Lawmakers Urge Yellen to Crack Down on Tax Havens

May 3, 2021

The Honorable Janet Yellen
Secretary of the Treasury of the United States
1500 Pennsylvania Ave. NW
Washington, D.C. 20220

Dear Madam Secretary:

We are writing to underscore the crucial role of Treasury in combatting international corruption and kleptocracy and to urge you to take early steps to confront this key national security threat.

Middle-class Americans are frustrated by perceptions of corruption at home, while authoritarian oligarchies are weaponizing corruption around the world. While these foreign and domestic trends have fueled passionate political discourse in recent years, a legacy of the Biden Administration should be achieving actual results by institutionalizing anti-corruption reforms throughout U.S. and international financial, diplomatic, and legal systems.

Domestically, Treasury has the authority to rapidly expand anti-money laundering (AML) obligations, as recommended for decades by law enforcement, anti-corruption watchdogs, and the Financial Action Task Force (FATF). With beneficial ownership reform on its way, the top policy priority in the fight against dirty money should now become the expansion of AML obligations to cover financial facilitators and professional service providers that can enable corruption — reports indicate that more than $13T are invested in U.S.-based private equity and hedge funds subject to very little ownership or money-laundering vetting. In other words, foreign kleptocrats could launder millions into our communities through a hedge fund's advisors and no one would be able to know. Treasury must also issue strong regulations in the months ahead to implement the recently mandated beneficial ownership registry in ways that limit exemptions and broaden reporting requirements.

Internationally, Treasury should lead a landmark international agreement to end offshore financial secrecy and illicit tax havens once and for all. In addition to an international agreement on the taxation of multinational companies, a deal to end offshore secrecy would need to be backed up by concrete commitments around an array of reporting mechanisms. These might include international agreements around public beneficial ownership registries, automatic exchange of tax information (harmonizing the U.S. and OECD regimes), and steps toward a global asset register and cross-border payments database.

To start organizing and positioning the department's resources to take on this urgent threat, we ask that you consider prioritizing four important initial steps:

We believe that the threats presented to U.S. national security by global corruption warrant a war-like footing in your department — similar to the proactive and energetic coordination generated to eliminate terrorism financing after 9/11. With your activation of working-level resources within the Terrorism and Financial Intelligence and International Affairs bureaus, we trust that Treasury could lead the way in tackling this transnational threat. We would welcome engaging with your staff as you develop these important policies.

Respectfully,

Tom Malinowski
Member of Congress

Sheldon Whitehouse
U.S. Senator