This week, the spotlight falls on the role that professional financial services play in enabling money laundering, as Chatham House researchers in the UK say Britain’s AML laws and the exploitation of loopholes by professional enablers help kleptocrats launder illegal assets; a Europol report published in the wake of the Pandora Papers highlights how the misuse of legal business structures enables organised crime; and Pakistan’s Federal Board of Revenue chalks up its first-ever conviction and jailing of a businessman under the country’s 2010 Anti-Money Laundering Act.
Find out more on these stories below.
UK’s anti-money laundering regime fails to stop kleptocratic wealth from entering Britain
In a damning report published this week in the UK, Chatham House researchers wrote that despite “progress on paper, the UK remains a safe haven for dirty money.”
The research found that Britain’s AML regime is lacking in critical areas, with the implementation of laws, enforcement failures, and exploitation of loopholes by professional enablers cited as the main reasons why kleptocrats continue laundering their wealth in Britain. The UK has increasingly become a “comfortable home for dirty money” since the 1980s when the deregulation of financial and professional services and the consequent growth of London as a centre for these services coincided with the rise of the post-Soviet kleptocracies.
Additionally, the UK’s failure to address the way kleptocrats assimilate into UK society and the consequences thereof was noted, stating that “the British government has placed combating serious organised crime at the centre of its foreign policy, but often fails to recognise the intimate connections UK society and institutions have with kleptocratic states and their elites, the latter of which continue to find a home-from-home in London.”
The report concludes by calling for a new approach by the global community and the UK to tackling the threat posed by the presence of kleptocrats, their associates and their financial flows, outlining nine recommendations that form an anti-kleptocracy regime.
Read more on this story at The Guardian.
Europol report warns of how organised crime groups manipulate legal business structures to facilitate money laundering
In the wake of the Pandora Papers, Europol has published a report stating that ‘beyond tax concerns, offshore companies play a key role in money laundering schemes involving organised crime and are often used to hide the true origin of the funds.’
The reports says that more than 80% of the criminal networks active in the EU use legal business structures for their criminal activities, while approximately 50% of all criminal networks set up their own legal business structures or infiltrate businesses at a high level. The organisation says such criminality has plagued the EU for years, yet there is still no significant progress towards combating it.
Describing how legal structures can be exploited to obscure the beneficial ownership of funds and other assets such as property, Europol calls for a two-fold approach to address the financial crimes highlighted by the Pandora Papers leak. To eradicate these illicit financial flows, the approach must emphasise upgrading the policy and legislative frameworks of the region’s anti-money laundering environment, as well as a strong, integrated operational response driven by international cooperation.
The report concludes by stating that Europol stands ready to support Member State law enforcement authorities and their many partners across the world to prevent and fight economic and financial crime.
Read more on this story at Europol.
Tax authorities in Pakistan jail businessman for money laundering offences
Pakistan’s Federal Board of Revenue (FBR) has won the country’s first ever court conviction and custodial sentence for money laundering. The businessman, called Habibullah, was sentenced to two years imprisonment and a fine of Rs500,000 (£2,134.5) under Section 4 of the Anti-Money Laundering Act. He was also sentenced to prison for one year and fined Rs100,000 (£426.90) under Section 192A of the Income Tax Ordinance 2001. Additionally, the court ordered the confiscation of Rs2090.4m (£8.9m) worth of proceeds from the crime.
The sentence was the culmination of an investigation conducted by the Directorate of Intelligence and Investigation into suspicious transactions involving Habibullah’s M/s Rai Trading co. The initial probe established that Habibullah had manipulated the financial flows through six accounts to deceive authorities as to the amounts of tax due to the state in 2015. As the investigation proceeded, it became clear that money laundering was in progress, and a second probe was initiated under the Anti-money laundering (AML) Act of 2010.
Reflecting on the ground-breaking ruling and sentence, an FBR spokesperson noted that “the accused is punished with imprisonment, [a] fine and forfeiture of entire ill-gotten [and] concealed money of Rs.2090 million.” Meanwhile, the FBR chairman informed a government Standing Committee that his organisation has logged 215 First Information Reports (FIRs) under the 2010 AML Act.
Read more on this story at Daily Pakistan.