Time for action on financial transparency
On 13 February the European Parliament will have a once-in-a-decade opportunity to vote for legislative revisions to the current EU Anti-Money Laundering Directive (AMLD).
If implemented correctly, a revised AMLD could have a tremendous impact on the battles against corruption, drug trafficking, tax evasion and a slew of other criminal activities all currently facilitated by the ease in which money can still be laundered in Europe today.
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The draft EU AMLD would, in part, require all companies registered in the EU to hold details of who really owns and controls them – their beneficial owners. This might not sound like much but consider this: in Europe less personal information is asked of a company opening a bank account than there is of an individual applying for a driver’s license, to rent an apartment or to simply obtain a library card.
As a result, many companies are opened in names unassociated with that of the person who really owns or controls them. And once a bank account has been opened in a false name, if illegal activity is suspected it is almost impossible to follow the money laundering criminal money trail back to the owner.
A public register would have made it more difficult for mafia organisations Cosa Nostra and Camorra to use Italian and other shell companies to launder huge sums of money. Over the last decades, Italian mafia groups used Italian companies to defraud the European Union out of millions of euros that were meant to be used to regenerate Europe’s poorest regions.
Last year, the European Commission hired accounting firm Deloitte to look into the effectiveness of the current AMLD. They found that it did not do enough to combat international or even pan-European money laundering schemes.
One of the short-comings high-lighted in the study was the difficulty banks have in identifying an account’s beneficial owner.
Not only can the due-diligence be a costly and time-consuming undertaking, but without substantial prohibitive measures in place, the incentive for banks to chase down information about wealthy clients is sometimes missing.
We belong to those who feel we need to go a step further and require European countries to set up registries of the beneficial owners of companies.
These registers should be publicly accessible.
By sharing company ownership with all interested parties - including banks, law enforcement, journalists, citizens and NGOs - we can ensure that adequate oversight is guaranteed and information is made available to those who need it.
Bankers will be able to follow through on due diligence, law enforcement will be able to attach names to proceeds from crime, journalists can research political contributions or other questionable or even illegal donations (and many other stories of corruption) and average citizens or small businesses could learn, for example, to better understand who is behind their partners, suppliers or customers.
Providing beneficial ownership information to the public registry would not require much from the companies beyond sharing information they should already possess such as the company beneficial owner’s full name, date of birth, the means of exercising control over the company, contact details and information detailing the legal shareholders.
With the AMLD vote, Europe has the potential to set the standard on anti-money laundering for the rest of the world. So much good to be done with relatively little effort - we hope MEPs from other member states are as clear about the wealth of possibilities as we are.
Cecilia Wikstroem is a Liberal Swedish MEP. Koen Roovers works in Brussels for the Financial Transparency Coalition, an international network of not-for-profit groups which advocates transparency and accountability in the global financial system