fighting corruption one goal at a time

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Fighting Corruption

One Goal at a TimeBy Molly Elgin-Cossart and Alex Zerden September 2015


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Fighting CorruptionOne Goal at a Time

By Molly Elgin-Cossart and Alex Zerden September 2015


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1 Introduction and summary

3 Defining the problem

5 Taking action on the Sustainable Development Goals

14 Conclusion: An opportunity for U.S. leadership

18 Endnotes

Contents


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1 Center for American Progress | Fighting Corruption One Goal at a Time

Introduction and summary

In jus a ew weeks on Sepember 25, heads o sae and governmen rom

around he world will gaher in New York Ciy a he U.N. summi or he

adopion o he pos-2015 developmen agenda.1 Expeced o be he larges

gahering o heads o sae ever, he summi will se ou a volunary ramework

known as he Susainable Developmen Goals, or SDGs, ha will inorm global

developmen policy and pracice or he nex 15 years. Te new ramework will

replace he Millennium Declaraion and he Millennium Developmen Goals, or

MDGseigh goals ha he world has used as a roadmap o work oward end-ing exreme povery or he pas 15 years.2

Crucially, whereas he MDGs, which were launched in 2000, ocused mainly on

imporan social aspecs o developmenpovery, healh, and child survival

he new ramework is broader and ackles underlying barriers o developmen.

Te agreemen includes he ollowing specific language o comba illici financial

flows, or IFFs, and corrupion, which undermine good governance and develop-

men: “by 2030 significanly reduce illici financial and arms flows, srenghen

recovery and reurn o solen asses, and comba all orms o organized crime” and

“subsanially reduce corrupion and bribery in all is orms.”3

Tese objecives, alhough very general and lacking measurable indicaors, seek o

hal he prolieraion o “global public bads,” injurious behaviors such as corrupion,

klepocracy, ransnaional crime, and errorism4 ha cross borders and undermine

governmen accounabiliy, global and local insiuions, and inernaional develop-

men. Public corrupion and bribery, or example, harm ciizens by divering sae

resources or privae gain. Te channels or IFFssuch as money laundering, he

abuse o shell companies, and unscrupulous inermediariesenable he proceeds

o corrupion and bribery o move rapidly across borders and blend wih he legaleconomy. I and when crimes are prosecued in a oreign or domesic jurisdicion,

weak enorcemen and coordinaion preven he imely recovery and reurn o solen

asses. Meanwhile, illici arms, narcoics, and human rafficking hrive by exploiing

he same mechanisms and loopholes ha aciliae corrupion and bribery.


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Combaing hese bads is no easy ask. Bu he inernaional communiy mus

ge he figh agains corrupion righ. Wihou cracking down on illici financial

flows, organized crime, corrupion, and bribery, ataining progress on broader

susainable developmen is more expensive and less likely o succeed. While he

curren language noed above is disappoiningly vague and lacks concree merics

or success, i is noneheless a good sar. In order o succeed, counries will needo ranslae he agreemen ino acions ha can be implemened and measured

agains indicaors o map progress.5 Over he nex ew monhs, he Iner-agency

Exper Group on Susainable Developmen Goal Indicaors, or IAEG-SDGs

which is comprised o chie saisicians rom counries around he world and

includes regional and inernaional agencies as observerswill develop a pro-

posal or indicaors ha provide sandard measures o progress.6

However, i will be up o naional governmens o deermine how o make

progress on hese indicaors. Tis repor examines one U.N. member saehe

Unied Saesidenifies is effors o dae on fighing IFFs and corrupion, andsuggess acions o ensure ha he global figh agains corrupion is more han

mere words. No counry can figh his global challenge alone. I will require a

global effor o succeed in reducing illici financial flows and corrupion. Tus, he

repor concludes wih recommendaions or he Unied Saes o ake leadership

in he global figh agains corrupion and IFFs.7

Illici financial flows and corrupion rob governmens and heir ciizens o reve-

nue; devasae rus in he sae and he rule o law; and eed crime, errorism, and

unehical behavior. Te U.N. summi or he adopion o he pos-2015 develop-

men agenda offers he opporuniy o ake he figh agains corrupion o he nex

level by embedding i as a developmen goal.8 Enshrining ani-corrupion effors

in high-level discussions and policies would provide a necessary sep oward crea-

ing a more jus and prosperous world.

The Sustainable

Development Go

call on nations to

“significantly redu

illicit financial

and arms flows,

strengthen recove

and return of

stolen assets, and

combat all forms

organized crime” a

“substantially redu

corruption and

bribery in all its for


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Defining the problem

Illici financial flows and corrupion are closely inerlinked. Tey diminish he

resources available o saesand ulimaely, o people. Wealhy klepocras, crimi-

nals, or privae companies ha pocke IFFs rusrae broader economic and social

developmen goals. Money divered rom public coffers ino privae hands has a

negaive impac on a counry’s economic developmen. Insead o public inves-

mens in healh and educaion, or example, elies use he proceeds o corrupion o

purchase expensive cars and jewelry, producing significanly less reurn or sociey.

Developing counries suffer ousized negaive impacs, which is why a ocus on

fighing IFFs and corrupion is so cenral o he pos-2015 developmen agenda

and worh special ocus.9 Crucially, IFFs exacerbae weak and undercapaciy

insiuions, eroding public rus and depleing scarce public resources ha could

be direced elsewhere. A repor rom he U.N. Economic Commission or Arica

High Level Panel on Illici Financial Flows idenified more han $50 billion ha

was los o he coninen annually beween 2000 and 2008.10 Te diversion o

unds and rise o corrupion exacerbae poliical insabiliy and hreaen he

undamenal securiy and resilience o socieies.11 Bribes, ofen channeled hrough

ax havens and major financial ceners, und miliia groups in places such as he

Democraic Republic o he Congo, Zimbabwe, and Angola and enable corrup

leaders o say in power even when hey ace inernaional sancions.12

IFFs reduce oreign exchange reserves, conribue o shoralls in ax revenues and

higher deb burdens, and poenially hinder greaer provision o social services.

Tere is broad agreemen ha curbing IFFs could subsanially increase he level

o domesic resources available o developing counries or financing he pos-

2015 developmen agenda.13

Tere is no inernaionally agreed-upon definiion o illici financial flows.14

However, or he purposes o his repor, hey are defined as resources ha

are divered as a resul o bribery, corrupion, ax evasion, money laundering,

errorism financing, hef o sae asses, or “a range o marke and regulaory

abuses under cover o anonymiy.”15


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IFFs are ofen conflaed wih relaed ax issues, and many o he same mechanisms

ha aciliae ax avoidancesuch as complex legal srucures, ax havens, and

unscrupulous inermediariesenable oher criminals such as money launderers,

drug raffickers, evaders o economic sancions, and erroris financiers o move

heir proceeds around he world.16

While here is broad agreemen ha he scale o economic and social losses as

a resul o IFFs and corrupion is enormouscredible conservaive esimaes

range in he low rillions o dollarshere has no been a global effor o ideniy

he scale o he problem, hus hindering effors o hal IFFs and enorce ani-

corrupion effors.17 A global effor o quaniy and sandardize he mehodology

used o credibly esimae he impac o IFFsand corrupion as a wholewould

highligh he scale o he problem.

Te Unied Saes should propose and suppor such an effor, which he Unied

Naions, World Bank, and Organisaion or Economic Co-operaion andDevelopmen, or OECD, could joinly lead. Tis would help make he case o coun-

ries and companies ha hey should ake acion and quaniy why i is worh he

invesmen. Paired wih assessmens o he effeciveness o various ani-corrupion

policies and ools, his base o evidence would help esablish a shared undersand-

ing o he problem and cos-effecive ways o ackle i. I would also provide a sound

basis or measuring progress on he objecives in he pos-2015 agreemen.

Acknowledging he scale and scope o IFFs and corrupion problems is he

firs sep o overcoming i. Recen effors o begin o measure corrupion and

governancesuch as he World Bank’s “Governance Indicaors,” he World

Economic Forum’s “Execuive Opinion Survey,” and ransparency Inernaional’s

“Corrupion Percepion Index”are a promising sar.18 Bu much more needs o

be done. A global effor ocused on IFFs and corrupion would help srenghen

he seps ha counries can ake, as oulined in he ollowing secion.


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Taking action on the

Sustainable Development Goals

Te Unied Saes has been a leader in ackling money laundering, oreign cor-

rupion, and asse recovery, bu i has allen shor in oher areas such as beneficial

ownership reorm, which would bring needed ransparency relaed o he owner-

ship o corporaions and oher legal eniies. Te key challenge is wheher he

Unied Saes has he poliical will o shore up is own work on combaing illici

financial flows and corrupion while helping oher naions wih heir effors.

Te inclusion o explici objecives on IFFs and corrupion in he proposed

Susainable Developmen Goals is an imporan opporuniy. Tree componenso hose objecives are deailed here, including he Unied Saes’ curren sanding

in addressing each objecive and recommendaions or seps he naion can ake

o significanly reduce illici financial and arms flows; srenghen effors o recover

solen asses and comba all orms o organized crime; and subsanially reduce

corrupion and bribery in all is orms.

Significantly reduce illicit financial and arms flows

Significanly reducing illici financial flows is necessary o achieve oher SDGs

since IFFs deprive saes o revenue, disor governmen decision-making,

and erode good governance and he rule o law.19 While IFFs have an ou-

sized impac on developing economies, he Unied Saes is no immune.

Addiionally, he Unied Saes plays an imporan role in semming he IFFs

ha originae rom, ransi hrough, and domicile in is economy. Specifically,

he Unied Saes can improve is effors o reduce IFFs hrough he financial

and real esae indusries. Enhanced laws and regulaions, such as closing bank-

ing regulaory reporing loopholes, as discussed below, can aid in his effor.

Furhermore, he Unied Saes can coninue o suppor oher governmensin building heir capaciy or domesic enorcemen agains IFFs, especially in

counries where corrupion and bribery are paricularly acue.


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Ani-money laundering, or AML, enorcemen is he main ool or combaing

IFFs originaing in and ransiing hrough he Unied Saes. Te Unied Saes

has some o he mos exensive ani-money laundering laws and regulaions in he

world. Muliple agenciesparicularly wihin he U.S. deparmens o Jusice,

Homeland Securiy, and he reasurydevoe significan resources o enorcing

his sysem. Te U.S. reasury Deparmen published a comprehensive moneylaundering risk assessmen in June ha deails some o he enorcemen effors

and rends over he pas decade.20 U.S. ani-money laundering effors include pros-

ecuions, a complex compliance archiecure under he Bank Secrecy Ac and he

Pario Ac,21 border and cusoms inerdicion, seting inernaional sandards, and

capaciy-building programs o assis oher counries.

Much o he AML compliance sysem leverages he resources o he privae secor,

paricularly hrough regulaions on he financial indusry, o address poenial

illici conduc occurring a heir businesses.22 However, serious and sysemaic

issues wih financial sysem oversigh and compliance persis.23 For example, U.S.auhoriies imposed a hen-record $1.9 billion fine or HSBC’s money laundering

or Mexican drug carels, erroriss, and pariah saes.24 Despie his, he coninued

deficiencies in HSBC’s ani-money laundering compliance program are seri-

ous enough ha he U.S. Deparmen o Jusice is seeking o keep a hird-pary

monior’s repor on hem confidenial, in par or ear ha criminals and erroriss

could poenially exploi hese weaknesses.25 Tis proraced scruiny o HSBC’s

remediaion effors was he resul o a deal ha enabled HSBC o avoid prosecu-

ion,26 bu he decision no o prosecue HSBC or individual employees has led

some civil sociey groups o complain ha large banks may perceive ha hey

are “oo big o jail,” weakening heir incenives o implemen cosly compliance

reorms.27 HSBC is no alone: Oher large financial insiuions remain arges o

enorcemen acions or coninue o receive scruiny on heir remediaion effors.

Tis heighened regulaory and enorcemen climae has creaed is own se o

consequences. Specifically, i may have conribued o decisions by major finan-

cial insiuions o simply pull heir businesses ou o cerain business lines and

counries, such as Somalia, direcly harming cerain populaions’ abiliy o access

financial services and creaing greaer risks or economic and poliical insabiliy.28

In he Unied Saes, indusry-specific and legislaive loopholes in he AMLenorcemen and regulaory srucure impede he governmen’s abiliy o ully

enorce he law in order o preven bad acors rom exploiing he broader U.S.

economy or IFFs and oher crimes. Acion on anonymous companies hrough

enhanced beneficial ownership legislaion, as oulined below, is one way o make

money laundering more difficul ha does no also impede access o financial

services or legal aciviies, such as cross-border remitances.


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IFFs hrive when perperaors can mask he beneficiaries o illici ransacions.

Currenly, he Unied Saes does no require is subnaional unis, he 50 saes, o

collec any inormaion on he beneficial ownerha is o say, he naural person

or persons who will own or conrol he eniy being ormedwhen orming a

new legal eniy such as a corporaion, limied liabiliy company, or parnership.29

Nor does i require corporae ormaion agens, corporae service providers, oratorneys who help orm U.S. eniies o collec beneficial ownership inormaion.

In he Unied Saes, abou 2 million corporaions are ormed per year, as many

as he res o he world combined. Ye he Unied Saes does less han almos any

oher jurisdicion o ideniy he individuals behind hose new companies.30

Anonymiy creaes a comorable cover or hose who are looking o hide heir

money wih ies o organized crime, corrupion, and oher nearious aciviies.

According o Te New York imes , more han hal o he sales in he approximaely

$8 billion New York Ciy luxury real esae markeresidences worh more han

$5 milliongo o shell companies each year.31 Tese include companies ied oRussian klepocras, corrup Greek businessmen, and mining magnaes conviced

o violaing he land righs o indigenous ribes.32

Te Unied Saes should close regulaory loopholes ha excuse cerain indus-

ries rom U.S. sauory requiremens o esablish ani-money laundering pro-

grams, including he real esae and escrow agens ha can handle he proceeds

o organized crime, corrupion, and bribery.33 In lae Augus, he U.S. reasury

Deparmen proposed a new rule on regisered invesmen advisors ha would

require hem o implemen AML compliance programs, a posiive developmen in

closing secor-wide gaps.34

IFFs also harm broader U.S. oreign policy and naional securiy ineress.

Recen esimony o he biparisan, Republican-led Congressional ask Force o

Invesigae errorism Financing ocused almos exclusively he need or beneficial

ownership reorm a he ederal level.35 In 2013, parly o address congressional

concern, he Whie House released is “G-8 Acion Plan or ransparency o

Company Ownership and Conrol”36 as par o a G-8 commimen o increase

corporae ownership ransparency.37 Te plan called or saes o collec benefi-

cial ownership inormaion as par o he corporae ormaion process. In 2014,he G-20 endorsed he implemenaion o beneficial ownership principles.38 Te

Whie House also announced a beneficial ownership legislaive proposal as par o

Presiden Barack Obama’s fiscal year 2014 budge.39


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Despie hese high-level commimens and growing suppor or legislaion requir-

ing U.S. saes o obain beneficial ownership inormaion,40 here is a real risk ha

progress could hal or even backslide. Legislaion proposing beneficial ownership

reorms is salled in Congress. Te Whie House proposed an alernaive o earlier

Senae bills ha atemped o address he issue o beneficial ownership in is FY

2014 budge, bu his alernaive has ye o be inroduced in Congress.

While U.S. progress has salled, oher counries such as he Unied Kingdom

and Norway have orged ahead by requiring he esablishmen o public corpo-

rae regisries ha will make corporae beneficial ownership inormaion avail-

able o he public.41

In he absence o progress on legislaion, he U.S. reasury Deparmen has

advanced a narrower regulaory proposal.42 Te proposed rule conains explici

due diligence requiremens or financial insiuions o ideniy he beneficial

owners o corporaions ha open accouns.43 Bu many consider he proposedrule inadequae o he enormiy o he ask.44 For insance, hen-Sen. Carl Levin

(D-MI) noed ha he proposed rule would “weaken curren [indusry] pracices

by employing an ineffecive and unworkable definiion o beneficial ownership.”45

Finding compromise on his issue may no be easy, paricularly on echnical

quesions. For insance, as a December 2014 Cener or American Progress brie

suggesed, reconciling beneficial ownership hresholds is an imporan ask: Te

difference beween ownership hresholds o 25 percen and 10 percen has pro-

ound implicaions or he ease wih which financial services indusry and com-

panies can mee cerain reporing obligaions. Any final rule should balance he

burdens placed on indusry wih reasonable expecaions or compliance.46

Te Obama adminisraion and Congress should coninue o engage wih he

business communiy, paricularly financial insiuions, sae governmens, and

civil sociey o find a workable mechanism or beneficial ownership reporing ha

mees law enorcemen needs while recognizing he burdens placed on indusry

and sae governmens. A joinly governed ask orce o business, civil sociey, and

governmen represenaives could be esablished o provide recommendaions on

a workable pah orward. Some in he business communiy have already poinedou ha here is a business case or ackling corrupion hrough shell companies47

because corrupion disors markes and can disadvanage hones companies ha

provide beter producs and services a lower coss. Finding a pragmaic soluion

ha business, he saes, and civil sociey can suppor would be helpul in breaking

he legislaive impasse around beneficial ownership.


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Te adminisraion should work wih parners in he G-7 and G-20 o require

beneficial ownership disclosures or public procuremen conracs, building

on exising effors. Consensus on prioriizing his imporan issue would send

a message o oher counries abou he need o improve heir public conrac-

ing sysems. Wih $9.5 rillion o public money spen each year on governmen

procuremen or ciizens48

and an esimaed 20 percen o 25 percen o naionalprocuremen budges los o corrupion annually, procuremen reorm also has

grea poenial o bolser domesic resources and send a broader marke signal.49

Strengthen efforts to recover stolen assets

and combat all forms of organized crime

While prevenionas oulined in he above acions on beneficial ownership and

ani-money launderingis he preerable means o sop illici aciviy and cor-

rupion, i is also imporan o righ already commited wrongs by reurning heproceeds o corrupion o heir counry o origin. For example, when Sani Abacha,

Nigeria’s ormer miliary ruler, died in office, Swiss and oher oreign bank offi-

cials reurned more han $1 billion ha he had plundered and hidden in oreign

accouns o he governmen o Nigeria.50

A credible mechanism or seizing and reurning solen asses can also deer

corrup officials who hide unds in jurisdicions oher han heir home counry.

Asse recovery is he legal, diplomaic, and invesigaory process o reurn exra-

erriorial asses o heir original jurisdicion. While here is no inernaionally

agreed-upon definiion o organized crime, i is disinguishable rom oher orms

o criminal aciviy based on is durable hierarchy and enerprise srucure, he

employmen o sysemaic violence and corrupion, and he exension o acivi-

ies ino he legal economy.51 Tese wo conceps are disinc and require differ-

en approaches and resources or he Unied Saes governmen o comba. Asse

recovery is a more recen and narrowly ocused challenge compared o combaing

he many orms o organized crime and is he ocus o his secion.

Advances in financial sysems, communicaions echnology, and ransporaion

combined wih differences in legal sysems, he high coss o coordinaing inves-igaions, a lack o inernaional cooperaion, and bank secrecyhave enabled

corrup officials o hide heir illici proceeds overseas. Bu in recen decades,

counries have shown increased willingness o cooperaively ackle his problem,

or insance by devoing an enire chaper o he 2003 U.N. Convenion agains

Corrupion o solen asses.52


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Te Unied Saes is pioneering highly effecive mechanisms or he reurn o

solen asses. For example, he U.S. Deparmen o Jusice, or DOJ, Klepocracy

Asse Recovery Iniiaive has proven o be a successul mechanism o ideniy and

reurn he proceeds o corrupion o heir counry o origin.53 Te iniiaive began

in 2010 and is led by he DOJ’s Asse Foreiure and Money Laundering Secion,

or AFMLS.54

A dedicaed eam o prosecuors and invesigaors develops cases byideniying asses such as money and real esae and hen seizing hem or ulimae

reurn o heir counry o origin.

o assis oher counries in esablishing similar asse recovery and invesigaive

programs, he DOJ, U.S. Sae Deparmen, and U.S. Deparmen o Homeland

Securiy have joinly compiled a pracical guide or heir oreign counerpars.55

Tis public documen is available o governmens around he world o help hem

undersand he mechanisms or cooperaion and inormaion sharing wih he U.S.

governmensuch as muual legal assisance, financial records, evidence gaher-

ing, and how o apply o seize asses locaed in he Unied Saes. In April 2014,hen-U.S. Atorney General Eric Holder announced he creaion o a dedicaed

klepocracy squad wihin he Federal Bureau o Invesigaion, or FBI, o urher

suppor he capabiliies o AFMLS and oreign parners who reques assisance.56

Te Unied Saes has also suppored mulilaeral asse recovery effors such as he

Solen Asse Recovery Iniiaive, or SAR, a World Bank-U.N. Office on Drugs and

Crime parnership.57 SAR has made subsanial progress in consolidaing avail-

able daa and inormaion on issues involving shell corporaions and corrupion

prosecuions.58 Tis public daabase allows anyone o research legal proceedings in

heir counry or oher jurisdicions.

wo recen documenshe 2011 Whie House “Sraegy o Comba

ransnaional Organized Crime,” or OC,59 and a biparisan 2013 U.S. Senae

repor iled “Te Buck Sops Here”60represen imporan seps orward in

acknowledging he role ha he Unied Saes plays in he organized crime

ecosysem. o build on his imporan work, he Unied Saes should imple-

men he legislaive reorms idenified in he Senae repor, among ohers, ha

would reduce he abiliy o launder unds rom organized criminal aciviies.61

Tis relaes specifically o enacing beneficial ownership legislaion and enhancingpenalies or money laundering.


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Substantially reduce corruption and bribery in all its forms

Corrupion and bribery represen wo inerrelaed harms ha conribue o illici

financial flows and harm ciizens by divering sae resources or privae gain. Te

mos widely used definiion o corrupion is he abuse o public office or privae

gain,62

alhough some objec ha he emphasis on he public secor ignores he roleo he privae secor.63 Corrupion is an ac ha benefis boh sides o a ransac-

ionhe giver and he receiverand involves he abuse o power held in a sae

insiuion or privae eniy.64 Bribery is a subse o corrupion ha ocuses on he

provision o somehing o value o a governmen official or a specific service.

Te Unied Saes is a global leader in combating corrupion and bribery in all is

orms. Te counry is a sae pary o he U.N. Convenion agains Corrupion, or

UNCAC, and he OECD Convenion on Combaing Bribery o Foreign Public

Officials in Inernaional Business ransacions.65

Domesically, he Unied Saes has pioneered oreign bribery prosecuions under

he Foreign Corrup Pracices Ac, or FCPA, o 1977.66 Among oher provisions,

he FCPA seeks o eliminae bribery o oreign governmen officials or commer-

cial gain. I has proven o be a powerul weapon o comba oreign corrupion as

companies and heir leaderships have undersood he business risks posed by cor-

rupion.67 Boh he U.S. Securiies and Exchange Commission, or SEC, and he U.S.

Deparmen o Jusice have auhoriy o enorce he FCPA. Even i he DOJ chooses

no o prosecue suspeced perperaors, he SEC can proceed wih fines or inac-

curae books and records or raudulen ransacionsacions ha ac as powerul

deerrens and ools or ransparency.68 Inernal invesigaions and volunary sel-

reporing by businesses abou poenial FCPA violaions urher expand he saue’s

capabiliies. Addiionally, he DOJ dispaches dozens o prosecuors around he

world o develop local capabiliies in areas such as ani-bribery and corrupion.69

Te DOJ has hired a new compliance counsel specialis who will be responsible

or evaluaing he effeciveness o FCPA compliance programs. As he DOJ devel-

ops norms and sandards around effecive compliance, hose sandards can serve

as a benchmark or oher counries.70 Te compliance counsel will aim o arge

FCPA compliance more effecively, ideniying sysemaic noncompliance romrogue individuals, providing guidance or appropriae precauions given a com-

pany’s risk profile, and esablishing sandards or monioring and oher measures

or noncomplian businesses. Clariying hese issues can help oher counries

improve he effeciveness and efficiency o heir compliance effors.71


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Te Unied Saes coninues o lead in shaping norms and global sandards in he

ani-corrupion field, and he U.S. financial sysem is an enormous asse o lever-

age in aking a more acive leadership role in ani-corrupion aciviies. Te Unied

Saes is he world’s larges financial sysem, and he dollar is he global reserve

currency, giving he U.S. financial sysem unparalleled global reach. Tis dominan

posiion enables he Unied Saes o ake on a leadership role because is poli-cies and pracices affec hose o oher counries. For example, he 2010 Foreign

Accoun ax Compliance Ac, or FACA, requires U.S. financial insiuions o

wihhold a porion o cerain paymens made o oreign financial insiuions

ha do no agree o ideni y and repor inormaion on U.S. accoun holders.72

Designed o curb offshore ax evasion, more han 100 jurisdicions have signed up

or inergovernmenal agreemens o implemen FACA. FACA has pu signifi-

can pressure on Swizerland o end banking secrecy and opened he doors or a

new global sandard on he auomaic exchange o ax inormaion ha all G-20

and OECD counries have endorsed.73

Ani-corrupion effors rely upon inernaional parners, and a serious rus defici

impedes greaer progress. Many developing counries suspec ha ani-corrupion

invesigaions are driven by poliical agendas, and auhoriies are ofen earul o

sharing inormaion when conducing invesigaions because hey are concerned

ha he inormaion migh leak. Many counries have limied capaciy and resen

he addiional burdens o compliance, so assisance wih capaciy buildingor

example, building daabases and regisrieswould be one way o esablish longer-

erm relaionships and build rus.74 Te Unied Saes would benefi rom proacive

engagemen ha osers good working relaionships wih law enorcemen auhori-

ies and prosecuors among a broader range o parners. In paricular, he Unied

Saes should work hrough regional and mulilaeral bodies, as i has begun o do

hrough he Asia-Pacific Economic Cooperaion orum’s ani-corrupion nework.75

Te SEC should aim o improve is engagemen wih oreign counerpars ha lack

resources and/or enorcemen capaciy, sharing is knowledge and ools and build-

ing relaionships wih oher jurisdicions ha can beter enable cooperaion in inves-

igaions and enorcemen. In addiion o working wih oher counries, he Unied

Saes, wih he Commerce and Sae deparmens in he lead, should engage wih

he business communiy, including hrough he U.N. Global Compac, o srenghennorms and principles o ani-corrupion and good governance.


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Trough he U.S. reasury Deparmen, he Unied Saes should seek o

srenghen he poliical profile and echnical capabiliies o he Financial Acion

ask Force, or FAF, o build on is ani-errorism-financing and money-launder-

ing experise and srenghen is work on relaed corrupion issues. Te reasury

Deparmen can also work wih he U.S. Sae Deparmen, promoe FAF’s lis o

high-risk and noncooperaive jurisdicions more broadly, and work wih counrieso help hem graduae rom he lis hrough concered acion.

Facing inward, he Unied Saes can make progress on is domesic effors o

reduce corrupion and bribery. Te DOJ mainains a Public Inegriy Secion o

comba corrupion by public officials.76 Similar mechanisms exis a he sae and

local levels. Furhermore, Congress enaced legislaion in 1978 and 1988 o esab-

lish permanen, independen, and nonparisan offices o inspecors general, or

IGs, in more han 70 ederal agencies.77 Tese offices provide an imporan mecha-

nism or governmen oversigh in prevening and deecing wase, raud, and

abuse. However, he IGs are experiencing difficulies in ulfilling heir mandaes.78


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Conclusion:

An opportunity for U.S. leadership

Te Susainable Developmen Goals offer an opporuniy or he Unied Saes o

lead on he global effor o comba illici financial flows and corrupion. Semming

his global public bad has he poenial o generae grea global public good. When

heads o sae and governmen mee in New York in Sepember, i is imporan o

secure high-level global commimens o figh corrupion. Te Unied Saes can

lead on his effor by aking imporan and relaively modes seps a home and

abroad o figh corrupion and helping shape global norms.

Crucially, he Unied Saes should propose and suppor a global effor o quaniy

IFFs and sandardize he mehodology used o credibly esimae o he impac

o IFFs in order o highligh he scale o he problem. A join U.N., World Bank,

and OECD effor o define IFFs and se ou a global assessmen o he impac and

linkages across bordersbuilding on effors by he OECD and he Inernaional

Moneary Fund, as well as civil sociey groupswould be a much-welcomed boon

o defining and ackling he problem o illici financial flows. Wheher hrough his

effor or separaely, a credible compilaion o ani-corrupion approaches deailing

wha works and wha does no would grealy help governmens and businesses ake

he mos effecive and efficien seps orward in curbing corrupion.

Te Unied Saes needs o uphold is exising G-8 and G-20 commimens o pre-

ven he ormaion and perpeuaion o U.S. corporaions and oher legal eniies

wih hidden owners hrough enhanced ederal beneficial ownership legislaion.

A World Bank repor highlighs Delaware as he second-mos popular locaion

or shell companies involved in major corrupion scandals afer he Briish Virgin

Islands.79 A shif in U.S. policy on his issue would lead o global change, much in

he way ha Foreign Accoun ax Compliance Ac has led o a global crackdown

on banking secrecy. Legislaion o ideniy ownership inormaion o anonymousshell companies in order o aciliae invesigaion by compeen auhoriieslaw

enorcemen, prosecuorial auhoriies, supervisory auhoriies, ax auhoriies,

and financial inelligence unisis an imporan sep.80


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In addiion o legislaion, he Obama adminisraion could work wih parners

in he G-7 and G-20 o require beneficial ownership inormaion or public

procuremen processes, leading by example wih more ransparen spending o

governmen unds. As par o he effor o srenghen beneficial ownership legisla-

ion, he Unied Saes should orm a join ask orce comprised o governmen,

business, legal, and civil sociey expers o help o reach agreemen on ousandingechnical issues. A he same ime, he Unied Saes can improve is own effors

hrough implemening he legislaive reorms proposed by he 2013 U.S. Senae

repor o increase penalies or money laundering and suppor enhanced benefi-

cial ownership requiremens.81

In order o improve global effors o seize and reurn solen asses, he Unied Saes

can build on is record o accomplishmens and devoe addiional resources o help-

ing oher counries wih heir invesigaions and prosecuions o solen asses and

sharing is knowledge, ools, and bes pracices wih parners abroad. In urn, his

would srenghen he naion’s own effors. Te Unied Saes should ocus efforshrough mulilaeral and plurilaeral iniiaives, such as he Solen Asse Recovery

Iniiaive led by he World Bank and he U.N. Office on Drugs and Crime.

In fighing corrupion across he globe, he Unied Saes can se sandards ha are

boh clearer and more argeed and pave he way or global acion. Some o hese

effors are already underway hrough he DOJ’s new compliance counsel. Te Unied

Saes can also improve enorcemen and advocae or more rigorous implemenaion

o exising global effors, such as he U.N. Convenion agains Corrupion.

All o hese effors would be bolsered by signals ha he Unied Saes is aking

seps o ge is own house in order by ackling domesic corrupionor example,

srenghening he abiliy o inspecors general o carry ou heir mandaesand

helping oher counries so ha he figh agains corrupion becomes a ruly

mulilaeral effor. Tis could include srenghening curren mulilaeral and

regional efforssuch as Financial Acion ask Force or Asia-Pacific Economic

Cooperaion ani-corrupion efforsas well as building capaciy on a bilaeral

basis wih a broader array o parners. Prioriizing relaionships hrough assisance

and capaciy building o oher counries in order o improve heir ani-corrupion

enorcemen and prosecuion capabiliies should be a primary insead o a second-ary goal o U.S. effors. Greaer alignmen beween he various inernaional- and

domesic-ocused insiuions working on illici flows and corrupionas he

Unied Kingdom has begun o do wih he ormaion o a new crime uni devoed

o invesigaing corrupion wihin U.K. borders ha affecs developing coun-

ries82is anoher imporan way o improve and sreamline U.S. effors.


19/26


Illici financial flows and corrupion severely limi developmen and economic

growh effors; undercu rus in he sae and he rule o law; and conribue

o he rise o crime and errorism. Te adopion o he pos-2015 developmen

agenda will provide an opporuniy o draw greaer atenion o hese issues and

embed he figh agains corrupion a a higher level. I he global communiy

agrees o ake acion o curb IFFs and corrupion, effors wihin he Unied Saescan be pushed urher. Counries mus seize his momen o global consensus

in he figh agains corrupion o ake concree acions a home and abroad. Te

Unied Saes should ake advanage o his chance o srenghen is corrupion

fighing effors and collaborae wih oher counries o make he world a saer,

more jus, and more prosperous place.


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About the authors

Molly Elgin-Cossart is a Senior Fellow a he Cener or American Progress, where

she works on issues involving oreign policy, inernaional developmen, rising

powers, and poliical economy. She is also a nonresiden senior ellow a New York

Universiy’s Cener on Inernaional Cooperaion. Previously, she was chie o saffo he U.N. secreary-general’s High-Level Panel on he Pos-2015 Developmen

Agenda, an inernaional panel appoined by U.N. Secreary-General Ban

Ki-moon o advise him on he uure global developmen agenda.

Alex Zerden is an atorney who has worked on ani-corrupion, financial crimes,

and congressional oversigh maters involving offshore ax evasion, beneficial

ownership legislaion, economic sancions, and money laundering.

Acknowledgements

Tis repor includes subsanive conribuions rom Alejandra Kubischek

Bujones, program direcor or inernaional rade and ani-corrupion a he

American Conerence Insiue, and rom David McNair, direcor or ransparency

and accounabiliy a he ONE Campaign.


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Endnotes

1 U.N. Sustainable Development Knowledge Platform,“United Nations Sustainable Development Summit2015,” available at https://sustainabledevelopment.un.org/post2015/summit (last accessed September2015).

2 United Nations, “We Can End Poverty: Millennium Goals2015 and Beyond,” available at http://www.un.org/millenniumgoals/ (last accessed September 2015).

3 U.N. Sustainable Development KnowledgePlatform, “Transforming Our World: The 2030Agenda for Sustainable Development,” available athttps://sustainabledevelopment.un.org/content/documents/7891Transforming%20Our%20World.pdf (last accessed September 2015).

4 The World Bank, “Global Economy: Global PublicGoods,” available at http://web.worldbank.org/WBSITE/EXTERNAL/EXTABOUTUS/0,,contentMDK:20627295~pagePK:51123644~piPK:329829~theSitePK:29708,00.html (last accessed September 2015). For more on “globalpublic bads” and illicit flows, see Peterson InternationalInstitute for Economics, “Chasing Dirty Money: Combat-ing Global ‘Public Bads’” (2004), available at http://www.

piie.com/publications/chapters_preview/381/7iie3705.pdf.

5 The indicators are currently being developed, withthe U.N. Statistical Commission leading the process.Proposed indicators include “total value of inwardand outward illicit financial flows (in current US$)” fortarget 16.4—which will be difficult to calculate giventhat there is neither an agreed-upon definition nor arigorous methodology for how to measure this—and“percentage of persons who had at least one contactwith a public official, paid a bribe to a public official,or were asked for a bribe by th ese public officials,during the last 12 months” for target 16.5. See U.N.Statistical Commission, “First proposed priority indica-tor list” (2015), available at https://docs.google.com/file/d/0B8n3WhOaTbGVZ3JIbUQ4QlFWYjQ/view. Seealso, Center for Global Development, “Financial Flowsand Tax Transparency,” available at http://www.cgdev.

org/topics/illicitfinancialflows (last accessed September2015); Organisation for Economic Co-operation andDevelopment, “Illicit Financial Flows from D evelopingCountries: Measuring OECD Responses” (2014), avail-able at http://www.oecd.org/corruption/Illicit_Finan-cial_Flows_from_Developing_Countries.pdf ; Alex Cob-ham, “Post-2015 Consensus: IFF Assessment” (Lowell,MA: Copenhagen Consensus Center, 2014), available athttp://www.copenhagenconsensus.com/publication/post-2015-consensus-iff-assessment-cobham; GlobalFinancial Integrity, “Illicit Financial Flows,” available athttp://www.gfintegrity.org/issue/illicit-financial-flows/ (last accessed September 2015).

6 United Nations, “IAEG-SDGs: Inter-agency Expert Groupon SDG Indicators,” available at http://unstats.un.org/sdgs/iaeg-sdgs/index.html (last accessed September2015).

7 While not exhaustive, this review consolidates dispa-rate U.S. government programs and activities to informhow other countries can develop their internal capacityto address the SDGs, as well as how the United Statesmay be able to assist in partnering with foreign govern-ments. Policy prioritization coupled with appropriatetechnical capabilities are essential to the successfulimplementation of any future reforms.

8 U.N. Sustainable Development Knowledge Platform,“United Nations Sustainable Development Summit2015.”

9 Civil society and international nongovernmental orga-nizations have become increasing vocal and engaged

on these interrelated issues. For reference on the scaleof this issue, Global Financial Integrity, an advocacy or-ganization, estimates that $991.2 billion left developingcountries through illicit financial outflows in 2012. SeeGlobal Financial Integrity, “Illicit Financial Flows.” For asample of other organizations engaging on this issue,see endnote 1. On the link between corruption andIFFs, see Financial Transparency Coalition, “Understand-ing the Relationship between Corruption and IllicitFinancial Flows,” February 28, 2014, available at http://financialtransparency.org/understanding-the-relation-ship-between-corruption-and-illicit-financial-flows/.

10 U.N. Economic Commission for Africa, “IFF Back-ground,” available at http://www.uneca.org/pages/iff-background (last accessed September 2015). Seealso, U.N. Economic Commission for Africa, “IllicitFinancial Flows: Report of the High Level Panel on IllicitFinancial Flows from Africa” (2015), available at http://

www.uneca.org/sites/default/files/PublicationFiles/iff_main_report_26feb_en.pdf .

11 For more on how corruption feeds instability andinsecurity, see Sarah Chayes, Thieves of State (New York:W. W. Norton & Company, 2015).

12 Tom Burgis, The Looting Machine (New York: PublicAf-fairs, 2015).

13 Joint Development Committee, “From Billions to Trillions: Transforming Development Finance” (2015),available at http://siteresources.worldbank.org/DEV-COMMINT/Documentation/23659446/DC2015-0002(E)FinancingforDevelopment.pdf; The World Bank, “Fi-nancing for Development Post-2015” (2013), availableat https://www.worldbank.org/content/dam/World-bank/document/Poverty%20documents/WB-PREM%20financing-for-development-pub-10-11-13web.pdf .

While some advocates tend to equate illicit financialflows to an equal amount of money that could be spenton essential services, such as education or health, theactual relationship is less direct. If the flows remained inthe country where they originated, a proportion of thefunds would be taxed as government revenue, whichwould then be allocated according to the government’spreferences and policies. Therefore, the actual moneydirected toward providing basic services would be aproportion of the taxable component of the total flows,and the amount directed toward basic needs wouldvary country by country.

14 The lack of a definition is itself an issue that needs to beaddressed and can be a subject for further research.

15 Alex Cobham, “Illicit Financial Flows: AssessmentPapers” (Lowell, MA: Copenhagen Consensus Center,2014), available at http://www.copenhagenconsensus.

com/sites/default/files/iff_assessment_-_cobham_0.pdf.

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16 At the U.S. government level, the U.S. Senate Perma-nent Subcommittee on Investigations scrutinizedthe linkages between foreign corruption and th eU.S. banking system in a 2010 hearing and report.See Senate Permanent Subcommittee on Investiga-tions, “Keeping Foreign Corruption Out of the UnitedStates: Four Case Histories,” February 4, 2010, availableat http://www.hsgac.senate.gov/subcommittees/investigations/hearings/-keeping-foreign-corruption-out-of-the-united-states-four-case-histories. In 2012,the subcommittee also examined the vulnerabilities ofthe financial system through a study of HSBC bank and

its anti-money laundering deficiencies, circumventionof economic sanctions, and relationships to banks sus-pected of terrorism financing. See Senate PermanentSubcommittee on Investigations, “HSBC Exposed U.S.Financial System to Money Laundering, Drug, TerrorismFinancing Risks,” July 16, 2012, available at http://www.hsgac.senate.gov/subcommittees/investigations/media/hsbc-exposed-us-finacial-system-to-money-laundering-drug-terrorist-financing-risks.

17 For more on measurement and methodologies, seeDaniel Kaufman, “Myths and Realities of Governanceand Corruption” (Washington: The World Bank, 2005).

18 The World Bank, “Worldwide Governance Indicators,”available at http://info.worldbank.org/governance/wgi/index.aspx (last accessed September 2015);World Economic Forum, “Executive Opinion Sur vey2014,” available at http://reports.weforum.org/global-

risks-2015/executive-opinion-survey-2014/ (lastaccessed September 2015); Transparency I nternational,“Corruption Perceptions Index 2014: Results,” availableat https://www.transparency.org/cpi2014/results (lastaccessed September 2015).

19 Arms flows are an important issue with serious implica-tions for development but are beyond the scope of thispaper, which focuses on the financial dimensions ofillicit flows and corruption.

20 U.S. Department of the Treasury, National Money Launder-ing Risk Assessment (2015), available at http://www.treasury.gov/resource-center/terrorist-illicit-finance/Docu-ments/National%20Money%20Laundering%20Risk%20Assessment%20%E2%80%93%2006-12-2015.pdf .

21 For example, see 31 U.S.C. 5311 et seq.; USA PATRIOT Act , Public Law 107-56, 107th Cong., 1st sess. (October

26, 2001), § 311, 312, 313, 314, 319(b), 325, 326, 351,352, 356, 359, 362.

22 International Monetary Fund, “Anti-Money Launderingand Combating the Financing of Terrorism (AML/CFT):Report on the Review of the Effectiveness of the Pro-gram” (2011), available at http://www.imf.org/external/np/pp/eng/2011/051111.pdf .

23 Ian McKendry, “Banks Face No-Win Scenario on AML‘De-Risking,’” American Ban ker , November 17, 2014,available at http://www.americanbanker.com/news/regulation-reform/banks-face-no-win-scenario-on-aml-de-risking-1071271-1.html?zkPrintable=1&nopagination=1.

24 James Ball and Harry Davies, “HSBC money-launderingprocedures ‘have flaws too bad to be revealed,’” TheGuardian, June 5, 2015, available at http://www.

theguardian.com/business/2015/jun/05/hsbc-money-laundering-procedures-flaws-too-bad-to-be-revealed.

25 The Wall Street Journal , “HSBC Judge Orders DOJ To TurnOver Monitor Report,” April 29, 2015, available at http://blogs.wsj.com/riskandcompliance/2015/04/29/hsbc-

judge-orders-doj-to-turn-over-monitor-report/.

26 Carrick Mollenkamp, “HSBC became bank to drugcartels, pays big for lapses,” Reuters, December11, 2012, available at http://www.reuters.com/article/2012/12/12/us-hsbc-probe-idUSBRE-8BA05M20121212.

27 Global Financial Integrity, “Money Laundering,”available at http://www.gfintegrity.org/issue/money-laundering/ (last accessed September 2015).

28 Pam Fessler, “Terrorism Fears Complicate Money Transfers For Somali-Americans,” National PublicRadio, February 25, 2015, available at http:// www.npr.org/2015/02/25/389037099/terrorism-fears-compli-cate-money-transfers-for-somali-americans.

29 Currently, no federal beneficial ownership legislationexists to address the issue of shell companies. Shell

companies designed to obscure ownership do not per-sist but rather thrive as a result of a failed status quo. Arecent U.S. Treasury Department report defined a sh ellcompany as one that is “registered with the state as alegal entity, but has no physical operations or assets.”See U.S. Department of the Treasury, National MoneyLaundering Risk Assessment , p. 43.

30 Government Accountability Office, “Company Forma-tions: Minimal Ownership Information Is Collectedand Available,” GAO-06-376, Report to the PermanentSubcommittee on Investigations, Committee onHomeland Security and Governmental Affairs, U.S.Senate, April 2006, available at http://www.gao.gov/new.items/d06376.pdf; Emile van der Does de Willeboisand others, “The Puppet Masters” (Washington: TheWorld Bank, 2011), available at https://star.worldbank.org/star/sites/star/files/puppetmastersv1.pdf ; MichaelFindley, Daniel Nielson, and Jason Sharman, “Global

Shell Games: Testing Money Launderers’ and TerroristFinanciers’ Access to Shell Companies” (Queensland,Australia: Griffith University, 2012), available at http://www.gfintegrity.org/wp-content/uploads/2014/05/Global-Shell-Games-2012.pdf ; Senate PermanentSubcommittee on Investigations, “Tax Haven Abuses:

The Enablers, The Tools & Secrecy,” August 1, 2006,available at http://www.hsgac.senate.gov/subcommit-tees/investigations/hearings/tax-haven-abuses-the-enablers-the-tools-and-secrecy; Senate PermanentSubcommittee on Investigations, “Tax Haven Banksand U.S. Tax Compliance: Obtaining the Names of U.S.Clients with Swiss Accounts,” March 4, 2009, availableat http://www.hsgac.senate.gov/subcommittees/investigations/hearings/tax-haven-banks-and-u-s-tax-compliance-obtaining-the-names-of-us-clients-with-swiss-accounts; Letter from FSC majority and minoritystaff to members of the Committee on FinancialServices, June 19, 2015, available at http://financialser-

vices.house.gov/uploadedfiles/062415_tf_memo.pdf ; Global Witness, “The Great Rip Off: AnonymousCompany Owners and the Threat to American Interests”(2014); Reuters, “Special Report: A little house ofsecrets on the Great Plains,” June 28, 2011, available athttp://www.reuters.com/article/2011/06/28/us-usa-shell-companies-idUSTRE75R20Z20110628; LouiseStory and Stephanie Saul, “Towers of Secrecy,” TheNew York Times, February 7, 2015, available at http://www.nytimes.com/2015/02/08/nyregion/stream-of-foreign-wealth-flows-to-time-warner-condos.html; Stephanie Saul and Louise Story, “At the TimeWarner Center, an Enclave of Powerful Russians,” TheNew York Times, February 11, 2015, available at http://www.nytimes.com/2015/02/12/nyregion/russia-time-warner-center-andrey-vavilov.html; Louise Story andAlejandra Xanic von Bertrab, “Mexican Political FamilyHas Close Ties to Ruling Party, and H omes in the U.S.,”The New York Times, February 10, 2015, available at

http://www.nytimes.com/2015/02/11/nyregion/ jose-murat-casab-mexico-pri-luxury-condos-us.html;Stephanie Saul, “Treasury Urged to Scrutinize ForeignReal Estate Buyers for Money-Laundering R isk,” The NewYork Times, March 10, 2015, available at http://www.nytimes.com/2015/03/11/business/treasury-urged-to-scrutinize-foreign-real-estate-buyers-for-money-laundering-risk.html; Global Witness, “TED Prize WinnerCharmian Gooch Announces Global Campaign toAbolish Anonymous Companies,” Press release, March17, 2014, available at https://www.globalwitness.org/archive/ted-prize-winner-charmian-gooch-announces-global-campaign-abolish-anonymous-companies/.

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31 Story and Saul, “Towers of Secrecy.”

32 Story and Saul, “Towers of Secrecy”; Saul and Story, “Atthe Time Warner Center, an En clave of Powerful Rus-sians.”

33 The U.S. Senate Homeland Security and Governmen-tal Affairs Committee Permanent Subcommittee onInvestigations’ 2010 hearing on foreign corruptionincluded a bipartisan recommendation to end thetemporary exemption for real estate agents andothers from the Patriot Act’s requirement to establish

an anti-money laundering program. See SenatePermanent Subcommittee on I nvestigations, “KeepingForeign Corruption Out of the United States: Four CaseHistories.” Other groups have called for the closingof loopholes in real estate transactions that facilitatethe flow of foreign corruption proceeds in the UnitedStates. See Transparency International, “U.S. Treasurymust close loopholes to s tem the flow of proceeds offoreign corruption into the U.S.,” Press release, March11, 2015, available at http://www.transparency.org/news/pressrelease/u.s._treasury_must_close_loop-holes_to_stem_the_flow_of_proceeds_of_foreign;Letter from Center for Effective Government and othersto Jennifer Shasky Calvery, March 10, 2015, available athttp://www.transparency-usa.org/documents/FinalLet-tertoFinCEN.pdf.

34 U.S. Department of the Treasury, Financial CrimesEnforcement Network: Anti-Money Laundering Program

and Suspicious Activity Report Filing Requirements forRegistered Investment Advisers (2015), available at http://www.fincen.gov/statutes_regs/frn/pdf/1506-AB10_Fin-CEN_IA_NPRM.pdf.

35 Cyrus R. Vance Jr., Testimony before the U.S. House ofRepresentatives Task Force to Investigate TerrorismFinance, June 24, 2015, available at http://financialser-vices.house.gov/uploadedfiles/hhrg-114-ba00-wstate-cvance-20150624.pdf.

36 The proposed definition of beneficial ownership in theG-8 action plan is “a natural person who, directly orindirectly, exercises substantial control over a coveredlegal entity or has a substantial economic interest in, orreceives substantial economic benefit from, such legalentity, subject to several exceptions.” The White House,“United States G-8 Action Plan for Transparency ofCompany Ownership and Control,” Press release, June

18, 2013, available at https://www.whitehouse.gov/the-press-office/2013/06/18/united-states-g-8-action-plan-transparency-company-ownership-and-control.

37 “Companies should know who really owns them andtax collectors and law enforcers should be able toobtain this information easily.” G-8 Summit, “LoughErne Declaration” (2013), available at https://www.gov.uk/government/uploads/system/uploads/attach-ment_data/file/207543/180613_LOUGH_ERNE_DECLA-RATION.pdf .

38 For the U.S. response, see The White House, “Fact Sheet: The G-20 Brisbane Summit,” Press release, November16, 2014, available at https://www.whitehouse.gov/the-press-office/2014/11/16/fact-sheet-g-20-brisbane-summit. The text from G-20 summit leaders’ statementreads, “We commit to improve the transparency of thepublic and private sectors, and of beneficial ownership

by implementing the G20 High-Level Principles on Ben-eficial Ownership Transparency.” See G-20, “G20 Leaders’Communiqué” (2014), p. 3, available at https://g20.org/wp-content/uploads/2014/12/brisbane_g20_lead-ers_summit_communique1.pdf .

39 Caroline Atkinson, “Beneficial Ownership LegislationProposal,” The White House Blog, April 4, 2014, availableat https://www.whitehouse.gov/blog/2014/04/04/beneficial-ownership-legislation-proposal.

40 Senate Permanent Subcommittee on Investigations,“Levin, Coleman,Obama Introduce Stop Tax HavenAbuse Act,” Press release, February 17, 2007, available athttp://www.hsgac.senate.gov/subcommittees/investi-gations/media/levin-coleman-obama-introduce-stop-tax-haven-abuse-act-s-681.

41 The U.K. registry is to begin operation in 2016. For apeer evaluation, see Financial Action Task Force, “UnitedStates,” available at http://www.fatf-gafi.org/countries/u-z/unitedstates/ (last accessed September 2015).

42 Currently, U.S. financial institutions collect beneficialownership information under a general statutory re-quirement, mandated by the Patriot Act. There is a verylimited requirement to collect beneficial ownership ona narrow set of foreign bank accounts under 31 C.F.R. §1010.610, 620 that the U.S. Treasury Department itselfrecently acknowledged occurs only under “limitedcircumstances.” See U.S. Department of the Treasury,National Money Laundering Risk Assessment , p. 43.Importantly, neither the Patriot Act nor any other U.S.law or regulation explicitly requires the collection ofbeneficial ownership information for corporations withaccounts. And real estate and escrow agents, certainvendors, and others are exempted from requirements.

43 Regulations.gov, “Financial Crimes Enforcement Net-work: Customer Due Diligence R equirements for Finan-cial In stitutions,” available at http://www.regulations.gov/#!docketBrowser;rpp=25;po=0;D=FINCEN-2014-0001

(last accessed September 2015). However, the ruleapplies only to banks, brokers or dealers in securities,mutual funds, and futures commission merchants andintroducing merchants in commodities. The publiccomment period closed in 2014. As proposed, the rulewould define the beneficial owner of a legal entitycustomer through an “ownership prong”—“eachindividual, if any, who, directly or indirectly, throughany contract, arrangement, understanding, relationshipor otherwise, owns 25 percent or more of the equityinterests of a legal entity customer”—and a “controlprong—“an individual with significant responsibilityto control, manage, or direct a legal entity customer.”See U.S. Department of the Treasury, “Financial CrimesEnforcement Network: Customer Due Diligence Re-quirements for Financial Institutions,”Federal Register 79(149) (2014), p. 45,157, available at http://www.fincen.gov/statutes_regs/files/CDD-NPRM-Final.pdf.

44 Then-Sen. Carl Levin (D-MI) criticized the rule’s pro-posed definition of beneficial owner as “deeply flawed.”See Letter from Sen. Carl Levin to Jennifer ShaskyCalvery, December 10, 2014, available at http://www.hsgac.senate.gov/download/levin-comment-letter-to-fincen-re-customer-due-diligence-requirements-for-financial-institutions-december-10-2014. See also,Global Financial Integrity, “GFI Urges Strengthening ofProposed Treasury Rule to Combat Dirty Money Flow-ing through U.S. Banks,” Press release, October 6, 2014,available at http://www.gfintegrity.org/press-release/gfi-urges-strengthening-of-proposed-treasury-rule-to-combat-dirty-money-at-u-s-banks/; Letter from

Transparency International to Financial Crimes Enforce-ment Network, October 2, 2014, available at http://www.transparency-usa.org/documents/Commentson-

TreasuryRulereCDD.pdf; International Monetary Fund,“Anti-Money Laundering and Combating the Financingof Terrorism (AML/CFT)—Technical Note” (2015), http://

www.imf.org/external/pubs/ft/scr/2015/cr15174.pdf.

45 Letter from Sen. Carl Levin to Jennifer Shasky Calvery.

46 Mary Beth Goodman, “Unraveling the Tangled Webs ofCorruption with Action on Anonymous Shell Compa-nies” (Washington: Center for American Progress, 2014),available at https://www.americanprogress.org/issues/security/report/2014/12/05/102640/unraveling-the-tangled-webs-of-corruption-with-action-on-anony-mous-shell-companies/.

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