AML POLICY
Money laundering , terrorist financing , evading taxes , bribery , corruption , abuse of human rights and even modern-day slavery differ in their nature , but they have some things in common : They destroy people ’ s lives , undermine the common values in our societies and they are facilitated by a lack of transparency .
Global money laundering transactions are estimated at 2 to 5 percent of global GDP . 1 The cost of corruption equals more than 5 percent of global GDP , with over $ 1 trillion paid in bribes each year . 2 More than $ 12 trillion has been siphoned out of Russia , China and other emerging economies into the secretive world of offshore finance . 3 Criminals hide behind a veil of complex and anonymous corporate structures , funneling dirty money into the legitimate financial market , evading taxes and enjoying the proceeds of crime , yet remaining untraceable to law enforcement agencies .
Anyone with experience in the compliance field will be familiar with these facts . There is no shortage of data that illustrate the scale and cost of the problem . The Financial Action Task Force ’ s ( FATF ) 40 Recommendations published in 2004 addressed the connection between business secrecy and financial crime . The World Bank ’ s Stolen Asset Recovery report of 2011 (“ The Puppet Masters ”) showed that of 150 corruption cases worth over $ 50 billion in illicit assets , nearly all involved the use of the companies with concealed ownership . But to your friends and family , the 2016 media blast around Panama Papers may have come as a revelation . It may have been the first time most civil society realized what the compliance world had known for decades . Such discoveries of the scale and pervasiveness of financial crime are needed for society to demand the changes necessary to effectively fight financial crime . As members of society , we can demand change from our political representatives for better regulations and their enforcement .
As part of the compliance environment , it is our duty to the rest of society to help prevent all forms of financial crimes . Thus , the requirement to uncover the true persons behind legal entities is key . However , the prevailing secrecy in corporate vehicles makes it often an impossible task for financial institutions ( FIs ) and designated non-financial businesses and professions ( DNFBPs ) to comply with antimoney laundering ( AML ) and anti-bribery and corruption ( ABC ) regulations and effectively identify the beneficiaries of legal entities .
Who is the UBO ?
There is no universal definition of “ beneficial owner .” Various bodies , governments and institutions differ in their interpretations . FATF , which sets the global standards in money laundering efforts , defines a beneficial owner as “ the natural person ( s ) who ultimately owns or controls a customer and / or the natural person on whose behalf a transaction is being conducted . It also includes those persons who exercise ultimate effective control over a legal person or arrangement .” 4 With regards to the owning threshold , FATF does not provide a clear answer and only provides 25 percent as an example .
How civil society can drive the change
With numerous large-scale corruption and tax avoidance scandals reaching the mainstream media every month , civil society is now more than ever aware of how the lack of transparency in corporate structures can have a negative effect on the economy and how , through anonymous entities , stolen assets can be transformed into luxurious villas , private jets and fast cars . Increased engagement against business secrecy from charities and non-profit organizations , but also journalists ’ groups working against corruption , has helped to build momentum . For example , a special report by Reuters in 2012 highlighted how one high street coffee shop chain avoided paying taxes on profits in the U . K . through a complex corporate structure . This led to a widespread media debate and in turn to customers boycotting the chain . Not only did the action have an enormous negative impact on the company ’ s reputation , but it also forced it to make changes to its tax maximization practice in the U . K . 5
Abuse of the housing market
Various organizations , including Transparency International , Global Witness , Tax Justice Network and ClampK , have been leading successful campaigns to reveal the misuse of corporate vehicles and the funneling of “ dirty money ” into the U . K . housing market . Abuse of the market directly impacts property prices in the country ’ s capital , making housing unaffordable to the working class . The U . K .’ s National Crime Agency reported that as much as 100 billion pounds in tainted cash passes through the U . K . each year , with significant sums invested in London ’ s thriving high-end housing market . 6 The civil society ’ s pressure has had a definite influence on the delivery of the government ’ s commitment to introduce the updates into the Criminal Finances Bill . The new regulation
1
The International Monetary Fund , http :// www . imf . org / external / index . htm
2
World Economic Forum , https :// www . weforum . org /
3
Tax Justice Network , https :// www . taxjustice . net /
4
“ Transparency and Beneficial Ownership ,” FATF Guidance , October 2014 , http :// www . fatf-gafi . org / media / fatf / documents / reports / Guidance-transparency-beneficial-ownership . pdf
5
Sylwia Wolos , “ Business Transparency in the Fight Against Financial Crime ,” Thomson Reuters , December 2 , 2015 , https :// blogs . thomsonreuters . com / answerson / business-transparency-financial-crime /
6
Juliette Garside , “ Hundreds of Properties Could Be Seized in UK Corruption Crackdown ,” The Guardian , October 13 , 2016 , https :// www . theguardian . com / business / 2016 / oct / 13 / properties-seized-assets-corrupt-cash-crackdown-criminal-finances-bill-tax-haven
ACAMS TODAY | SEPTEMBER – NOVEMBER 2017 | ACAMS . ORG | ACAMSTODAY . ORG 73