AML POLICY
allows the government to freeze the U. K. assets, including property, of international human rights violators, even if the offense was committed overseas.
The U. S. property market is similarly flawed. Earlier this year, as part of its program to identify and track secret homebuyers hidden behind shell companies and opaque structures for money laundering, the U. S. Treasury Department’ s Financial Crimes Enforcement Network( FinCEN) found that“ about 30 [ percent ] of the transactions covered by the Geographic Targeting Orders( GTOs) involve a beneficial owner or purchaser representative that is also the subject of a previous suspicious activity report. This corroborates FinCEN’ s concerns about the use of shell companies to buy luxury real estate in‘ all-cash’ transactions.” 7
Political commitments
Social pressure has finally pushed politicians to tackle the problem of secrecy. Unable to mask or ignore the impact that the lack of transparency in legal arrangements have on society, participants at the 2013 G8 Summit endorsed the core principles on beneficial ownership and published action plans setting out steps they will take to enhance transparency. In November 2014, G20 leaders adopted a policy document containing 10 principles intended to improve the transparency of beneficial ownership of companies and trusts—“ G20 High- Level Principles on Beneficial Ownership Transparency.” In the document, the group stated:“ We need better cooperation between government agencies, as well as greater transparency, particularly on the beneficial ownership of corporations, trusts, foundations and other legal arrangements. We need to ensure that beneficial owners are identified and that access to information on beneficial owners and international exchange of this information can be further improved.” 8 In June 2017, in Hamburg, the group again expressed the will for effective implementation of the international standards of transparency and UBO, welcoming the work done by FATF and the Global Forum on Transparency and Exchange of Information for Tax Purposes in this regard. The Group praised the“ major progress” in the fight against tax evasion and tax avoidance, as reported by the Organisation for Economic Cooperation and Development in the July 2017 Report. 9 The development in the Base Erosion and Profit Shifting( BEPS) package implementation and first automatic exchanges of financial account information( AEOI), scheduled to take place in September 2017, were presented as the Group’ s recent achievements. However, in terms of the accessibility of the beneficial ownership information itself, not much has been presented in the G20 Hamburg Action Plan or the Leaders’ Declaration, but further reports on the progress were requested.
As important as high-level political commitments are, progress in implementing changes at the national level has been unimpressive. Regulatory and legislative pressure to identify the UBO as part of AML and ABC regimes is growing. For example, regulators have taken more industries into their purview. However, governments have not made much real effort to make the information available.
Available information in the EU and the U. S.
In the EU, the Fourth AML Directive requires member states to introduce registrars of the beneficial owners of companies. Yet in June 2017( the implementation deadline) only a handful of member states had functioning registrars. Most registrars were hidden by a paywall or simply unavailable to the public, with data protection and privacy laws cited to justify restricted access. For example, the U. K. beneficial ownership registrar(“ People with Significant Control Registrar”) opened in 2016, but excluded trusts from the requirement to file ownership information. Only a year later, Scottish Limited Partnerships( SLPs), which form two-thirds of all the opaque corporate entities in the U. K., have been covered by stricter disclosure rules. The registrar of trusts’ beneficiaries is still to be created.
Where registrars did become available in Europe, the quality of data( often collected but not verified) was widely criticized by industry experts. This further illustrates that European countries still have a long way to go to make a real change. The beneficial ownership data that is collected must be of better quality, accessible without restrictions and encompassing of more legal forms, including trusts. Only then will European legal entities become unattractive to financial criminals.
The U. S. is only now attending to the problem. The International Monetary Fund strongly criticized the U. S. for failing to address the lack of transparency of American corporations and trusts, and published clear and strong recommendation for U. S. authorities to“ ensure that accurate beneficial ownership information of U. S. corporations and trusts … is collected and maintained by either registries of corporations and trusts … and requiring all FIs and DNFBPs, in particular trust and company service providers( TCSPs) including lawyers and accountants providing such services, to identify the beneficial owners of
7
“ FinCEN Renews Real Estate‘ Geographic Targeting Orders’ to Identify High-End Cash Buyers in Six Major Metropolitan Areas,” FinCEN, February 23, 2017, https:// www. fincen. gov / news / news-releases / fincen-renews-real-estate-geographic-targeting-orders-identify-high-end-cash
8
“ G20 High-Level Principles on Beneficial Ownership Transparency,” G20, 2014, http:// www. g20. utoronto. ca / 2014 / g20 _ high-level _ principles _ beneficial _ ownership _ transparency. pdf
9
“ OECD Secretary-General Report to G20 Leaders,” G20, July 2017, http:// www. oecd. org / tax / oecd-secretary-general-tax-report-g20-leaders-july-2017. pdf
74 ACAMS TODAY | SEPTEMBER – NOVEMBER 2017 | ACAMS. ORG | ACAMSTODAY. ORG