Obama urged Congress to quickly pass the legislation as part of a global effort that has gained force after the “Panama Papers” exposed just how widespread the use of shell companies to hide wealth can be.
“In recent months, we’ve seen just how big a problem corruption and tax evasion have become around the globe,” he told journalists at the White House.
“We saw what happened with the release of the Panama Papers,” he said.
“And we’ve seen the degree to which both legal practices of tax avoidance, that are still unfair and bad for the economy, as well as illegal practices that in some cases involve nefarious activities, continue to exist and to spread.”
On Thursday the White House and the Treasury Department announced new rules for the financial industry along with proposed legislation to stymie the use of front companies within the United States that hide the identities of beneficial owners.
The rules close a loophole that has continued to permit foreigners to open such companies in the United States, enabling money laundering and tax avoidance.
They also now require banks and other financial institutions to identify the beneficial owners, corporate or individuals, of any new accounts.
“One of the main ways that companies avoid taxes or wealthy individuals avoid taxes is by setting up a bunch of shell corporations and making it harder to trace where money is flowing and what taxes are owed,” Obama said.
“We say to the financial institutions, you’ve got to step up and get that information,” Obama said.
At the same time, Obama noted, Congress has to change the law to force the identification of all companies’ true owners at the creation of the companies.
“Only Congress can fully close the loopholes that wealthy individuals and powerful corporations all too often take advantage of, often at the expense of middle-class families,” Obama said.
The move comes amid a rising tide of public and government support around the world for fighting tax evasion and other financial crimes that is enabled by banking secrecy laws.
The Panama Papers, a trove of documents from a Panama law office detailing thousands of offshore companies used for hiding assets, focused attention on the fact that a number of US states permit the creation of anonymous companies and trusts by both US citizens and foreigners.