In the 20th edition of the Corruption Perceptions Index (CPI), four out of the top five performing countries are European (Denmark, Finland, Sweden and Norway). However Europe cannot be complacent about the role it plays in facilitating corruption elsewhere.
“Although some of the best performing countries are in Europe, EU states should be concerned about their complicity in corruption around the globe. We know that any effort to stop corruption in one country is undermined as long as corrupt officials are allowed to hide their money in another. That is why the EU must act in the next few weeks to prevent money laundering and clamp down on the secret companies that mask corruption” said Carl Dolan, Director of the Transparency International EU Liaison Office.
All too often the proceeds of corruption find their way into EU financial centres, undermining the EU’s role in promoting anti-corruption reforms. Dirty money enters the financial system and is often legitimised by using corporate vehicles (such as companies, trusts, foundations and other legal arrangements) offering disguise, concealment and anonymity. A key loophole for money launderers is the lack of information collected and published on those who ultimately own and control companies, trusts and other legal structures
The scale of the problem:
- In 2011 alone, the developing world lost US$946.7 billion in illicit outflows, an increase of 13.7% over 2010. The capital outflows stem from crime, corruption, tax evasion, and other illicit activity. (See the 2013 report by Global Financial Integrity here)
- A report by the Stolen Asset Recovery Initiative of the World Banks and UNODC, found that in a review of big corruption cases over the last 30 years, 70% of them disguised their ownership through the misuse of corporate entities such as anonymous shell companies
- Only two months ago, a major new money laundering investigation was launched involving 19 UK companies in an alleged conspiracy to launder £12.5 billion of dirty money. The funds are suspected to originate from “major criminals and corrupt officials around the world”, channelled from Russia with the involvement of Latvian and Moldovan banks.
- Other examples involving shell companies and opaque ownership structures in the EU include: stolen assets from the former regime in Ukraine, Europe’s horsemeat scandal, the ongoing Magnitsky Affair and Italian mafia groups such as Cosa Nostra and Camorra.
“By outlawing secret company ownership and mandating public registries of the identities of the real, living people (beneficial owners) who ultimately own and control companies and other legal entities it will make it easier to track the origin of corrupt or illicit funds. said Nienke Palstra, Policy Officer at Transparency International EU.
Denmark, the top performer in the CPI, has strong rule of law, support for civil society and clear rules governing the behaviour of those in public positions, it also set an example this November, announcing plans to create a public register including beneficial ownership information for all companies incorporated in Denmark. This measure, similar to those announced by Ukraine and the UK, will make it harder for the corrupt to hide behind companies registered in another person’s name.
Transparency International is currently running a campaign to Unmask the Corrupt, urging the European Union, and other leading financial centres to follow Denmark’s lead and create public registers that would make clear who really controls, or is the beneficial owner, of every company.
• TI EU Policy Paper “Fighting Money Laundering in the EU: From Secret Ownership to Public Registers” (2014) http://www.transparencyinternational.eu/wp-content/uploads/2014/01/TI-EU-Policy-Paper-Beneficial-Ownership.pdf
• TI EU Anti-Money Laundering focus page: www.transparencyinternational.eu/focus_areas/anti-money-laundering/
• TI’s Financial Jargon Buster here: www.transparency.org/glossary/#/
• Procedure File for the review of the 3rd AMLD http://www.europarl.europa.eu/oeil/popups/ficheprocedure.do?reference=2013/0025(COD)&l=en