IMF faults US for inaction over shell companies

The International Monetary Fund said on Tuesday that the United States was moving too slowly to prevent the use of shell and front companies to hide ownership. 

PHOTO: AFP

JUL 8, 20157:13 AM

[WASHINGTON] The International Monetary Fund said on Tuesday that the United States was moving too slowly to prevent the use of shell and front companies to hide ownership.

The IMF said US regulators had made little progress toward the need to require that banks know who ultimately is behind the companies for which they handle money.

The issue is important to policing money laundering and tax evasion, the IMF noted, and action was recommended eight years ago by the Financial Action Task Force, which comprises the world's leading economies and financial centers.

It noted that US regulators have drawn up some draft regulations that would toughen requirements for banks and other financial institutions to learn the identity of beneficial owners of accounts.

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"But these measures... are progressing slowly," the IMF said in its annual assessment of the US economy and financial system.

And the report said that the changes proposed by US regulators, including draft rules from the Treasury released a year ago, might not fully address the problems identified by the FATF.

"The lack of sufficient transparency may impact the authorities' effectiveness in identifying and prosecuting persons who commit money laundering using US companies and trusts, including laundering associated with taxes evaded in the United States and abroad." The US and European governments have sought to crack down on tax avoidance as a way to boost government receipts, and Washington has also stepped up its investigations into illicit or banned money movements by criminals and countries and people under official sanctions, such as Iran and designated terror groups.

But the United States continues to allow the use of shell and front companies that mask who is the ultimate beneficial owner of those companies.

The IMF said that the inability of law enforcement agencies, for example, to be able to determine the beneficial ownership of companies or trusts "may curtail how effective the authorities can be in pursuing criminally persons who misuse US corporations to launder proceeds generated domestically as well as abroad or to trace and recover their illicit assets."

AFP

    
 

US growth threatened by global political and economic upheaval, IMF warns

A global slowdown in economic growth, together with political and economic upheaval in places like Greece, the Middle East and Ukraine, could hurt US growth going forward, the International Monetary Fund said on Tuesday. 

PHOTO: AFP

JUL 8, 20157:02 AM

[WASHINGTON] A global slowdown in economic growth, together with political and economic upheaval in places like Greece, the Middle East and Ukraine, could hurt US growth going forward, the International Monetary Fund said on Tuesday.

In its detailed yearly analysis of the US economy, the IMF also reiterated that the Federal Reserve should delay its rate hike until the first half of 2016, until there are signs of a pickup in wages and inflation.

IMF staff said weaker global growth, including in China, would sap US exports and investment in certain sectors, and also push down equity market valuations. "Finally, risks from Russia/Ukraine, Greece or the Middle East represent an unpredictable wild card with negative, but difficult to quantify, effects for the US," IMF economists said in the report.

The Obama administration has downplayed the damage a Greek meltdown could have on the US economy, but has also maintained constant pressure on Greek and European officials to resolve the country's standoff with its international creditors.

The IMF last month cut its growth forecast for the world's biggest economy to 2.5 per cent for this year, from 3 per cent seen in April. The IMF releases a full update to its global economic forecasts this Thursday.

The Fund also urged the United States to fully implement the Dodd-Frank bank reform law passed in the wake of the US financial crisis, and create an independent national regulator for the insurance sector. "Before the memory of the crisis begins to fade, it will be important to complete the reform agenda and resist attempts to overturn previously agreed measures," IMF staff said in an assessment of US financial stability.

However, IMF staff privately admit that their recommendations are unlikely to be popular in the US Congress or among state regulators, who currently regulate the insurance sector.

REUTERS