Dirty Money

We are working to expose the actors, methods and systems that the corrupt depend upon to facilitate the laundering, transfer and investment of dirty money.

Corruption can no longer be dealt with within a country’s borders. From foreign bribery to rigged public procurement to embezzlement of health or education money, very often Grand Corruption is transnational and depends upon the international financial system. Recent scandals from 1MDB to Odebrecht show how corrupt businesses and officials, with the help of banks and other professional enablers such as lawyers, accountants and real estate agents, abuse existing loopholes to pay bribes, buy influence, hide, launder and enjoy stolen money.

We work to close the loopholes in the global financial system that allow corruption schemes to flourish and the billions stolen from citizens to be hidden and laundered. We want to ensure the corrupt have nowhere to hide, no one to help and no impunity for their acts.

It is easy for criminals to hide when companies legally do not have to state their beneficial owners, that is the real person who benefits from it. Without information, it is much harder for investigative journalists and law enforcement to detect wrongdoing and follow the money.

Anonymous companies and trusts used to hide the identity of the person at the source of the funds, become vehicles to launder and transfer stolen money, or to operationalise corrupt deals. These companies and offshore accounts pay bribes and buy influence. Anonymity and secrecy also make it easier for the corrupt to use dirty money to purchase properties and other luxury goods at home and abroad.

In 2016, the Panama Papers shed light on the wide use of this practice – more than 140 public officials were using more than 214,000 offshore entities to hide the ownership of assets.

Anonymous companies fuel corruption, deprive those in need and concentrate wealth and power in the hands of the few.

We believe there should be no anonymous companies and we campaign for governments to introduce registers that disclose the real owners of companies. Beneficial ownership registers must be accessible to law enforcement, the media and the public in open data formats. The information in the register should be independently verified.

Public beneficial ownership registers facilitate cross-border investigations into corruption, as well as other crimes, such as human and drug trafficking and environmental crimes. It also helps shine a light on conflicts of interest, undue influence and dark money in politics.

Many countries offer Golden Visa schemes, offering fast-track citizenship or residency to foreign nationals in exchange for substantial investment in the country, often in real estate.

Member States of the European Union are particularly attractive, as citizenship or residence in one country grants access to the whole EU.

Golden visa schemes are highly desirable for those associated with corruption because they offer access to a safe haven for their stolen wealth. Golden visas limit exposure to the risk-based approach of banks, allow the corrupt to travel under the radar of sanctions regimes or even serve as a get-out-of-jail-free card, allowing them and their dependents to evade law enforcement or prosecution at home.

Our research shows that despite the risks, a number of schemes operating in the EU have revealed alarming flaws in their architecture.

We are calling on the EU to set common standards and mechanisms for reducing the corruption risk posed by golden visas programmes. Proper oversight is needed to ensure the individuals – and their money – are clean before being granted a Golden Visa.

Banks play a key role in facilitating money laundering and feature prominently in almost every major money laundering scandal.

Banks have been subject to multiple anti-money laundering regulations for decades. From ‘know your customer’ rules to more elaborated enhanced due diligence procedures, in general, banks are well regulated when it comes to anti-money laundering. There are, however, a number of areas of concern relating to identification of and access to beneficial ownership information, as well as the identification of domestic and foreign politically exposed persons.

More importantly, the weak implementation and effectiveness of existing rules mean that in spite of advances in the regulatory framework, banks continue to turn a blind eye to dirty money, failing to stop or report suspicious transactions. As a consequence, public money that should be used for common good ends up in offshore accounts or luxury apartments.

In addition to financial institutions, corrupt companies and officials often seek the help of professional intermediaries. Corporate service providers _ lawyers and accountants - knowingly or negligently, enable corruption by either handling dirty money or setting up anonymous companies for suspicious clients.

They may also serve as nominee shareholders or directors, keeping the real owner confidential. These professionals, along with real estate agents, may also play a role in facilitating real estate purchases used to launder money. Dealers in luxury good, including the art world and super-yachts, precious stones and jewels, play a similar role.

These entities and professionals are considered “gatekeepers” of the financial sector exactly because they are in a privileged position to prevent and identify suspicious activities and flag them to authorities. Professional enablers should be required to implement comprehensive anti-money laundering programmes and report on suspicious clients, paying enhanced attention to politically exposed persons, and transactions.

Weak supervision and lack of sanctions offer few incentives for gatekeepers to prevent or report the flow of potentially illicit funds. Recent corruption scandals raise serious questions about the measures undertaken by financial institutions and the private sector to fight money laundering.

Countries should implement comprehensive anti-money laundering regimes through stronger oversight and law enforcement. Without strong watchdogs and sanctions, the flow of illicit funds around the world will continue to worsen.

The recovery of assets is important to ensure redress in corruption cases and break the impunity cycle. However, asset recovery has very limited success compared to the assets stolen and hidden. Estimates of total global anonymous and potentially illicit wealth range from US$7 trillion to US$32 trillion (around 10% of total global wealth). Only US$2.6 billion in illicitly acquired wealth was frozen and a meagre US$423 million returned by OECD countries between 2006 and 2012.

Much more needs to be done to ensure stolen assets are detected, seized, repatriated to their country of origin and, most importantly, used for the benefit of citizens in these countries, the real victims of corruption.