The U.S. Is a Hypocrite on International Financial Crime
(Bloomberg Opinion) -- For more than a decade, the U.S. has pressed the rest of the world to crack down on the financial secrecy that has aided tax evasion and international crime. The Foreign Account Tax Compliance Act, adopted in 2010, requires other countries to report the accounts of U.S. taxpayers or be excluded from the U.S. financial system. Governments complied, despite the costs imposed on their financial institutions (and on U.S. taxpayers living abroad). Indeed, they went further: More than 100 countries signed on to the Common Reporting Standard, which exchanges more information than FATCA demands.
Yet the U.S. didn’t reciprocate. It hasn’t joined the CRS, and Congress has denied the Treasury Department the authority to collect information on foreigners’ balances held in U.S. bank accounts and their true owners.
As the recent Pandora Papers investigation attests, the U.S. has made itself a haven of choice for people looking to hide their money. States such as South Dakota and Nevada offer additional protections against disclosure, and have gained a competitive advantage over Switzerland and the Cayman Islands: If wealthy foreigners park assets in carefully structured trusts, neither the U.S. Internal Revenue Service nor their home-country governments will know. Ecuadorian President Guillermo Lasso and Chinese billionaire Sun Hongbin are reportedly among those who’ve found this appealing.
It seems little to ask that the U.S. should provide the same transparency that it demands of everybody else. Congress took a step in the right direction this year, when it passed a law requiring certain companies to register their beneficial owners. But it’s unclear whether the requirement will apply to trusts. Treasury should specify that it does.
Beyond that, Congress should empower Treasury to gather the data needed to participate in international exchanges of information, and to play its full part in ensuring that dirty money has nowhere to hide.
Editorials are written by the Bloomberg Opinion editorial board.
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