PanamaTimes

Friday, Mar 29, 2024

Building the Basis of a Transatlantic Response to Illicit Finance

Building the Basis of a Transatlantic Response to Illicit Finance

Despite years of technical efforts led by the Financial Action Task Force (FATF), the global anti-financial crime standard setter, the challenge of illicit finance endures.

In fact, its impact seems ever more insidious. Illicit finance is not merely the domain of criminals; it also supports kleptocrats and those engaged in grand corruption both for their own gain and, increasingly, for national advancement.

Central to this proliferation of dirty money is the role played by leading global financial centres as facilitators of, and safe harbours for, the money generated by kleptocrats and other malign actors. Chief among these havens are the US and the UK, where the realisation is dawning that illicit finance not only undermines the integrity of their economies, but it also threatens national security, notably being used to erode democracy.

Against this backdrop of increasing political support for greater action against illicit finance, RUSI’s Centre for Financial Crime and Security Studies held the first meeting of its Taskforce on a Transatlantic Response to Illicit Finance (TARIF) in late July. This meeting focused on how the US and the UK can shore up their domestic foundations, to plug the gaps that are all too often exploited by malign actors to facilitate flows of illicit finance around the globe.

TARIF also considered how the US and the UK – as key members of a range of relevant anti-financial crime and security communities – must collaborate to draw attention to the widespread failings of the contemporary global counter-illicit finance regime.

Fixing the Home Base


To ‘fix the home base’, TARIF members put forward the following starting points:

1. Central to advancing the response to illicit finance must be an acknowledgement by leading policymakers in the US and the UK that both countries have domestic vulnerabilities – with international consequences – that must be remedied. As the UK’s Economic Crime Plan (ECP) notes, ‘strong domestic action will underpin our efforts to combat economic crime and illicit financial flows at the international level’.

2. Supervision of ‘professional enablers’ – such as lawyers, accountants and real estate agents that provide the services that facilitate the moving and storing of funds – must be strengthened. Greater use should be made of technology to support supervision in both jurisdictions. In the UK, the CEO of the Financial Conduct Authority has talked of becoming a ‘data-led regulator’ – but what does this mean, and how does it become a reality? Smaller regulated entities must be subject to far more muscular supervision and enforcement to promote greater responsibility and cultural change. In both countries this will require a close look at the structure of the supervisory regime, ensuring that those responsible for supervision have no conflict of interest between their status as a membership organisation and supervisory responsibilities for those same members. In the US, this means supervising lawyers by making use of FinCEN’s (the US financial intelligence unit) existing authorities. This failure to regulate lawyers in the US, in particular, undermines the credibility of the US as a global leader in tackling illicit finance.

3. Furthermore, both countries must dedicate more attention to the supervision of real estate and private equity, asset classes favoured as havens for the proceeds of corruption. In the US, smart intelligence gathering tools, such as Geographic Targeting Orders, that require real estate title insurers to collect and report certain financial crime related information to FinCEN, should be placed on a permanent footing. In the UK, where a similar tool has been under consideration as part of the ECP, this should be introduced via reforms to the UK’s Proceeds of Crime Act to boost the paucity of financial crime intelligence currently gathered.

4. Vehicles that have proved to be loopholes in illicit finance defences, such as private schools and universities, as well as those that facilitate citizenship and residency schemes, should be subject to much greater scrutiny and potentially brought under anti-financial crime regulations. In this regard, the recent suggestion in the EU’s proposed new anti-money laundering (AML) regulation that companies offering investor residency schemes should also be covered by AML obligations is worthy of note.

5. Without strong enforcement, regulations and laws are meaningless. This shortcoming is particularly evident in the UK. Thus, a concerted effort must be made to greatly enhance the enforcement response to meet the current illicit finance threat. Where greater financial resources are needed, a new funding model may be required which could make use of the soon to be introduced Economic Crime Levy in the UK, but is likely to require more radical thinking – for example, increasing investment via the expanded use of seized criminal assets. Laws may also need adapting. For example, corporate criminal liability should be introduced to target enablers of illicit finance. Furthermore, to mitigate the fact that UK law enforcement currently faces situations in which it cannot risk the potential costs associated with pursuing high-value illicit finance cases, close consideration should be given to the introduction of cost-capping in civil cases.

An Honest Assessment


Alongside acknowledging their domestic vulnerabilities, the US and the UK should lead an honest international discussion about the state of the current anti-financial crime system, a system that – to a great extent – does not work effectively. Given the countries’ positions in the G7, G20, the FATF and the UN Security Council, and their combined role as cheerleaders for the global effort to strengthen financial integrity, such a discussion would carry significant weight and mitigate legitimate accusations of double standards.

In addition, the US and the UK should commit to reforming the global anti-financial crime system focusing on outcomes – for example, clear impact on profit-motivated crimes such as human trafficking – and not outputs. This should be based on a whole-of-system approach, with responsibility in the private sector distributed in terms of risk, covering all professions (such as lawyers and real estate agents, not just banks) that contribute to financial crime.

Cross-border information sharing must lie at the heart of any meaningful recasting of the response to illicit finance. While domestic information sharing to fight financial crime has improved considerably in the past five to seven years, international sharing remains nascent. As they have done domestically, the US and the UK should lead the way by developing a transatlantic public–private information sharing partnership. This must include more private–private sharing, which is tactical, real-time and moves towards a shared data format so that resources can be most effectively deployed. This must also include greater involvement from intelligence agencies, an essential step for tackling illicit finance linked to kleptocracy.

Information sharing should not be restricted to traditional private sector actors but must also embrace social media providers, and consideration should be given to whether these new facilitators of illicit finance should also be placed within the regulated perimeter, requiring them to play a central part in the response to illicit finance.

Time for a Radical Rethink


No other countries have invested so much in developing the global policy architecture for combatting illicit finance. Now it is time for the US and the UK to unequivocally commit to getting their houses in order and lead by example. They should provide no excuses to those that have historically been able to point to US and UK shortcomings to justify their own failings. Washington and London should collaborate to use their positions of influence in the financial crime community to lead a radical rethink in the international response to illicit finance.

Newsletter

Related Articles

PanamaTimes
0:00
0:00
Close
Apple warns against drying iPhones with rice
In a recent High Court hearing, the U.S. argued that Julian Assange endangered lives by releasing classified information.
Global Law Enforcement Dismantles Lockbit Ransomware Operation
Russian opposition leader Alexey Navalny has died at the Arctic prison colony
The President of Argentina Javier Mile does not fly private, he flies commercial, with the citizens he represents. And they LOVE him for it.
Bitcoin Reaches $50,000 for First Time in Over Two Years
Belo Horizonte: Brazil's Rising Carnival Hotspot for 2024
In El Salvador, the 'Trump of Latin America' stuns the world with a speech slamming woke policing after winning a landslide election
Tucker’s interview with Putin is over 50M views on X within the first 5 hours.
Finnish Airline, Finnair, is voluntarily weighing passengers to better estimate flight cargo weight
President Nayib Bukele has proudly announced El Salvador's remarkable achievement of becoming the safest nation in the Western Hemisphere.
Former Chilean President Sebastian Piñera Dies in Helicopter Crash
This farmer seems to understand science a bit more than the event organizer, Klaus Schwab.
Facebook turns 20: From Mark Zuckerberg's dormitory to a $1trn company
The Coolest Dictator in the World" on the Path to Victory in El Salvador
Macron, France and fake news
Indian-Origin Man 'King' Arrested For Smuggling $16 Million Drugs Into US
Can someone teach Americans that not every person with slanted eyes is Chinese?
Europe's Farmers Feeding the People, Protesting Against Politicians Who Do Nothing for Their Country and Serve Only Themselves at Taxpayers' Expense
Paris Restaurant That Inspired 'Ratatouille' Loses $1.6 Million Worth Of Wine
Brazilian Police Investigate Bolsonaro's Son for Alleged Illegal Spying
Police in Brazil Raid Residence of Bolsonaro Associate Over Allegations of Illegal Spying
Border Dispute Escalates as Texas Governor Vows Increased Razor Wire
OpenAI Enhances ChatGPT-4 Model, Potentially Addressing AI "Laziness" Issue
The NSA finally acknowledges spying on Americans by acquiring sensitive data
Report Reveals Toxic Telegram Group Generating X-Rated AI-Generated Fake Images of Taylor Swift
US Border Patrol States 'No Plans' to Remove Razor Wire Installed in Texas
Bitcoin Experiences Approximately 20% Decline in Value
Klaus Schwab recently appointed himself as the Earth's "trustee of the future."
DeSantis Drops Out, Endorses Trump.
Nikki Haley said former President Trump is "just not at the same level" of mental fitness as he was while president in 2016.
Residents of a southern Mexican town set the government palace on fire in response to the police killing of a young man
Samsung Launches AI-Driven Galaxy S24, Ushering in New Smartphone Era
Judge Questions SEC's Regulatory Overreach in Coinbase Lawsuit
The Ecuador prosecutor who was investigating the television studio attack, has been assassinated.
Is artificial intelligence the solution to cyber security threats?
Vivek Ramaswamy suspends his US election campaign and endorses Trump.
Viral Satire: A Staged Satirical Clip Mistaken as Real Footage from the 2024 World Economic Forum in Davos
The AI Revolution in the Workforce: CEOs at Davos Predict Major Job Cuts in 2024
Ecuador Reports 178 Hostages in Prison Gang Standoff
The Startling Cuban Espionage Case That Has Rattled the US Government
Two Armed Men in Ecuador, Dressed as Batman and The Joker Storm the Streets.
Armed Gang Raids Ecuadorian TV Station Following State of Emergency Declaration
Anti-Democratic Canada: Journalist Arrested for Questioning Canadian Finance Minister on Support of Terrorist Group
Ecuador's 'Most-Wanted' Criminal Vanishes from Prison
Mexican Cartel Supplied Wi-Fi to Locals Under Threat of Fatal Consequences for Non-Compliance
Border Surge Leads to Over 11,000 Migrants Waiting in Northern Mexico
Outsider Candidates Triumph in Latin American Elections
As Argentina Goes to the Polls, Will the Proposal to Replace the Peso with the Dollar Secure Votes?
Fatal Shark Attack Claims Life of Boston Woman Paddleboarding Near Bahamas Resort, According to Police
×