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20th November 2023
Legislation to boost tax education and diversify the profession
Legislation that would allow K-12 educators to use federal grants for accounting education is being endorsed by the AICPA. Jan Taylor, senior director and academic in residence for AICPA's academic and student engagement, believes this legislation would not only create highly skilled tax practitioners but also diversify the profession. The perception of accounting as a profession needs to change, as technology has transformed the role of accountants, automating many tasks and opening up avenues for more creative work. The bills, H.R. 3541 and S. 1705, would establish accounting as a Science, Technology, Engineering, and Mathematics (STEM) career pathway and improve access for underrepresented students. By recognizing accounting as a STEM field, more students will be exposed to the profession and have greater opportunities for success. The legislation aims to strengthen the accounting pipeline, drive economic opportunity, and ensure future leaders are prepared to meet evolving needs.
U.S. hydrogen tax credit rule could slip into 2024
The release of a highly-anticipated rule guiding the use of clean hydrogen tax credits could be pushed into next year, as Treasury officials look to find ground between environmentalists and industry as to how "green" the incentives should be. The key question is over whether to restrict the tax credits only to hydrogen producers who use new sources of clean electricity to run their plants, instead of tapping power already on the grid. Industry wants the law to allow projects fueled by existing energy sources, including natural gas, hydroelectricity and nuclear, to be eligible for the tax credits.
IRS acted properly in rejecting delinquent taxpayer's plan
The IRS did not arbitrarily reject a delinquent taxpayer's plan to partially pay his tax liabilities because it concluded that he could pay those liabilities in full, the Tax Court has ruled. An IRS appeals officer determined that the taxpayer could pay a higher amount than what was offered under his proposed installment agreement. The court ruled that the officer's decision was not an abuse of discretion.
EY partner fired over tax scheme allegations
EY has fired an Australian partner accused of promoting a tax minimization scheme and receiving over A$700,000 in unauthorized payments from clients. The partner, whose name and former title cannot be revealed due to a suppression order, is being sued by the commissioner of taxation in the federal court. EY confirmed that the partner was terminated for the unauthorized receipt of financial benefits in connection with client transactions. The allegations include the promotion of a tax exploitation scheme to seven clients between November 2016 and April 2021.
Empire State factory gauge surges to seven-month high
The Empire State business conditions index, the Federal Reserve Bank of New York's gauge of manufacturing activity in the state, rose 13.7 points in November to 9.1, its highest level since April, and well ahead of the -3 reading expected by economists polled by the Wall Street Journal. The shipments index rose 8.6 points to 10; however, the index for new orders dropped 0.7 points to -4.9, unfilled orders fell 4.1 points to -23.2, and expectations for six months ahead plummeted 24 points to -0.9. Any reading below 0 indicates a drop in conditions.
Wells Fargo struggles with regulatory obligation to monitor financial crime
Wells Fargo is facing challenges in meeting its regulatory obligation to monitor financial crime, as regulators push the bank to improve its systems for catching criminals. The bank is also dealing with a lawsuit alleging that it allowed a $490m Ponzi scheme to operate. The regulators are focused on the bank's consumer-watching systems, while the lawsuit highlights the consequences of monitoring systems failure. Wells Fargo disputes the allegations in the lawsuit and is cooperating with law-enforcement officials. The bank has been privately rebuked multiple times by regulators for inadequate oversight of criminal activity. Wells Fargo is working to rebuild its risk and control apparatus to prevent and detect problems. The bank has previously faced penalties for non-compliance with anti-money laundering rules. The lawsuit claims that Wells Fargo fell short of its responsibilities in the Ponzi scheme case. The parties are currently in settlement talks, with the receiver expecting a potential settlement of over $100m. Similar issues have been costly for other large banks.
FCC enacts rules to eliminate digital discrimination
The Federal Communications Commission (FCC) has ratified new rules to combat discrimination in internet services, marking a significant step towards digital civil rights in the U.S. The rules empower the FCC to investigate instances of discrimination by broadband providers based on income, race, ethnicity, and other protected classes. The regulations also address disparities in investment and the "digital divide" caused by regional or socioeconomic inequality. FCC Chairwoman Jessica Rosenworcel highlighted the impact of the digital divide on communities of color, lower-income areas, and rural areas. The telecommunications industry has opposed the rules, arguing that they would hamper investment. However, digital advocacy group Free Press Action praised the regulations and called for further action. The FCC is also set to reintroduce net neutrality rules and aims to connect every U.S. household to quality internet service by 2030. 
Fraud at Americanas was $1bn more than previously suspected
Long-delayed financial reports released Thursday indicate that last year’s accounting scandal around Americanas was deeper than the Brazilian retailer previously reported. The company revealed that the size of the fraud was 25.2 billion reais ($5.2bn) as of the end of 2022, or about 5 billion reais more than it previously estimated. The accounting issues have their origin in supply chain financing and false advertising contracts. Bloomberg says the revised figures add a layer of complexity to what it describes as one of Brazil’s largest corporate meltdowns. “Americanas is the biggest interested party in clarifying what really happened,” the company’s management said in a statement. “The numbers of financial statements now reflect the most realistic and transparent figure of the company’s assets and liabilities.” Americanas reported a loss of 12.9 billion reais ($2.7bn) in 2022 and 6.2 billion reais in 2021, according to the filing. The company said it won’t redo annual figures before 2021 and will re-publish quarterly reports for 2022 along with its 2023 release by year-end.
Businesses must take risks to survive, report says
A survey by PwC of over 3,900 companies worldwide found that three-fifths view generative artificial intelligence as a good opportunity, but 37% believe they are highly or extremely exposed to cyber risks. Additionally, a quarter of respondents felt their organizations were very exposed to geopolitical conflict. Sam Samaratunga, global and U.K. head of risk services for PwC U.K., said: “In a world that is persistently in a state of flux, it is clear that organizations need to transform, with new and emerging technologies playing a critical role in that transformation. So it is no surprise that cyber and digital risks are top-of-mind in 2023, with those leaders responsible for managing risk ranking cyber higher than inflation. However, the survey highlights that if organisations don't take risks, they will not progress.”
Israeli detective sentenced to prison for global hacking campaigns
A U.S. court has sentenced Aviram Azari, an Israeli private detective, to six years and nine months in prison for organizing global hacking campaigns. Azari, a former policeman, pleaded guilty to wire fraud, conspiracy to commit hacking, and aggravated identity theft. Prosecutors stated that Azari's firm earned nearly $5m over five years for managing hacking campaigns that targeted thousands of victims, including climate change activists and critics of German company Wirecard. The US Attorney's office in Manhattan described Azari as having "exhibited zero regard for the harm inflicted on his victims." Azari was hired by Wirecard to target individuals and financial firms that had criticized the company. He also used hackers to steal emails from climate activists campaigning against Exxon Mobil Corp. Azari's defense lawyer requested a sentence of no more than five years, citing his client's acceptance of responsibility and a "debilitating medical condition" contracted while in jail. The sentencing follows an investigation by Reuters that exposed how Azari and other private investigators used hackers to assist wealthy clients in court battles.
2024: The year of generative AI
In the realm of technology, 2023 will go down in history as the "the year of generative AI," writes Clearwater Analytics CTO Souvik Das - who adds that 2024 promises to do the same in the financial sector. According to a Goldman Sachs Research report, generative AI is reshaping business workflows, promising a 1.5% boost in global productivity. The financial sector will closely watch generative AI adoption as it accelerates in the coming year. Streamlining client onboarding and compliance is made possible with generative AI, cutting down time and ensuring regulatory compliance. Generative AI's effectiveness in investment accounting depends on precise "prompt engineering" and contextualized prompts. Transparency and auditability are prioritized in generative AI responses to meet compliance standards. The adoption of generative AI has the potential to transform the financial services industry, introducing new methods to enhance efficiency and address challenges. By using generative AI responsibly and transparently, notable improvements can be made in the sector.
Shakira faces trial for tax fraud
Global pop star Shakira has been summoned to a Barcelona courthouse to attend her trial for allegedly defrauding Spanish tax officials of millions of euros. Shakira, 46, faces six counts of failing to pay the Spanish government €14.5m (about $15.8m) in taxes between 2012 and 2014. The case made headlines in 2018 and currently hinges on where Shakira lived during that period. Prosecutors in Barcelona have alleged that the Colombian singer spent more than half of that period in Spain and therefore should have paid taxes on her worldwide income in the country even though her official residence was still in the Bahamas. Prosecutors said in July that they would seek a prison sentence of 8 years and two months and a fine of €24m ($26.1m) for the singer who has won over fans worldwide for her hits in Spanish and English in different musical genres. Shakira's public relations firm said that she had already paid all that she owed and an additional €3m (about $3.2m) in interest. A three-judge panel, led by magistrate José Manuel del Amo, will preside over the trial. The trial is initially scheduled to conclude on December 14.

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