Obama rolls out ‘Panama Papers’ plan to stop tax cheats and money launderers


The “Panama Papers” have spurred the Obama administration to action.

The White House tonight rolled out new measures by the IRS and U.S. Treasury department, as well as proposals for several congressional bills, to go after “tax cheats, kleptocrats, and other criminals” who “abuse the financial system or shell companies and other legal entities.”

The president’s press office said its moves were a direct result of last month’s release by Fusion and 106 other global media organizations of the “Panama Papers” — 11.5 million previously secret documents from one Panamanian law firm that specialized in setting up anonymous shell companies, often for politicians, criminals and corrupt financiers.

That release, coordinated by the International Consortium of Investigative Journalists, was chronicled in Fusion’s new investigative documentary, Dirty Little Secrets.

“In recent weeks, the disclosure of the so-called ‘Panama Papers’… has brought the issues of illicit financial activity and tax evasion into the spotlight,” the White House said in its release.

“The Panama Papers underscore the importance of the efforts the United States has taken domestically, and the efforts we have undertaken with our international partners, to address these shared challenges.”

While the Panama Papers investigation focused on the actions of one Latin American law firm, Fusion found that many criminal investigators blamed U.S. states’ corporate secrecy provisions for hindering their efforts.

“It is a significant impediment to our investigations when we can’t determine who the true owner is of a company,” Patrick Fallon, Washington-based head of the FBI’s financial crimes section, told Fusion about shell companies generally in a March interview. “While we [in the U.S. talk] about offshore accounts in other countries, I think we have a lot of room for improvement here to promote transparency.”

The Obama plan includes two administrative actions:

  • The first is a new Treasury rule requiring banks, securities brokers and other financial institutions to “collect and verify the personal information of the real people (also known as beneficial owners) who own, control, and profit from companies when those companies open accounts.” Fusion and its partners in the ICIJ investigation chronicled at length how shell companies in the U.S. and abroad can be easily, cheaply set up to conceal their true owners and intentions.
  • Treasury and the IRS also proposed a set of rules to close “a loophole in U.S. laws that has allowed foreigners to hide assets or financial activity behind anonymous entities established in the United States.” The new regs would require “a narrow class of foreign-owned U.S. entities” to obtain an employer identification number from the IRS — the corporate equivalent of a Social Security Number that helps the government track a corporation’s tax liabilities.

Administration officials touted the moves as decisive action — “a significant step forward to increase transparency and to prevent abusive conduct within the financial system,” Treasury Secretary Jacob J. Lew said in a release.

But much of the administration’s grandly announced plan to tackle financial corruption hinges on future action by an adversarial Congress. It called on the GOP-led House and Senate to consider a White House proposal to require more corporate information-gathering and sharing on businesses’ “beneficial owners,” as well as broader powers for federal investigators and prosecutors to pursue alleged money launderers.

It also urged the Senate to ratify eight tax treaties that have languished for years — including deals with Switzerland and Luxembourg to get U.S. officials more info on offshore tax evaders’ assets in those countries’ secret accounts.

It’s unclear whether those measures could be passed by any Congress — much less one that has treated the Obama administration as a lame duck tenancy even before a new president has been elected. Nevertheless, administration officials struck an optimistic tone in announcing their plans.

“We look forward to working with Congress in a bipartisan manner,” Lew said, expressing hope that America’s leadership could meet in the middle to “protect the integrity of the U.S. and global financial systems.”