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Dirty Money

Written by Guest on Friday, 22 February 2013

Every year billions of pounds are funneled through UK banks, helping to conceal corrupt ventures abroad. The people who drive the theft, movement, and concealment of corrupted funds cannot do so without the willingness of financial institutions to take the money, and the inadequate company regulations which enable their identities to remain hidden. 


Every year billions of pounds are funneled through UK banks, helping to conceal corrupt ventures abroad. The people who drive the theft, movement, and concealment of corrupted funds cannot do so without the willingness of financial institutions to take the money, and the inadequate company regulations which enable their identities to remain hidden.

Developing countries lost $5.86 trillion in illicit financial flows in the decade spanning 2001-2010. Almost $6 trillion which could have been ploughed into corruption-resources-corruption-resources-healthcare corruption-resources-corruption-resources-education, and water sanitation, ended up funding the mansions and fast cars of the people who stole it. The G8 countries are not unsullied by this tragic statistic.

The ability of financial institutions to do sufficient checks on the legitimacy of funds relies on them being able to find accurate information on who their customers really are. However the current system can make it almost impossible for a bank to find accurate information on who ultimately runs, owns, and profits from the company – the ‘beneficial owner’.

The son of the Equatorial Guinea’s leader and dictator, Teodoro Nguema Obiang Mangue bought a $35 million property in cash in the United States but his job as Minister of Forestry, Fisheries & the Environment pays him only $4,000-$5,000 per month. The majority of the population of his country Equatorial Guinea, which is rich in natural resources, live on an average of $1 a day. His British Virgin Island shell company, Ebony Shine International LTD, helped him transfer funds to the US for the purchasing of his luxury jet.

Legislation in the UK only demands a company to reveal the ‘legal owner’, but not the ‘beneficial owner’ (the actual benefactor of the company funds). Criminals will set up so-called anonymous shell companies (branches of other companies) where they can store stolen money. Shell companies often only exist on paper and have no real employers or offices, hence are very difficult to trace. These shell companies become prime vehicles for money laundering.

Since there are no laws demanding the transparency of a company to reveal the beneficial owner it is very challenging for prosecutors to trace the source of the money. This makes the tracing of illicit funds time consuming and difficult. In the time that it can take for the investigators to trace the source of the funds the suspects have ample opportunity to move the money elsewhere.

Overseas Territories (OTs) and Crown Dependencies (CDs) are frequently used for money laundering purposes. Eventual legislation must seek to include these territories. These overseas territories are used as “secrecy jurisdictions” or tax havens for many tax avoiders or money launderers. The Bribery Act which was implemented in 2010 does not extend to OTs and CDs.

The UK must ensure that the beneficial owners of UK registered companies are declared in a register accessible to regulators financial institutions, and the public. This would assist financial institutions in their checks on prospective clients, and give citizens around the world (whose funds end up in London) the opportunity to hold their governments to account.

Transparency International UK has written to the Prime Minister, asking him to use the UK’s presidency of the G8 to raise the issue of money laundering and push for change. This platform should be leveraged to encourage other G8 countries to commit to combat the global displacement of billions in public funds.

Written by Cecilia Uddenfeldt Wort

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Read 8262 times Last modified on Tuesday, 24 November 2015 11:47

Guest

The TI-UK blog features thought and opinion from guest writers as well as TI staff. Any opinions expressed by external contributors do not necessarily reflect the views of Transparency International UK.

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