New financial regulations would force companies to disclose more information about their owners, as part of a crackdown on tax evaders and money launderers, US President Barack Obama’s administration announced on Friday.
Obama also urged US Congress to pass legislation that he said would further enhance transparency in the US banking system and help law enforcement track down secret owners.
Obama linked the push to the disclosures in the Panama Papers, the leaked documents that revealed how many wealthy individuals and government officials from around the globe use shell companies to hide assets and avoid paying taxes.
Photo: AP
“We’ve seen just how big a problem corruption and tax evasion have become around the globe,” Obama said at the White House, as he promised to continue an effort “to make sure that the rules aren’t rigged and our economy works for everybody.”
Obama spoke a day after the US Department of the Treasury announced two new measures aimed at forcing companies to better track and disclose ownership to the US Internal Revenue Service.
One, the so-called customer due diligence rule, was finalized on Thursday after four years’ consideration. The rule dictates how banks keep records on who owns the companies that use their services.
A second proposed rule would close a loophole that allows a narrow class of foreign-owned companies to avoid reporting to the service.
As the treasury announced the regulations, US Treasury Secretary Jack Lew wrote to Congress urging lawmakers to go further.
Lew said congressional action was needed to give law enforcement tools “to combat bad actors who seek to hide their financial dealings and evade their tax responsibilities.”
The high profile push is unlikely to get much traction in a divided Congress that has shown no appetite for tackling contentious tax battles or taking on financial service industry in an election year.
Several anti-corruption experts said the new rule for banks’ record-keeping leaves loopholes of its own and the proposed legislation is watered down.
“It appears the rule is quite weak,” Global Witness senior policy adviser Mark Hays said on Friday.
For example, special accounts set up by lawyers to hold company funds could be excluded from requirements for banks to determine a company’s true owners, Hays said.
Global Financial Integrity director of governmental affairs Heather Lowe called the administration bill “a very watered down version.”
The American Bankers Association said many of its concerns about the rule as it was being drafted were taken into account by the treasury regulators in the final version.
“We were pleased,” the lobbying group’s president Rob Nichols said in a statement.
A two-year transition period for the rule to take effect, “along with manageable expectations for customer and ... ownership identification, alleviates some of the potential burden,” he said.
The administration also made a push on another front. Obama and Lew both urged lawmakers to ratify eight tax treaties that have languished in the Senate.
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