International Anti-Corruption Day was Dec. 9, and a number of international bodies marked the occasion by lobbying the United Nations to put an end to anonymous shell companies used by criminals to hide their identities and launder illicit funds. Two days later, on Friday, the United States took a significant step in this direction, with Congress passing a defense spending bill that includes language to require corporations to identify who owns and controls them (i.e., beneficial ownership).
The development reminded me of Eddie Murphy’s line from the film “Trading Places”: “I can see! I can see!” While Murphy used the line to support the pretense a couple of police officers cured his faked blindness, anti-money laundering (AML) practitioners might soon be saying the same in the real-world fight against financial crime.
The proposed U.S. legislation will help all of us, and some of us will be more empowered and emboldened to reject business where we are unable to see who we are doing business with.
The proposed changes in the United States are most welcome and increasingly necessary in a world where the more fake news is produced, the need for facts and evidence is greater. Transparency of corporate ownership is paramount, and this will not change under a new presidential administration.
Transparency provides clarity and accuracy, as well as an opportunity to assess and risk rate all parties. Transparency International has lobbied for beneficial ownership registers, as has Global Witness and many other non-government organizations. Even major banks have supported this lobby, because they want to be able to see who they are doing business with and where they may need to target their financial-crime-fighting resources.
Historically, banks and the financial services sector have allowed customers and their money to dictate the terms of business and a relationship. Consequently, banks have accommodated the offshore companies with opaque ownership and control structures. Some banks and firms have applied their own resources to establish the real ownership and control.
All this opacity has hindered the AML practitioner, the corruption investigator, and law enforcement while facilitating crime. When I was a detective investigating boiler room frauds, an assistant state attorney in New York asserted London was the biggest offshore center in the world and Delaware was offshore to Manhattan. Sure doesn’t sound like the beach and palm trees we might instinctively think of.
Perhaps now, after decades of perverse tolerance of these opaque corporate entities, the game is up. In the event the U.S. government is legislating for transparency, banks and other regulated financial service businesses are now in stronger position to demand the same from customers and third parties.
As the recent “FinCEN Files” leaks proved, in the event a bank does not know who they are ultimately doing business with or for, then there exists a possibility it is providing financial services to and laundering money for a person listed on the FBI’s most wanted list. Many of us in the global AML community know we need to improve the effectiveness and outcomes of our collective efforts—the proposed U.S. legislation will help all of us, and some of us will be more empowered and emboldened to reject business where we are unable to see who we are doing business with.
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