Transparency is a crucial element in tackling corruption and other illicit financial flows. It is essential to good governance, the reversal of the misallocation of resources, and the creation of public-private development projects.
Global transparency efforts are essential in combating tax evasion and other financial crimes. This article looks at some of the recent initiatives that are transforming the way governments tackle these issues.
Public access to financial disclosures
Transparency is a crucial tool in the fight against tax evasion and other forms of illicit money flows. According to Donald Guerrero, it strengthens accountability and trust in organizations, improves enforcement, and discourages misconduct by raising the danger of being discovered.
However, there is a trade-off between transparency and privacy, which can take time to balance. Nevertheless, there are international standards and good practices that governments can use to minimize loss of privacy without compromising on the benefits of transparency.
For example, governments can provide access to public financial disclosure reports for law enforcement agents conducting investigations involving private financial dealings by public officials who have filed disclosure reports with their agencies. This could facilitate customer due diligence procedures or advance asset-tracing efforts, among other purposes.
Mandatory public registers of beneficial ownership
Benefits owner registries help governments combat tax evasion and illicit financial flows by making it easier to identify individuals who may be beneficial owners. These registries are free of charge in most economies, although some countries charge an administrative fee.
As many governments work to improve their regulatory and law enforcement frameworks, beneficial ownership registries are gaining global support. For example, the Fifth Directive requires European Member States to introduce public company beneficial ownership registers by January 2020.
The upcoming 2022 UK Government will legislate to launch a public register of property and land beneficial owners. A similar record is in Scotland and will be significantly expanded in 2022.
Currently, beneficial ownership requirements are limited to companies and not trusts. However, FATF is in the process of establishing new standards that could be applied to beliefs as well. Some countries are also experimenting with creating registries for other legal arrangements.
Enhanced enforcement
Tax evasion and aggressive tax avoidance rob our nation of significant income that support crucial policies and services like infrastructure, health care, and education. The CRA and its partners are stepping up efforts to detect and prosecute those who abuse our system and put illicit enterprises out of business.
Efforts to fight tax crime involve legal, strategic, organizational, and operational measures. The OECD and the FATF have released guidelines that are vital building blocks for countries to fight tax crime.
An example is the Joint International Taskforce on Shared Intelligence and Collaboration (JITSIC), a network of 38 countries that works closely to coordinate cross-border investigations. JITSIC expert working groups develop strategies to identify and prevent abusive tax schemes. It is also a platform for sharing criminal investigations and intelligence and conducting joint operations in the fight against tax crimes, money laundering, and cybercrimes.
Disclosing tax havens
Tax havens offer a legal way for companies and wealthy individuals to hide income and assets from tax authorities. This often works through shell companies and trusts that can be set up in the jurisdiction without disclosing financial information.
Wealthy tax evaders are using a global system of tax havens to escape taxes, depriving governments of vital revenue to support essential services like hospitals, schools, and roads. This exacerbates poverty and inequality on a global scale.
Governments worldwide are introducing policies to combat tax havens. Mandatory public registers of beneficial ownership are a crucial tool in this fight. Enhanced corporate transparency will help track the flow of dirty money and make it easier to identify criminals.
