna.gilfillan@uncaccoalition.org.

October 26: Launch of the report: “Dirty money and the destruction of the Amazon: uncovering the role of the United States in illicit financial flows linked to environmental crimes in Peru and Colombia»

Save the date for the launch of FACT’s new report analyzing the links between US financial secrecy and environmental crimes in the Amazon region. Keep an eye on the Just the FACTs newsletter for more information on the report, as well as registration details for the launch event.

The report launch will take place virtually and in person at the Open Gov Hub in Washington, DC, from 12:00 p.m. to 2:00 p.m. EDT. Live translation between English and Spanish will be available.

We hope to see you there!


About the FACT Coalition

The Coalition for Financial Responsibility and Corporate Transparency (FACT) is a nonpartisan coalition of more than 100 state, national and international organizations working for a fair and honest tax system that meets the challenges of a global economy and promotes policies to combat the harmful effects of the global economy. impacts of corrupt financial practices.
For more information, visit www.thefactcoalition.org.
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