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Europe can set the standard on anti-money laundering

October 29th, 2013

This Op-Ed originally appeared on the EU Observer’s website.

BRUSSELS – Money launderers, corrupt politicians, tax dodgers and traffickers of all sorts rely on the same things to move their ill-gotten gains. They need legal structures that allow them to hide their identity.

This often happens through anonymous companies whose beneficial ownership is hidden. European leaders have a unique chance to curb these shell companies in the ongoing review of the European Union’s anti-money laundering rules.

To ensure cash or assets are efficiently processed, corrupt officials and politicians require professional bankers, lawyers and accountants willing to help them.

Either these professionals are negligent because they do not ask too many questions about where money or assets comes from. Or they play a central role in making sure it is impossible to identify where corrupt money originates from and who controls it.

This concluded that three quarters of the 27 banks it surveyed had inadequate procedures in place to spot and block tainted money.

The FSA study suggested that a fifth of the banks surveyed failed to identify indirect beneficial owners who exercised ultimate control.

The true customer of corrupt assets can hide behind complicated corporate structures (imagine a Russian Matryoshka doll: a company inside a company, inside a company) that makes uncovering the true nature of transactions and their beneficiaries very difficult.

The modus operandi of illicit financial flows are not aberrations, but part of a structural problem.

Governments across the world should take action to tackle this problem by promoting transparency of the ownership and control of companies.

After great pressure from civil society around the globe, such policies were recommended by G8 leaders earlier this year.

The EU could and should play a central part in a global effort to stem the flows of illicit capital by promoting transparency.

EU member state governments and the European Parliament can set the international standard on anti-money laundering rules.

On the table is a proposal that all companies must hold details of their own beneficial ownership.

This is a good start, but only a first step, as law enforcement would still have to approach a company directly for this information, potentially tipping off any suspects.

Instead, the EU could vastly increase the benefits if beneficial ownership information were to be made publicly available.

This would allow for people, law enforcement bodies and not in the least, financial institutions from around the world to look into the ultimate beneficiaries of companies.

Given the cross-border nature of money laundering, only global public scrutiny would help to expose, and, to a large extent, prevent the abuse.

Written by Koen Roovers

RT @alexcobham: Fascinating discussions today at the @UN_PGA's high level event on illicit financial flows https://t.co/vZcPq9bBsJ https:/…
- Tuesday May 21 - 2:54pm

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