Limit to compliance – taxes

from The New York Times

Privacy is important, but for what? Is ownership of real estate an issue of privacy? If you were a person of interest, like a celebrity, it might be an issue of privacy. But how about the rest of us?

Obviously, New York City Mayor De Blasio does not believe that real estate ownership information is subject to privacy. (Note: We are not discussing residence information, we are discussing ownership. Residence information is already considered to be public information.)

In times when New York City is witnessing an incredible growth in luxury apartments not just in Manhattan but in all of its boros, more and more people are being priced out of their homes. Rents have been going up much faster than wages, let alone the very sticky long-term unemployment rate. It is really indeed a shame that people must move away from the meager jobs they possess to be able to afford rent, even though that move might cost them their career network, the very group of people who will help them find a job should they lose one. Starting in a new place is very difficult.

Here’s an issue where the tax revenues that usually offset such disparities somehow have not been and are not. It is getting worse. On a line-by-line basis, everyone might be paying their correct taxes, but on an aggregate basis, there are many who do not seem to be paying.

This is very likely because of an accounting issue. A taxpayer can be completely compliant with all taxes, but still be paying less than economists have predicted because economists forgot to take into account a very important change that takes place when profits are earned by a corporation but is kept to raise the price of shares. The only way for investors, which are a class of people who can afford to buy much more than their needs and can afford to buy the productivity of other people, can only reap the benefits of the productivity of those people’s work they own through shares by… selling the shares. When those shares are sold, it is sold to other people who can afford to buy the productivity of people who work in a public corporation. Share prices rise due to increased net income, but rise in share price is not taxed at the earned income rate as employee’s must pay.

In this particular case, shell corporations are a great way to make real estate investments into parcels of interest rather than land, allowing shareholders to sell their interests even if the real estate generates net income.

Here’s the limitations of compliance. Compliance professionals in financial services cannot work on these types of policy issues because it requires changing the economics of our economy as a whole. Until this situation continues, compliance officers can only continue to make sure that the system perpetuates.


Marcus Maltempo is a compliance professional with more than a decade of experience helping banks, law firms and clients manage investigations and regulatory responses. He is a member of ACAMS and ACFE. 

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Cyrus Vance, Jr. Kenote

On Monday, January 26, Associations of Certified Anti-Money Laundering Specialists (hereon ACAMS) held its Third Annual AML Risk Management Conference at The Conrad Hotel in downtown New York. Over the course of this week, summaries and takeaways from the key notes and panel discussions will be shared in this blog.

HeaderCyrus Vance, Jr. is the Manhattan District Attorney in the New York county DA’s Office. He is known for a keen focus on financial crimes and crimes where financial services can aid Law Enforcement.

His keynote enumerated five:

  1. Increase in prosecutions of Auditors and Accountants and their firms.
  2. Payday lenders pose a risk to banks and the DA’s office intends to help banks stay out of trouble made by payday lenders.
  3. Non-financial transactions, like credit card verification for hotel reservations, have helped the DA to verify sex traffickers’ activities.
  4. Homegrown terrorism financing is still a risk and financial services play a crucial role is helping the DA’s office collect evidence.
  5. Cyber crime’s boundaries are not national, therefore, the DA’s office has began information sharing partnerships, beginning with London. Paris is interested.

About the Author: Marcus Maltempo is a compliance professional with more than a decade of experience helping banks, law firms and clients manage investigations and regulatory responses.
He tweets @MoneyCompliance