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DOINGSOLITTLETOSTOPCORRUPTION?

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WHYARETHREEOFTHE
WORLDSRICHESTCOUNTRIES

byAlesiaNahirnyon18October2016inPoliticsandgovernment

DOINGSOLITTLETOSTOP
CORRUPTION?
18OCTOBER2016

BENINSFIGHTAGAINST
CORRUPTIONISONLY
BEGINNING
11OCTOBER2016

WHATARETHECANDIDATES
HIDING?
8OCTOBER2016

OBITUARYOFJOEMUIRURI
GITHONGO
23SEPTEMBER2016

AGROWINGCALLFROM

OneofthebestknowndatapointsintheanticorruptionfieldistheestimatefromGlobalFinancial
IntegritythatUS$1.1trillioninproceedsofcorruption,crimeandtaxevasionaretakenfrom
developingcountrieseveryyearandinvestedinWesternbanks,realestate,andluxurygoods.The
volumeofillicitfinancialflowsishigherthanthetotalvalueofdevelopmentaidandforeigndirect
investmentintopoorcountriescombined.Therevenueslostbypoorcountriesthroughtaxdodging
aloneareestimatedatUS$160billioneveryyear,moneywhichcouldbeusedtobuildthousands
ofschoolsandhospitals.
Ifyouveeverfoundyourselfwonderinghowthisscaleofpillageispossible,themostrecentround
ofreportsfromtheFinancialActionTaskForcehastheanswer.

BUSINESSFORCOMPANY
OWNERSHIPTRANSPARENCY
22SEPTEMBER2016

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TheFinancialActionTaskForce(FATF)istheworldsantimoneylaunderingstandardsetter.Every
sevenyearsFATFassesseshowmucheachofits180membercountrieshasdonetostopdirty
moneyfrombeingusedtobuyrealestate,highendcarsandotherluxuryitems,orbedeposited
intoabankaccount.Inotherwords,howgoodisacountryatpreventingitselffromaidingthe
corrupt.
RecentlyreleasedreportsonAustria,CanadaandSingaporeshowhowthecorrupthavefew
roadblockstoparkingandspendingcashinthesethreecountries.Similartopreviousreports,the
latestbatchreceivedlimitedmediacoverageasidefromonspecialistwebsites.
ItdoesnthelpthatFATFassessmentsaredense.Butfromananticorruptionperspective,itswell
worthdivingintothesereports.Tuckedawayamongtheacronymsareasurprisinglylargenumber
ofmajorloopholesthatclearlyshowthreeoftheworldswealthiestcountriesfailingtostopthe
corrupt.
Hereisasmallselection:
LawyersinCanadaareexemptedfromthecountrysantimoneylaunderingreporting
regime.FollowingaSupremeCourtdecisionin2015,theProceedsofCrime(Money
Laundering)andTerroristFinancingActanditsregulationswerefoundtobreachattorney
clientprivilegeinsofarasrecordkeeping,clientidentificationandverification,andcompliance
inspectionbyCanadasFinancialIntelligenceUnit(FINTRAC)wereconcerned.The
Governmenthadpreviouslywithdrawnthereportingrequirementforthelawprofession
followinginjunctionsbylawsocieties.Thoughlawyersaresubjecttoantimoneylaundering
rulessetbyCanadianlawsocieties,accordingtotheFATFtheexemptionoflawyersfrom

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federallegislationconstitutesaseriousimpedimenttoCanadaseffortstofightmoney
laundering(seepage7,para27).
ItiscommoninAustriatopaylargeamountsofcashwhenbuyingluxurygoods.
Luxurygoodsdealersdonotfeelthatitcouldbesuspiciousifacustomerinsiststopaycash,
evenwhenitisaveryhighamount(seepage74,para260).Infact,thereisnolimitonpaying
withcashinAustria,oneofeightEuropeancountriesstilllackingacashlimit.
Lawyers,accountantsandrealestateagentsrarelyreportsuspiciousactivities.
AccordingtotheglobalFATFstandards,lawyers,accountantsandrealestateagentsare
supposedtoreportsuspicioustransactionstoauthorities.Yetasthetablebelowshows,
suspiciousreportingbytheseandothernonfinancialsectorsisremarkablylow.Forinstance,
accountantsinCanadaandrealestateagentsinAustriadidnotfileanysuspiciousreportsin

Tweetsby@anticorruption
TransparencyInt'l

@anticorruption
#Mexicoexgovernorof#Veracruzhasallegedly
disappearedashefaces#corruptioncharges.
#timeforjustice
aljazeera.com/news/2016/10/m

themostrecentyeardatawasavailable.

SO FEW SUSPICIOUS ACTIVITIES?

Mexico:Governoraccusedofcorruptio
Suspicious Transaction Reports led by/in...

Singapore

Canada

Austria

ProsecutorssaidJavierDuarte,whohas

Year

2014

2014-15

2014

aljazeera.com

Lawyers

15

n/a

12

Accountants

Real estate agents

34

Sources: Singapore: Table 24, page 100 FATF Mutual Evaluation report; Canada: Table 18, page 84 FATF MER; Au
stria: Table 23 page 78 FATF MER. Note: Austria includes accountants and tax advisers

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#Corruptionkillsin#BangladeshWeandother
NGOsarenottheenemyofBangladesh,
#corruptionis:@JoseUgazSM
medium.com/corruptionsto
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Singaporesauthoritiesclosedthousandsofclientaccountsaspartofataxreview,but
didnotbringasingleenforcementaction.Singaporesauthoritiesin2012and2013
conductedataxreviewwhichledtotheclosingof22,000accounts.Despitethisexercisealso
generating2,988SuspiciousTransactionReports,noantimoneylaunderinglawenforcement
actionsresulted(seepage60,para176andpage113,para356).
Canadiancompaniesandtrustsareathighriskofmoneylaunderingabuse.Over70
percentofallmoneylaunderingcasesinCanadainvolvedcompaniesandtrusts(seepage
102,para281).However,therewerehardlyanyprosecutionsoftheseentitiesformoney
launderingoffenses,duetoashortageofresourcesandexpertise(seepage51,para139).
TransparencyInternationalsresearchin2015alsofoundsignificantweaknessesinCanadian
measurestotackletheabuseofanonymouscompanies.
InAustria,thetotalpenaltiespaidbyfinancialinstitutionsforantimoneylaunderingfailings
in2014amountedto21,000.Threeofthesixpenaltiesrelatedtofailingstodoproper
backgroundchecksonhighrankingpublicofficials(PoliticallyExposedPersons),whichledto
maximumfinesof2,500(seeTable29,page90).Austriahasahighlydevelopedfinancial
sectorholdingover1trillioninassets,andisanimportantbankinggatewaytoCentraland
EasternEurope.
SingaporesauthoritiesdontreallyknowwhatsgoingoninsidetheirFreeport.Asthis
Economistarticleexplains,Freeportsallowhighvaluegoodstobestoredintransit
indefinitely,andcanbeauniquemoneylaunderingandterroristfinancingthreat.Inthecase
ofSingapore,FATFfoundthatTheauthoritiesdidnotdemonstrateacomprehensive
understandingofwhatactivitieswerebeingundertakenintheSingaporeFreeport(seepage
29,para73).
Thesegapsareoftenlinked,weakeningfurthertheoverallantimoneylaunderingdefencesofa
country.Forexample,theuseofshellcompaniestobuyrealestateasseeninLondonandNew
Yorkmakesitevenmoredifficulttotracktherealbuyersofproperty.InCanadiancitieslike
Vancouver,thesharpriseinrealestatepriceshasbeenlinkedtotheinfluxofillicitflows,asmoney
launderersseeknewdestinationstoparktheirdirtymoney.
Stoppingillicitfinancialflowswillrequireglobal,systemicreforms.TheresultsoftheFATFreports
suggestthereisalsoanurgentneedforsomebasicnationallevelactionintheregulation,
supervisionandsanctioningofmoneylaunderingactivity.
Thequestionremains,however,whethertheworldsrichestcountrieshavethewilltoeffectively
addressillicitflowsathome,orwhethertheywillcontinuetopassthebuckwaitingforother
countriestoshowleadership.

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ThenextroundofFATFcountryreviews,tobereleasedaroundDecemberthisyear,willcoverthe
USAandSwitzerland.EmailalertsfromFATFcanbefoundhere.
*MaxHeywoodfromTransparencyInternationalSecretariatinBerlincontributedtothisblog.
Images:Toronto:CreativeCommons,Flickr/thelearningcurvedotca|Singapore:Creative
Commons,Flickr/snapah|Vienna:CreativeCommons,Flickr/mrfederico
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AboutAlesiaNahirny
TransparencyInternationalCanada
ViewallpostsbyAlesiaNahirny

accountants,antimoneylaundering,Austria,Canada,FATF,featured,FinancialActionTaskForce,lawyers,PoliticallyExposedPersons,
realestateagents,Singapore
Beninsfightagainstcorruptionisonlybeginning

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