Business & Finance

U.S. To Increase Enforcement For Foreign Corruption Law

WASHINGTON — President Barack Obama said tax avoidance was a global problem, and called for more international efforts to crack down on offshore entities, tax shelters, and illegal shell companies, in his first comments in the wake of the massive document leak known as the Panama Papers.

The comments on April 5 followed two days of revelations stemming from the international reporting project, which includes millions of emails, corporate registries, and other documents leaked from a Panamanian law firm.

“There’s always going to be some illicit movement of funds around the world, but we shouldn’t make it easy,” Obama told reporters at the White House. “We shouldn’t make it legal to engage in transactions just to avoid taxes.”

The materials were initially obtained by the German newspaper Suddeutsche Zeitung, then shared with dozens of media outlets around the world by way of the Washington-based International Consortium of Investigative Reporters.

The revelations have traced suspicious money transfers for people close to President Vladimir Putin, the prime minister of Iceland, the president of Ukraine, the king of Saudi Arabia, and relatives of the presidents of Azerbaijan and Kazakhstan, among others.

No notable U.S. citizens have been identified in the materials revealed to date, though project organizers said there may be some in the coming days.

Owning shell companies anonymously is not outright illegal so long as it’s not being done to skirt laws or avoid paying taxes. But many of the schemes highlighted by the Panama Papers project link back to politically connected insiders — some in developing countries — amassing vast wealth at the expense of a country’s taxpayers.

Tax avoidance is “not unique to other countries, because there are people in America who are taking advantage of the same stuff,” Obama said. “A lot of it is legal. That’s the problem.”

Obama’s comments follow an announcement earlier on April 5 by the U.S. Justice Department that it was increasing funding for foreign corruption investigations, including adding more agents and more prosecutors.

In a conference call with reporters on April 5, Assistant Attorney General Leslie Caldwell said that, in addition to the increased staffing, the Justice Department was setting up a program to encourage more “self-reporting” by companies who may have violated the Foreign Corrupt Practices Act.

That 40-year-old law known as the FCPA has almost unrivaled international reach due to the fact that so much of the global financial system hinges on access to U.S. markets.

U.S. prosecutors have used the law to go after top officials with world soccer’s governing body, FIFA, and dozens of corporations such as French rail giant Alstom and recently, Dutch-headquartered telecom Vimpelcom.

Caldwell said the new program would impose more stringent penalties on companies that wait before reporting FCPA violations to U.S. regulators.

Copyright (c) 2015. RFE/RL, Inc. Reprinted with the permission of Radio Free Europe/Radio Liberty, 1201 Connecticut Ave NW, Ste 400, Washington DC 20036.