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86 IRET Policy Bulletin 1 (2003)

handle is hein.taxfoundation/iretpbul0045 and id is 1 raw text is: May 14, 2003 No. 86 FINANCIAL PRIVACY AND INDIVIDUAL LIBERTY Introduction Well before the September 11 attacks, a major European-led international effort was underway to promote greater intergovernmental information sharing and to effectively end financial privacy. Although there was some interest in the law enforcement aspects of this program by the Financial Crimes Enforcement Network of the U.S. Treasury Department (FinCEN) and, internationally, by the Financial Action Task Force on Money Laundering (FATF), it was clear that the primary motivation of the governments leading the effort was tax administration. The Organization for Economic Cooperation and Development (OECD) launched a major initiative in 1996 designed to abolish financial privacy and limit tax competition by blacklisting low- tax jurisdictions or so-called tax havens (the OECD Harmful Tax Competition initiative). In 2000, the United Nations (UN) commenced a campaign to enable the UN to share financial information among UN member states through the proposed United Nations International Tax Organization (UNITO). The United States government made important contributions to the effort with the proposed bank deposit interest reporting regulations, the qualified intermediary (QI) rules, the effective incorporation of know your customer (KYC) banking regulations into the U.S. QI rules and support for the OECD and other initiatives. The European Union also launched its Savings Tax Directive designed to share information among EU member states and other key financial centers, including the U.S. and Switzerland. Law enforcement officials need reliable information to combat serious crimes, prevent terrorism and protect national security. Congressional testimony and reports in the U.S. and European news media made it clear very soon after the attacks, however, that the current information sharing framework both within the U.S. government and internationally is simply inadequate and misdirected for purposes of addressing the threat that terrorism poses to the United States and allied countries. The approach that has been adopted so far is largely to do more of what has been ineffective. Moreover, many of the innovations or new initiatives inaugurated since the attacks will actually make the situation worse. The political situation since the attacks has changed dramatically. There has been an acceleration in the demands to share information and a further degradation in privacy concerns. This was demonstrated, most notably, by the enactment in October, 2001 of the International Institute for IRET is a non-profit, tax exempt 501(c)3 economic policy research and educational Research organization devoted to informing the public about policies that will promote on the economic growth and efficient operation of the market economy. Economics of 1710 Rhode Island Avenue, N.W., 11th Floor * Washington, D.C. 20006 Taxation (202) 463-1400 * Fax (202) 463-6199 * Internet www.iret.org

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