Task Force Blog

Posts by Ann Hollingshead

About the Author:

Ann Hollingshead is a Financial Transparency Coalition blog contributor, whose posts appear weekly. Formerly a Junior Economist at Global Financial Integrity, Ann is now pursuing a Master of Public Policy (MPP) from the University of California Berkeley. Follow her on Twitter: @AnnHollingshead.

Incorporation Standards in Banking: A Race to the Bottom

April 10, 2014

Sometimes—even usually—competition is a good thing. It lowers market prices; it sent a man to the moon; and it’s responsible for thousands of Olympic medals. In many cases, competitions–or races–are responsible for innovation, efficiency, and better performance. In these cases, an individual actor’s pursuit of victory leads to the betterment of society, a market, or a generation of athletes. However, sometimes competitions—or races—instead lead to worse outcomes for society. Often called a “race to the bottom,” these kinds of competitions include, for example, international degradations of environmental and labor standards.

This kind of race also happens in U.S. banking, where individual states’ pursuits of bank deposits have led to a degradation of bank security for the entire nation.

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Ending Corporate Tax Loopholes

March 31, 2014

Tax expenditures—government spending through the tax code, also called loopholes—have increased dramatically in the last twenty years. In some ways tax expenditures are good; for example, they can be used as incentives to encourage corporate and private behavior that provides a social benefit. On the other hand, these expenditures both lower government revenue and can skew the horizontal and vertical equity of our tax system. For example, corporate loopholes can result in dramatically different effective corporate rates for nearly identical companies.

These loopholes have dramatic effects on effective tax rates. While the United States has a statutory tax rate of 35% (the second highest among developed nations) corporations in this country pay an effective tax rate of just 12.6%. Senator Tom Coburn, a Republican from Oklahoma, has responded to these statistics with this: “An individual’s or corporation’s tax rate shouldn’t be dependent on their ability to hire a tax lobbyist. It’s especially wrong to ask families who are struggling to make ends meet to subsidize special breaks for corporations.”

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Post-2015 Development Agenda: Moving to Self-Sufficient, Sustainable Development

March 28, 2014

For fifteen years, eight goals have represented the yardstick by which development is measured. These are the Millennium Development Goals (MDGs) adopted in the United Nations Millennium Declaration at the beginning of the century, and represent a commitment to a noble new partnership to drastically reduce poverty worldwide. It is through this Declaration that all 193 member states of the United Nations and 23 organizations have agreed to achieve a set of eight goals by 2015.[1]

Now that we are rounding into the last year of the Declaration, the UN and other aid organizations are developing the post-2015 Development Agenda and asking the important question: “So now what?”

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Symbolic or Substantive? Financial Sanctions Against Russia

March 21, 2014

I’ve noted before that sanctions, while certainly well-intentioned, are often meaningless in practice. In large part, this occurs because of many of the opacity issues in the international financial system. As a result of these flaws, whether intentionally or not, sanctions are often (although not always) purely symbolic. So in the case of Russia, which is now on the receiving end of the so-called “toughest sanctions since the Cold War,” are financial sanctions symbolic or substantive? Given the current dynamics in Russia and abroad, are they likely to work?

If you’ve been reading the news at all, you already know that events are unfolding fast in the Crimea. Just last week, Crimea was very much a part of Ukraine. After a referendum vote on Sunday, when an overwhelming majority of residents voted in favor of independence and membership in the Russian Federation, the jurisdiction’s lawmakers formally seceded from Ukraine. Yesterday, Russia formally annexed Crimea.

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The “Irony” of Public Registries in the United States

March 13, 2014

As someone who loves to obsess over grammar rules of all kinds, I’m careful when using the word “irony.” It’s a notoriously difficult word to use. That’s why, as I was pondering the U.S. policy position on beneficial ownership and the word “ironic” lingered in the edges of my mind, I pushed it away. No, […]

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Understanding the Relationship between Corruption and Illicit Financial Flows

February 28, 2014

In many ways, both illicit financial flows and corruption are undefined and relative. For that reason, they’re both notoriously difficult to measure. The difficulty in measuring them in the first place may be part of the ambiguity surrounding their connection. Ambiguity aside, however, these concepts are highly interrelated. Here’s how.

What is corruption in the first place? Transparency International uses the following working definition of corruption: “the abuse of entrusted power for private gain.”

I imagine that definition is purposively vague and inclusive on purpose. Corruption isn’t just bribe paying, although that’s often it. It’s not just in business relationships, but also political, social, and even athletic ones. Corruption isn’t necessarily illegal, although it’s often so. And in some cases, while it may be illegal, it isn’t always enforced, which makes it legal in practice. For TI’s purposes, such a definition allows better, more inclusive measurement of this complex phenomenon.

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Recent Acclaim for FTC Members & the World’s Desire for More Transparency

February 12, 2014

This year, when the Think Tanks and Civil Societies Program at the University of Pennsylvania (TTCSP), made its annual list of the world’s most relevant think tanks, it chose four Financial Transparency Coalition members among its ranks. They included Global Witness, Tax Justice Network, and Global Financial Integrity, which ranked #32, #54, and $63 (respectively) for Think Tanks with the Best Advocacy Campaigns. FTC member Transparency International was also highly celebrated on the list, appearing a full twelve times, many of which were top ten spots. Among others, TI ranked #12 for Top Think Tanks Worldwide, #1 for Top Transparency and Good Governance Think Tanks, and #10 for Think Tanks with Most Significant Impact on Public Policy.

Every year, TTCSP releases this index to “acknowledge the important contributions and emerging global trends of think tanks worldwide.” And “gain understanding of the role think tanks play in governments and civil societies.” It compiles the list by eliciting nominations and receiving comments from literally hundreds of individuals and organizations around the world. These include current and former directors of think tanks, public and private donors, policymakers, journalists, scholars, civil society representatives, and academics. For a think tank to even be eligible for the list, it must receive no less than five independent nominations and then undergo two rounds of rankings from experts.

The rankings are a clear reason to celebrate the success of our FTC members, but they may also provide us with an opportunity for a moment of introspection.

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A New Priority for President Aquino: Tax Evasion on Imports to the Philippines

February 6, 2014

The Philippines has made significant progress on its quest to confront corruption and tax evasion under the guidance of President Aquino. However, a new report by Global Financial Integrity shows one important—and growing—component of the problem is trade mispricing, specifically import under-invoicing, and its role in facilitating tax evasion in the Philippines.

In June 2010, Benigno Simeon Cojuangco Aquino III assumed his position as the 15th President of the Philippines. As a Senator, before his election to the Presidency, Aquino pursued an anti-corruption agenda. For example, Aquino contributed to the Preservation of Public Infrastructures bill—which raised standards in public infrastructure construction by penalizing contractors involved with faulty and low-quality construction—and the creation of a Congressional Oversight Committee to ensure the proper use of intelligence funds.

Since assuming the presidency, Aquino has pursued an agenda of economic growth and anticorruption. As part of this agenda, Aquino has also aggressively gone after tax dodgers and appointed the ruthless Kim Henares to head the Bureau of Internal Revenue. Henares has sent federal prosecutors after actresses, a doctor, and other auspiciously-wealthy individuals.

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Fighting income disparity with some basic FTC recommendations

January 28, 2014

The Financial Transparency Coalition issues play an important role in the context of global income inequality. By discouraging tax evasion and corruption among the world’s wealthy individuals and corporations, the FTC recommendations could play an important role in alleviating egregious and dangerous income disparity.

When we talk about global inequality, we are usually referring to one of two issues: (1) inequality between nations and regions and (2) inequality between individuals. Inequality between nations usually refers to the huge disparities between the average incomes of people in different countries. The other kind of inequality, that between individuals, refers to the overwhelming disparity of incomes between the world’s richest and the world’s poorest people.

Many of the world’s wealthiest individuals live in rich nations and many of its poorest live in poor nations, but not always. In fact, the world’s current wealthiest individual is Carlos Slim Helu, a telecom mogul from Mexico—the same nation where nearly half of the population lives in poverty, including 11.5 million men, women and children in extreme poverty. Likewise, Mukesh Ambani, whose net worth totals $21.5 billion, and Prince Alwaleed Bin Talal Alsaud ($20 billion), live in India and Saudi Arabia, respectively. While neither of these nations is among the poorest in the world, nearly one third of India’s population lives below the poverty line and one quarter of Saudi Arabia’s does.

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Dirty Cash from Ukraine and the European Anti-Money Laundering Directive

January 16, 2014

Victor Yanukovych lives on 340 acres of land on the banks of the river Dnieper in Ukraine. His home, a five story mansion named Mezhyhiriya, is decorated with marble, crystal, and precious woods. It is difficult to overstate the luxury of this palatial building. Its cedar doors are worth $64,000 each, the wall paneling in […]

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The U.S. Needs Parity on Anti-Money Laundering and Beneficial Ownership

January 10, 2014

Last week, the Wall Street Journal reported that the U.S. Justice Department has indicated it will step up its enforcement of anti-money laundering (AML) rules among financial institutions and boost its efforts to safeguard U.S. banks from illicit financial flows. As the article points out, this comes as no surprise to those of us who have watched this issue—prosecutors in the United States have been bringing more cases against banks using the Banking Secrecy Act and DOJ has aggressively pursued both domestic and international banks for deficient money laundering controls.

The DOJ’s efforts are laudable, but unfortunately they expose a systemic deficiency in another area. In fact, while the United States has made commendable strides in many areas—and the Obama administration has repeatedly promised to crack down on financial secrecy—there is at least one, glaring hole in the progress: on beneficial ownership.

There are plenty of reasons for the United States (and indeed all countries) to strengthen rules on beneficial ownership, but one obvious reason is to enhance AML efforts. The connection between the two is fairly straightforward: criminals obscure their identities using anonymous shell companies (or “phantom firms”) to launder the proceeds of crime. Without knowledge of the “beneficial owner” (or the flesh in blood person) of an account, law enforcement officials are stymied in their efforts to trace illicit funds.

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Transparency Priorities for 2014

January 4, 2014

The New Year is a great time for resolutions. Of course most of these resolutions are made on a personal basis. But resolutions can also be made on a national and international level. So in that spirit, here are five resolutions from the FTC and some of our Coalition members. These reforms and priorities, if […]

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