From Agence France Presse:
The International Monetary Fund (IMF) said on Tuesday that the United States was moving too slowly to prevent the use of shell and front companies to hide ownership.
This is strong stuff, coming from the IMF. Shell companies are just one kind of secrecy vehicle: there are many others.
The IMF said US regulators had made little progress toward the need to require that banks know who ultimately is behind the companies for which they handle money.
To be precise, the IMF said, in its characteristically diplomatic language:
Work is underway to strengthen financial integrity, but more rapid progress is needed to enhance transparency. Draft regulations have been produced to strengthen financial institutions’ obligations to identify and verify the identity of beneficial owners; and policy intentions announced to improve the authorities’ access to information on the beneficial ownership and control of U.S. companies. But these measures. . . are progressing slowly. Even when completed, the intended changes may not address fully all of the deficiencies identified in the last FATF mutual evaluation report. The lack of sufficient transparency may impact the authorities’ effectiveness in identifying and prosecuting persons who commit money laundering using U.S. companies and trusts, including laundering associated with taxes evaded in the United States and abroad, by U.S. citizens and foreigners respectively, and to cooperate effectively with their foreign counterparts in this regard.
It is good to see the IMF identifying trusts as an issue: this is important. For those who read our earlier Loophole USA blog, remember what the U.S. Fincen draft rules said about trusts:
“There are many types of trusts. While a small proportion may fall within the scope of the proposed definition of legal entity customer (e.g., statutory trusts), most will not. . . . identifying a ‘‘beneficial owner’’ among the parties to such an arrangement for AML purposes, based on the proposed definition of beneficial owner, would not be practical. At this point, FinCEN is choosing not to impose this requirement.”
And the U.S. seems to be hosting and tolerating outrageous activities on its own territories, such as Guam. A new “Guam trust incentives program“, for example, boasts 100 percent tax-free trusts. Coupled with the fact that Fincen won’t even bother to investigate these things, we have the makings of yet another toxic cocktail, courtesy of Uncle Sam.
This IMF report severely understates the scale of the issue. For an overview of the sheer scale of the deficiencies in the U.S., see our earlier Loophole USA blog.
It’s as if the U.S. were aspiring to take over the leadership role in offshore tax havens from Switzerland or the U.K.