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The latest news headlines on issues and developments affecting the internal audit profession.

Feb. 26, 2021

Explaining the U.S. Corporate Transparency Act

Among the new pieces of U.S. legislation that went into effect Jan. 1 is the Corporate Transparency Act, which was enacted as part of the National Defense Authorization Act for Fiscal Year 2021. According to the National Law Review, The law requires certain U.S. entities to report the personal information of their beneficial owners to the Financial Crimes Enforcement Network of the U.S. Department of the Treasury, including name, address, date of birth, and unique identification number from an acceptable document such as a driver's license or passport. The law defines a beneficial owner as an individual who exercises "substantial control" over an entity or owns or controls no less than 25% of the ownership interests of the entity. The legislation is designed to set a clear federal standard for entity incorporation; protect U.S. national security; and enable law enforcement efforts to counter money laundering, terrorism financing, and other illicit activity. It also more closely aligns the U.S. with international standards concerning anti-money laundering and countering terrorism financing. Other than criminal enterprises, the sector that is expected to be impacted the most is small businesses, who will be tasked with navigating the new business landscape to comply.

G20 Meets to Discuss Fiscal Support for Global Economy

Members of the G20 met Friday and are expected to affirm support for COVID-19 relief measures within their own countries and to discuss boosting International Monetary Fund (IMF) resources in support of poorer countries, Reuters reports. The meeting of finance ministers and central bank governors from the world's top 20 economies was held virtually. German Finance Minister Olaf Scholz said his primary goal was to convince colleagues that it is too early to scale back stimulus support programs. "Contrary to what had been hoped for, we cannot speak of a full recovery yet," he said. "For us in the G20 talks, the central task remains to lead our countries through the severe crisis." According to Reuters, the G20 is also expected to extend a six-month suspension of debt payments on IMF loans for poorer countries.

Austria, Greece, Urge Other EU Nations To Adopt Vaccination "Passport"

Austria and Greece are urging other EU nations to adopt coronavirus vaccination "passports" that could help revive Europe's stricken tourist industry, BBC News reports. The idea of such a document, likely to be a certificate, would be to permit those who have been vaccinated to travel freely within the EU. However, the proposal, which was put forward during a virtual discussion between EU leaders, faces opposition from some of the bloc's 27 member states. Among the concerns, France and Germany say such documents could be premature because data on the efficacy of vaccines in preventing a person from carrying or passing on the virus is incomplete. 

U.S. President Biden Lifts Freeze Blocking Legal Immigration to U.S.

U.S. President Joe Biden issued a proclamation on Wednesday lifted a freeze on green cards that had been put in place by former President Donald Trump last spring in the name of protecting the pandemic-damaged U.S. job market, the Associated Press reports. Immigration lawyers said the freeze was blocking most legal immigration to the U.S. Biden has not said whether there will be any redress for visa lottery winners who lost out because of the pandemic-era policies.

Feb. 24, 2021

U.S. President Biden to Authorize Global Supply-chain Review in Four Key Industries

U.S. President Joe Biden is scheduled to sign an executive order to review the global supply chains used by four key industries to avoid the shortages in computer chips and other goods seen as critical during the COVID-19 pandemic, Politico reported. Biden's order will institute 100-day reviews of the global producers and shippers for the chips used in consumer products, large-capacity batteries for electric vehicles, pharmaceuticals and their active ingredients, and critical minerals used in electronics. The reviews will seek to determine whether U.S. firms in these sectors are relying too much on foreign suppliers, particularly those in China.

Oxford Data Shows Uneven COVID-19 Distribution Globally

Statistics from Our World in Data, a University of Oxford research group, show the unequal distribution of vaccinations globally. Many of the richest countries such as the U.K., United Arab Emirates (UAE), and the U.S. show much higher cumulative COVID-19 vaccination doses among their populations compared to poorer countries. Israel ranks the highest, with more than 88 doses administered per 100 people, followed by the UAE (57), U.K. (27), and U.S. (19). "To bring this pandemic to an end, a large share of the world needs to be immune to the virus," the Oxford nonprofit stated. "It will be key that people in all countries — not just in rich countries — receive the required protection." According to the Associated Press, U.N. Secretary-General Antonio Guterres recently spoke to the U.N. Security Council, urging a Global Vaccination Plan that brings together scientists, vaccine producers, and those who can fund an equitable distribution of the vaccine. Other world leaders are criticizing the vaccination inequity, including Mexican President Andres Manuel Lopez Obrador who called the uneven distribution "totally unfair," Reuters reported.

Companies Partner to Boost Cryptoasset Adoption

KPMG's recent Pulse of Fintech H2'20 report (PDF) cited the mainstreaming of crypto-assets as a top fintech trend for 2021. "The evolution of digital ledger technologies combined with stablecoins [a cryptocurrency whose market value is pegged to an external reference] and increasing interest in central bank digital currencies may begin to open up tremendous opportunities in the cross-border payments space," the report said. KPMG, BitGo Inc., and Coin Metrics Inc. are partnering to help financial institutions manage the risks in public blockchain networks and offer crypto and digital assets products. According to a KPMG announcement, the venture is intended to facilitate increased institutional adoption of crypto-assets and public blockchains.

Evidence Mounts That a Single Dose of Pfizer's Vaccine Is Effective at Reducing COVID-19 Infection

A new study from Public Health England finds that not only does Pfizer and BioNTech's two-dose COVID-19 vaccine provide strong protection against infection and also significantly reduce rates of transmission, but just a single dose also has many of the same benefits. The findings show one dose reduces the risk of catching infection by more than 70%, which rises to 85% after the second dose. The study followed more than 23,000 U.K. health-care workers for two months, testing them every two weeks regardless of whether they had symptoms. These findings align with those of a widely circulated study out of Israel that found the Pfizer vaccine was effective at protecting against symptomatic infection 15 to 28 days after the first dose.

Feb. 22, 2021

U.S. Federal Reserve Highlights High Risk of Business Failures in Report to Congress

In its semi-annual monetary policy report to the U.S. Congress, the Federal Reserve stated that despite a degree of economic recovery following the peak of the COVID-19 pandemic, the risks of ongoing business failures in the U.S. "remain considerable." According to the Fed, business borrowing currently sits at near historic highs. Although there are large cash balances and low interest rates that should boost growth, many small and medium-sized businesses remain perilously close to insolvency. Many of these facts are indicators of what Reuters calls a "potential economic hangover" looming. The Fed still plans to maintain a policy of low interest rates and $120 billion in monthly bond purchases as the economy continues to recover, but if these policies generate significant inflation, there remains a possibility it could reverse course.

ESG Expertise Valued in New Board Appointments

Increasingly, corporate boards are looking for environmental, social, and governance (ESG) expertise when selecting board members, according to an Agenda article (paywall). ESG topics such as climate change and workforce diversity have grown in importance as consumers, investors, regulators, and public policymakers increasingly focus on them, Agenda says. However, a January study by New York University's Stern Center for Sustainable Business warns that ESG experience among directors is still lacking, with only 29% of the 1,188 directors sitting on Fortune 100 boards in 2019 having relevant ESG credentials, especially related to environmental sustainability. The article's expert sources discuss the qualities boards should seek.

Child Slavery Lawsuit Targets World's Largest Chocolate Companies

Eight men from Mali who claim they were trafficked as child slave labor on cocoa plantations in Ivory Coast have filed a lawsuit against the world's biggest chocolate companies in federal court in Washington, D.C., The Guardian reports. In the lawsuit (PDF), the men, who are now in their 20s, accuse the companies of aiding and abetting the illegal enslavement of "thousands" of children on cocoa farms in their supply chains. The suit was filed on their behalf by the human rights organization International Rights Advocates and is being brought under the U.S. Trafficking Victims Protection Reauthorization Act of 2017.   

U.S. Study Identifies 70% More Homes and Properties at Substantial Risk From Flooding

In the U.S., climate change has increased the risk that properties will experience damaging floods, and the insurance market has greatly underestimated that risk, CNN reports. The article cites a study by First Street Foundation that analyzed the flood risk of every home and property in the contiguous U.S. According to the study, 4.3 million residential properties have a substantial risk of financial loss from flooding, which many homeowners are not aware of. New research from the group shows that if all of these homes were to be covered for flood risk through the National Flood Insurance Program, the rates would need to go up 4.5 times their current premiums to cover the risk today. When looking at all kinds of properties, the group found that a total of 14.6 million are at substantial risk of flooding, or 70% more properties than are identified by the Federal Emergency Management Agency. The nonprofit research group says the discrepancy exists because its analysis "uses current climate data, maps precipitation as a stand-alone risk, and includes areas that FEMA has not mapped."

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