GFI Calls on President Obama, G8 Leaders to Require Public Registries of Corporate Ownership, Curtail Illicit Financial Flows


WASHINGTON, DC – As G8 leaders prepare to meet Monday and Tuesday in Northern Ireland, Global Financial Integrity (GFI) called on U.S. President Barack Obama to take aggressive action to curtail illicit financial flows and support public disclosure of corporate ownership information as essential to reducing crime, corruption, tax evasion, and terrorist financing. Under the leadership of British Prime Minister David Cameron, the G8 Summit is expected to focus on curbing abusive tax dodging and corruption.

“President Obama has the opportunity to serve as the lynchpin of a global deal cracking down on the most damaging problem in the international financial system,” said Raymond Baker, President of GFI and a longtime authority on financial crime. “Illicit financial flows drain roughly $1 trillion per year from developing countries. Tax haven secrecy and anonymous shell companies facilitated the illegal outflow of roughly $261 billion from the Greek economy in the lead-up to the European debt crisis, and tax haven abuse is estimated to cost U.S. taxpayers roughly $150 billion per year. Illicit financial flows facilitated by tax haven secrecy and anonymous shell companies are a global epidemic undermining rich and poor nations alike.”

“The summit next week is a truly historic moment, and we’re all waiting to see whether President Obama—and other G8 leaders—will rise to the challenge,” added Mr. Baker.

Phantom Firms: Public Registries of Beneficial Ownership Essential

“Anonymous shell companies are the most-widely used method for laundering the proceeds of crime, corruption, and tax evasion,” noted Heather Lowe, GFI’s Legal Counsel and Director of Government Affairs. “These phantom firms facilitate sex slavery, terrorism, and tax evasion. Public registries of meaningful corporate ownership information are essential to curtailing these pernicious crimes.”

“Prime Minister David Cameron has taken the lead on this issue, calling for public registries, but other G8 countries must sign-on for meaningful action to be taken,” continued Ms. Lowe. “A commitment from President Obama is seen as essential to securing a strong G8 agreement. He should seize this opportunity to eliminate the biggest facilitator of transnational crime and corruption.”


Automatic Exchange of Tax Information

GFI also sees securing the automatic exchange of tax information between jurisdictions on a multilateral basis as essential to detecting and deterring tax evasion.

Ten European nations, including four members of the G8, and many of Britain’s overseas territories—such as notorious tax havens like the British Virgin Islands and the Cayman Islands—announced in April that they would begin a pilot program to exchange information automatically on a multilateral basis. The European nations in the pilot program also committed to promoting multilateral automatic information exchange as the new global standard, a move lauded by GFI. Moreover, G20 Finance Ministers—a larger grouping of nations which includes all members of the G8—announced in April that automatic tax information exchange is “expected to be the standard.”

“The remaining members of the G8—Canada, Japan, Russia, and the U.S.—should join the multilateral pilot program for automatic tax information exchange next week, and commit to expanding the program to developing countries as soon as possible,” commented Ms. Lowe. “Tax evasion is taking a serious toll on rich and poor countries alike. Automatic tax information exchange ensures that tax authorities and law enforcement in these countries will have the necessary records they require to detect and deter tax evading money. This is the moment to fully embrace automatic exchange.”

Country-by-Country Reporting

The G8 is also primed to take a position on abusive tax avoidance by multinational corporations. GFI believes that it is essential that international businesses operating in all sectors be required to disclose revenues, profits earned, taxes paid, and staff levels on a country-by-country, if not subsidiary-by-subsidiary, basis.

“As recent investigations of Apple, Google, Starbucks, and Amazon reveal, it is the norm in international business to shift corporate profits through accounting gimmicks to low- and no- tax jurisdictions,” said Ms. Lowe. “This aggressive tax avoidance starves governments of revenue at a time when rich and poor nations alike are struggling to pay their bills. It’s a global problem that needs to be addressed at the G8 Summit next week. The G8 should require all multinational companies to report their profits, taxes paid, sales, employee levels and more on a country-by-country basis. While not a complete solution to the problem, such a requirement would significantly expose and deter abusive tax dodging.”

On Wednesday, the European Union joined the United States in adopting legislation requiring companies operating in the extractive industries to report on payments made to all governments, with Canada also announcing its intent to adopt similar rules. The European Union also adopted in April requirements that all financial institutions disclose profits made, taxes paid, subsidiaries, and staff levels on a country-by-country basis. GFI has praised all of the advancements as progress, but likewise urged the EU and others to extend those transparency requirements to all business sectors.

The G8 leaders’ summit is scheduled to take place Monday and Tuesday, June 17-18, 2013 at Lough Erne in Northern Ireland.

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