How FATCA Could Stop Transnational Organized Crime
May 30th, 2012 by Angela Offerman
By now, most of us in the financial industry have familiarized ourselves with the proposed FATCA regulations, as financial industries around the world are strongly voicing their opinions on this hot topic. While the main discussion has centered on how the financial industry will be rocked by the new legislation, another noteworthy industry will also be greatly impacted—the organized crime industry.
Not surprisingly, we do not often hear much about how new legislation will affect this unconventional business group. Representatives are not submitting letters to the IRS, appearing before the House, or forming committees to voice their opinions. However, this industry may not be receiving as much attention as it should, considering it compromises an estimated 15% of global GDP.
So how exactly do murders, drugs, cover businesses, and prostitution relate to FATCA? We made the connection through journalist and author Misha Glenny, who uncovers the increased prevalence of organized crime in relation to the deregulated global financial market in this interesting TED talk.
Glenny begins by detailing the growth of organized crime over the past twenty years highlighting the politics, technology, and globalization that made it all possible. His story comes from a thorough examination of the global criminal world involving hundreds of interviews with policeman, victims, consumers of illicit goods and services, and even the criminals themselves. These revealing discussions with those closest to the action unveiled the link between organized crime and the liberalization of international financial markets, which, according to Glenny, is one of the biggest enablers of global organized crime.
He dismantles the illusion that globalization and politics alone facilitated the growth of organized crime on an international level, through his detail of the pervasiveness of money laundering by criminals. Glenny explains how banking deregulation led to intense competition of financial centers around the world, who happily accepted deposits from very dubious sources, without any questions. With no effective mechanisms in place to prevent this, criminals capitalized on the opportunity to not only increase their wealth, but also to widely distribute it geographically, making it more difficult for authorities to discover and seize—until now that is.
One of the main FATCA requirements causing pushback from international financial centers deals with the increased detail in documentation of account holders. The legislation aims to increase the transparency of the offshore banking network to detect and prevent money laundering and tax abuse, which, of course, has caused several “safe havens” and other nations who receive significant U.S. business to voice their concern over the loss of business they may see as their clients become identified as U.S. taxpayers. Although we have not heard from them, organized criminals across the globe are probably also concerned with the proposed regulations that could potentially weaken the network that paved the way for their growth on an international level.
So while transnational organized crime has not been the main item on the FATCA agenda, it may be the exact legislative action Glenny deemed essential in putting an end to the delinquency. In future years, the FATCA story will likely unfold to follow the impacts on things like tax revenue and offshore accounts, but it will be interesting to see if anyone can bring light to its effects on the shadow economy as well.
Tags: FATCA, IRS, TIN
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