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More on the FinCEN files, and reforms to the UK Company Registry
Antonis Melis
October 2, 2020

The FinCEN files have brought to light huge gaps in global systems that regulate dirty money.

Find out more on the consequences of this leak, as well as the UK’s attempts to fill the gaps by reforming the Company Registry in our weekly news round up below.

Clamping the Wheel of the Money Launderers’ ‘Vehicle of Choice’: Reform of the UK Company Registry

The UK has announced the first major reforms to the UK company registry in 170 years since its inception. This comes in perfect timing as the FinCEN files have shown that London is considered a hub for money laundering.

From the wide-ranging reforms proposed, there are four areas which have the most potential in reducing the role of UK companies as a money launderers’ vehicle of choice.

First, perhaps the most significant proposal is the introduction of improved verification with the use of mandatory ID verification for directors of companies, introducing company formation agents and nominating ‘persons of significant control’. This is a long-awaited change and will finally bring the UK to the same standard as many other European jurisdictions.

Second, the government proposes to give new powers to the registrar of companies (the CEO of Companies House) to query information presented to them. Previously the registrar had to accept all information presented to them on trust and had no legal power to query that information.

Third, the report makes a number of proposals in relation to improving intelligence sharing and data exploitation with regards to the information contained within the company register. The Companies house has previously been sharing information with law enforcement, but that has mostly been on a reactive basis and was not a core function. The new proposals will allow bulk data-sharing exercises that allows the House to police the register, rather than being a repository of company data.  

The final proposed reforms are plans to transform the Company House to better meet the challenges of processing an increasing volume of data, whilst integrating it with partners from the UK’s anti-money laundering regime. These changes will require ‘new digital technologies and process capabilities alongside improved staffing and resource functions’ as stated in the proposal. However, they remain silent on the scale of the ambition and the funding model.

Find out more in this detailed article by RUSI

HSBC & Standard Chartered to face class action over money laundering claims

Two American law firms have started building class action lawsuits against HSBC and Standard Chartered following allegations the banking giants failed to crack down on money laundering.

The FinCEN Files released last weekend show that HSBC allegedly continued to move dirty cash for clients it already suspected of nefarious activity.

Banks are supposed to stop moving cash or shut down accounts if they have evidence of criminal activity. But the reports claimed HSBC did not take action.

Standard Chartered is facing a different lawsuit.  The previous year a whistle-blower had provided US investigators with a list of Standard Chartered clients, which he suspected were fronts for the Iranian military and its nuclear programme. The whistle-blower Julian Knight, a former RAF pilot, now points out that many of the firms on his original list have cropped up on the FinCen files despite Standard Chartered rubbishing his claims.

He said: 'The FinCen leak vindicates our case because it has disclosed many of the same sanctioned and sanctionable companies that I disclosed to US investigators.'

Both these class action lawsuits show that banks are potentially more eager to push their own profits than protect economies from being damaged by illicit activity.

Read more on this in the original article on This Is Money

See what we think about the FinCEN files here – The fallout from the FinCEN files

Global tax abuses, money laundering and corruption take heaviest toll on the world’s poor, UN report says

A United Nations panel concluded that governments and banks around the world are doing little to tackle tax abuses, money laundering and corruption in a global financial system that perpetuates inequality and condemns people to endemic poverty.

The International Financial Accountability, Transparency and Integrity (FACTI) panel, comprised of former heads of state and government leaders, past central bank governors, business and civil society leaders and prominent academics, said in an interim report that outmoded financial controls had failed to keep pace in a globalized, digitalized world.

The report states that “We need to explore new and creative solutions to make systems more comprehensive and robust, and ultimately build a coherent ecosystem of institutions and frameworks for transparency, accountability and integrity.”

“Too many banks are in cahoots and too many governments are stuck in the past,” FACTI co-chair Dalia Grybauskaitė and former president of Lithuania, said in a press release about the report. “We’re all being robbed, especially the world’s poor.”

The report goes on to mention that when all major banks are equally responsible for the illicit movement of money, they will then not suffer any reputational damage relative to the rest of the sector.

Banks, government and regulatory bodies will need to become more transparent, and less lenient on those who are found for their wrongdoing.

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