Reliance on information from banks hindering corruption and money laundering investigations

Governments are failing to tackle international money laundering and tax fraud because police don’t have the tools to track down the owners of companies suspected of criminal activity, a new report published today by Transparency International argues.

Analysis of country evaluations issued by global anti-money laundering regulator, the Financial Action Task Force (FATF), shows that poor performance is strongly linked to a reliance on data held by banks. Transparency International argues that FATF should require countries to establish central registers of the real owners of companies. Registers must be public in order to allow better verification of information.

See the report: Who is behind the wheel? Fixing the global standards on company ownership

FATF requires governments to ensure that authorities can quickly find out who the real or ‘beneficial’ owners of companies registered in their territory are. Of 83 countries assessed by FATF since 2014, only one (Trinidad and Tobago) fully complies with this rule. No country is considered to be ‘highly effective’ in this area.

“Almost without fail, anonymous shell companies appear at the center of major cases of corruption, money laundering and tax evasion,” said Maíra Martini, an anti-money laundering expert at Transparency International and author of the study. “Funds can be transferred between corporate bank accounts within seconds, but identifying who owns companies involved in cross-border corruption cases can take authorities up to a year.”

FATF does not specify how information on company ownership should be collected. Transparency International found that in the vast majority of 26 countries analysed in detail, authorities rely on information collected by banks and other reporting entities. This impedes investigations, as authorities often first need to know where the company banks. They may also require a court order, and information held by banks is often unverified. Cross-border ownership and banking structures create additional hurdles, the FATF reports reveal.

On the other hand, FATF’s assessment teams found it easier for authorities to access information in countries where there is a central register of company ownership.

“Central registers make it much easier for authorities to access the information they need in a timely manner. When these registers are also public, there are more ways of making sure the information available is accurate, as journalists and civil society can identify inaccuracies and cross-reference with other sources,” said Martini.

Transparency International urged FATF to revise its recommendations to adopt a multi-pronged approach to beneficial ownership information, with reporting entities and companies themselves being required to maintain accurate and reliable information to compliment central registers.

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