Economic Crime Ecc0059



Professor John Heathershaw (Associate Professor of International Relations at University of Exeter), Thomas Mayne (Research Fellow, Department of Politics and International Relations at University of Exeter), Professor Jason Sharman (Sir Patrick Sheehy Professor of International Relations at University of Cambridge), Dr Tena Prelec (Research Fellow, Department of Politics and International Relations at University of Oxford), Professor Ricardo Soares de Oliveira (Professor of the International Politics of Africa at University of Oxford), and Professor Alex Cooley (Professor of Political Science, Barnard College at Columbia University)

Executive Summary

Evidence sug­gests that reg­u­lat­ed indus­tries – this sub­mis­sion con­cen­trates on the bank­ing and real estate indus­tries – fail to prop­er­ly imple­ment the risk based approach man­dat­ed in the anti-mon­ey laun­der­ing reg­u­la­tions in rela­tion to high risk clients, espe­cial­ly polit­i­cal­ly exposed peo­ple (PEP). This is pre­dom­i­nant­ly a fail­ure of com­pli­ance, most like­ly due to a lack of effec­tive enforce­ment, although the anti- mon­ey laun­der­ing reg­u­la­tions could be improved to address the issue of PEPs from cor­rup­tion hotspots or ‘klep­toc­ra­cies’.The FinCEN files sug­gest that banks are the most like­ly reg­u­lat­ed indus­try to file ‘defen­sive’ Suspicious Activity Reports (SARs) in order to escape legal lia­bil­i­ty, rather than block­ing the trans­ac­tion (or fur­ther trans­ac­tions) and clos­ing the client’s account. Meanwhile, real estate agents and con­veyancers are not incen­tivized to files SARs, whose num­bers in these sec­tors remain low.Until pro­fes­sion­als in reg­u­lat­ed indus­tries are pros­e­cut­ed or sanc­tioned for fail­ing to report sus­pi­cions or knowl­edge of mon­ey laun­der­ing, com­pli­ance will remain low. The same can be said for those sub­mit­ting false infor­ma­tion to Companies House. Although plans are afoot to grant Companies House more pow­ers to inves­ti­gate such Go here indi­vid­u­als, the reforms lack a clear time­line, as do the pro­posed tight­en­ing of the reg­u­la­tions regard­ing Limited Partnerships, which have been iden­ti­fied as a com­mon vehi­cle for mon­ey laundering.The use of Unexplained Wealth Orders (UWOs) in tar­get­ing PEPs whose sources of wealth are unclear is already in jeop­ardy, after one such UWO was dis­missed, when the judge failed to take into account the cor­rupt polit­i­cal econ­o­my of the PEP’s coun­try of ori­gin. The judge’s reliance on enforce­ment actions from the PEP’s coun­try of ori­gin appears to under­mine the very point of UWOs in the case of foreignPEPs: the order’s aim is sure­ly to coun­ter­act, and not rein­force, claims of legit­i­mate wealth by those in pow­er in cor­rup­tion hotspots.

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