|
Transparency International (press release) (blog)
|
Money-laundering: too important to leave to the experts alone
Starting tomorrow a group of government officials and experts
belonging to the world’s leading anti-money laundering organisation –
the Financial Action Task Force (FATF) – will be meeting in Paris. On the agenda
is the adoption of a document on an issue that has major implications
for the fight against crime, corruption and tax evasion around the
world.
It’s a shame nobody outside of this small circle of experts from governments and international organisations has had a chance to see the document before it comes out.
According to the FATF website, at its upcoming plenary meeting the organisation will adopt guidance on beneficial ownership and company transparency.
Beneficial ownership is the term
used to describe who actually benefits from the assets and profits of a
company. At the moment many countries allow the formation of shell
companies with proxy directors which obscure the real (beneficial)
owner. When people are allowed to hide their identity behind a shell
company in this way, there is a risk of this advantage being used to
hide illicit money.
The FATF guidance matters because it “will assist countries to design
and implement measures that will deter and prevent the misuse of
corporate vehicles, such as companies, trusts and other types of legal
persons and arrangements – for money laundering, terrorist financing and
other illicit purposes.”
Corporate transparency of beneficial ownership is an essential measure to stop the abuse of shell companies by hidden owners. There is large and growing evidence
to show that anonymous shell companies play a role in most major
corruption and crime cases. Just last week, for example, it was reported that 19 UK shell companies had been used to allegedly launder US$20 billion in illicit funds.
Although it is not the most well-known of international
organisations, the FATF is a powerful inter-governmental body which sets
global standards for the prevention of money-laundering and the
financing of terrorism. Since its creation in 1989, the FATF has been
highly successful in getting countries to sign up to its recommendations, with over 180 countries already having done so.
The FATF not only sets standards; it also evaluates how well
countries are complying with them and can place laggards on “blacklists”
and “greylists” if they are not up to scratch.
To what extent it has been successful in getting countries to comply
with its recommendations, however, is less clear. The Organisation for
Economic Cooperation and Development found in December 2013 that none of its 34 members is fully compliant. Other independent studies have questioned the effectiveness of the global anti-money-laundering system.
Despite these criticisms, the fact remains that the FATF is the go-to
organisation when it comes to money-laundering, with impressive
leverage over national governments. It has also updated and strengthened
its methodology, which starting in 2014 will measure the effectiveness of countries’ regulatory frameworks.
Given that hidden corporate ownership is one of the key loopholes
which is used to launder dirty money, it is a missed opportunity not to
have shared the beneficial ownership guidance in draft form with the
public and asked for comments: the FATF would have been surprised at the
quantity and quality of responses.
The Financial Transparency Coalition,
for example, brings together over 150 civil society organisations, as
well as governments and thematic experts, and its members have developed
significant expertise on the problem of hidden company ownership and
its consequences. A strong consensus has emerged that the best way to
tackle abuses is to create central public registries
of beneficial ownership, which would allow authorities to easily
identify the real owners of companies, greatly increasing the chances of
criminals being caught.
At the recent annual conference
of the Coalition, held last week in Lima, transparency in beneficial
ownership was discussed on panel after panel, linked to issues as
diverse as human rights, extractive industries and climate change.
The FATF has already taken significant steps to increase its
transparency by publishing its reports and other guidance documents in
full on its website. However, it only publishes after documents have
been approved in final form.
The organisation should take its transparency a step further, making
greater efforts to allow citizens to participate and comment during the
process leading up to publication.
Citizens are the primary victims of the crimes which result in
illicit money being laundered. They should be given the chance to
contribute solutions to something that affects them directly.
No comments:
Post a Comment