Obama calls on Congress to crack down on shell companies
President Obama on Friday urged Congress to help combat shell companies engaged in financial crimes, saying the recent release of the so-called "Panama Papers" highlighted the tax evasion and money laundering taking place around the globe.
Obama, speaking at a news conference on the April jobs report and the economy, called for legislative action to change U.S. laws, which currently allow banks to promise foreigners secrecy.
One of the main ways to avoid taxes is through the creation of shell corporations, and "we're saying to financial institutions you have to step up and get that information," Obama said. "Require banks to report people behind shell companies. We're not going to be able to complete this job unless Congress acts as well."
The president specifically called on Sen. Rand Paul to "stop blocking the implementation of tax treaties," saying he was certain the Kentucky Republican did not endorse tax evasion, yet had been a "little quirky."
Paul for years has been blocking treaties on the Senate floor due to privacy concerns, at one point saying he didn't think the U.S. should agree to "a standard that might allow bulk collection of data on everyone who lives overseas."
Eight tax treaties with other countries have been awaiting Senate approval for several years -- including amendments to existing treaties with Switzerland and Luxembourg that would enable U.S. law enforcement to obtain information about financial accounts in those countries.
"The inability to obtain this information has impeded investigations and enforcement relating to offshore tax evasion -- including evasion involving secret Swiss bank accounts," the White House said in a statement detailing its efforts and calling on Congress to act on the treaties.
Obama's comments came a day after his administration was taking executive action to close loopholes that enable tax evasion and money laundering, announcing regulations to compel companies to disclose more information about their owners.
The White House unveiled the new rules as Treasury Secretary Jacob Lew urged Congress to pass legislation that would make the U.S. banking system more transparent and help officials track down covert owners.
"Illicit financial activity is a critical concern for the United States and our partners around the world," Lew wrote in a letter to congressional leaders. "Additional statutory authority is necessary to put the United States in the strongest position to combat bad actors who seek to hide their financial dealings and evade their tax responsibilities."
Lew's letter came as Treasury put the final touches on a rule stipulating how banks should keep records on who owns the companies that use their services.
A second proposed rule would close a loophole that allows a narrow class of foreign-owned companies to avoid reporting to the IRS.