GAO should consider public financial registries to stem global corruption

Global corruption is a serious national security concern and Congress has the opportunity to stem the tide of corrupt money that continues to benefit the rich and powerful, especially following the bombshell revelations from the Pandora Papers, a trove of financial and legal data leaked to the public. CREW has submitted testimony calling for specific transparency measures that would improve and expand the United States’ anti-corruption legal regime to the House Appropriations Committee Subcommittee on Financial Services and General Government for Fiscal Year 2023.

The U.S.’s status as a haven for illicit finance has shaped parts of the U.S. economy, from opaque trusts in South Dakota that harbor alleged laundered money to a luxury real estate boom that has permitted the super-rich from around the world to park their wealth in Malibu mansions. Due to our extraordinarily weak corporate secrecy laws, disadvantaged communities have been disproportionately impacted, further deepening economic and racial inequalities. The U.S. is now the world’s second-worst tax and financial secret haven, trailing only the Cayman Islands. If we continue to ignore financial corruption as a national security threat, we will undermine any global or domestic anti-corruption effort.

While Congress’s passage of the Corporate Transparency Act (CTA) in 2021 was a strong first step to fixing long neglected and broken anti-corruption laws, the U.S. still lags far behind other countries in fighting global corruption because the registry created through the CTA to track beneficial owners of American corporations does not make the registry information publicly available. Public registries, such as those in place in the United Kingdom and the European Union, have shown immense promise in combating illicit cash flows. For instance, expanded public accessibility requirements have helped the EU’s fight against illicit money—when Luxembourg opened its public beneficial ownership registry, journalists and accountability groups quickly identified numerous shell entities owned by notoriously corrupt individuals.

These public registries function well because they make use of the public sector’s proven ability to decode and decipher huge financial datasets, as exhibited by the Pandora Papers. FinCEN estimates there are now approximately 30 million domestic corporations that would need to report beneficial ownership information in the United States, and approximately three million more domestic entities are created each year. The U.S. has a unique opportunity to implement a transparency measure that has proven immensely effective—Congress should act now to push the U.S. to be a leader in the fight against global corruption by studying the impact of public financial registries on anti-corruption accountability.