US: White House Introduces New Rules to Tackle Financial Crimes

Published: 06 May 2016

obamaBarack Obama (Photo: US Federal Government)

By Igor Spaic

The White House has announced a set of measures aimed at combating financial crimes and strengthening financial transparency, including regulations requiring companies to reveal additional information on their owners to the International Revenue Service.

The Thursday announcement by the Obama administration comes at a time when financial crimes involving the use of offshore shell companies have hit the global spotlight, following a set of stories published as part of the Panama Papers beginning in early April.

The Panama Papers are a set of 11.5 million leaked documents resulting in a series of investigative stories that expose how a number of businessman, politicians and celebrities exploited Panama's offshore taxation system in order to hide their wealth and avoid or minimize taxes.

The new rules, introduced in order to strengthen the abilities of law enforcement agencies in detecting financial crimes including the bankrolling of terrorist activities, force banks to “to know and verify the identities of the natural persons (also known as beneficial owners) who own, control, and profit from companies when those companies open accounts.”

The administration also proposed tax rules aimed at closing a loophole which enables foreigners to “hide assets or financial activity behind anonymous entities established in the United States,” by relieving foreign-owned companies of the duty to report to the IRS.

Additionally, the administration has submitted legislative proposals to Congress which would require companies to reveal information about the true identity of individuals who are behind a company, as well as establishing additional tools that law enforcement may use to crack down on corruption and money laundering.

In a letter to the Senate, Treasury Secretary Jacob Lew urged Senators to finally approve earlier tax treaties that have been pending for several years that could aid the battle against offshore tax evasion.

According to the White House press release, the Senate has yet to approve eight tax treaties with other countries, as well as amendments to existing treaties the US has with Switzerland and Luxembourg which enable US law enforcement to obtain information about financial accounts in those countries. The inability to obtain this info has, according to the release, impeded investigations related to offshore tax evasion, including cases involving secret Swiss bank accounts.

Furthermore, the release presses Congress to “strengthen the United States’ hand in pressing other countries to improve transparency by ensuring that we live up to our end of the bargain.”

Reuters has quoted US Deputy National Security Advisor for International Economics Wally Adeyemo, telling reporters that the US financial system "should not provide the rich, the powerful, and the corrupt with the opportunity to shield their assets."