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Ultimate Beneficial Ownership takes the front page

Britain and the US take major steps in combating financial crime related to shell companies, and FATF releases a report on trade-based money laundering.

Antonis Melis
December 11, 2020

The UK and the US are set to make major changes to the way criminals hide behind shell companies, as the United States Congress passes new reforms that mark the end of anonymous shell companies.  

On the other end, the UK is not as quick to act as they have only released consultations that propose similar changes.

However, money laundering comes from many different angles and as the world looks to plug the holes in beneficial ownership, FATF has released a report on how to combat trade-based money laundering.

Find out more on these stories below.

US poised to overhaul the country’s anti-money laundering legislation

The United States Congress has released the National Defence Authorisation Act which includes reforms that mandates companies in the U.S to report their ultimate ownership to the Treasury Department.

Find out more on Ultimate Beneficial Ownership here.

This change will effectively mark the end of anonymous shell companies, which are often used to hide the identities of individuals involved in financial crime. This ownership information will not be made public.

Other changes in the act will see the U.S improve its financial intelligence work, by increasing international cooperation between financial crime units and bulking up the data collection of their own Financial Crimes Enforcement Network (FinCEN).

Read more on this story from the International Consortium of Investigative Journalists.

UK government launches consultations to crack down on company fraud and improve corporate transparency

Earlier this week the British government published three consultations to support reforms that clamp down on fraud, give the Companies House more power to query information and improve the quality and value of the information it holds; and to restrict the use of corporate directors to stop criminals from hiding behind complex corporate structures.

A notable proposal states that directors cannot be appointed until their identity has been verified, and the Companies House registers powers will be expanded to allow it to query, investigate and remove false or inaccurate information.

The Minister for Corporate Responsibility Lord Callanan said “Today’s proposals set out further detail on our far-reaching reforms to ensure the Companies House register is fit for the 21st century – allowing us to crack down on fraud and money laundering, while providing businesses with greater confidence in their transactions.”

These changes are a much-needed response to the ongoing challenges in combating financial crime.  

FATF releases new report on trade-based money laundering

A new report by the Financial Action Task Force (FATF) and Egmont Group has been released to help the public and private sector deal with the increasing challenges of identifying trade-based money laundering (TBML).

The report outlines current TBML risks and uses case studies from FATF to illustrate how criminals exploit trade transactions to move money.

“While financial institutions were aware of the risks associated with third-party intermediaries, the report acknowledges that others in the supply chain, such as legitimate importers or exporters, or those with an oversight role, such as auditors or accountants, may not question why an entirely unrelated third-party is involved in the payment settlement process,” the report says.

In order to detect and disrupt TBML schemes, the report recommends improving information sharing of financial and trade data and building better cooperation between authorities and the private sector.

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