December 8, 2021
WASHINGTON D.C. – Global Financial Integrity (GFI) praises the release of a first of its kind “United States Strategy on Countering Corruption” released by the White House. This strategy document provides a comprehensive approach to fighting corruption both in the U.S. and abroad that will have an impact on many facets of illicit finance including corruption, money laundering and tax avoidance.
One of the most impactful steps recommended in this document to curb illicit finance is beneficial ownership regulations to address anonymous shell companies. Identifying the beneficial owner of all legal entities is vital to addressing illicit finance as this is the easiest way for bad actors to move money with illicit origins and is virtually untraceable.
Additionally, this document will help fight illicit finance through regulations on the U.S. real estate sector, minimum reporting standards for investment advisors and other types of equity funds, and greater due diligence of gatekeepers in the financial system. The real estate and investment sectors are easy ways for illicit actors to move large amounts of money without being identified, and to turn that money into legal gains. Gatekeepers including lawyers, accountants and trust and company service providers make the movement of illicit funds possible and are the ones most interacting with illicit actors, therefore adding due diligence requirements to these jobs is an effective way to help curb illicit finance.
The strategy cites GFI’s report “Acres of Money Laundering,” as evidence that regulatory action is needed to curb the ability of corrupt and illicit actors to abuse the U.S. real estate sector. GFI found that at a minimum US$2.3 Billion was laundered through real estate between 2015 and 2020, and that corrupt actors were involved in the majority of cases reviewed GFI therefore welcomes the commitment for Treasury to issue regulations including reporting requirements for those with valuable information regarding real estate transactions.
GFI President and CEO Tom Cardamone said “we welcome the White House’s continued focus on money laundering through real estate and look forward to working with the administration in addressing this key national security and corruption issue.”
The White House strategy document further recommends that the U.S. Treasury re-examines anti-money laundering obligations for investment professions, as many have little or no requirements. This recommendation is in line with a report published last week by the FACT Coalition, Global Financial Integrity, and Transparency International U.S. Office, “Private Investments, Public Harms” that calls on the Treasury Department to issue new rules for investment advisors. This includes establishing anti-money laundering standards and “know your customer” requirements, both of which would require investment advisors and companies to conduct further due diligence in order to identify the beneficial owner of any legal entity attempting to invest money through them.
GFI is encouraged by this strategy document, which provides a great step in recognizing and addressing the United States’ role as a destination jurisdiction for illicit finance enabling corruption and cross-border illicit financial flows. However, this document must be backed by all players in forming the regulations to ensure the rules created will match the scope of the risks currently posed.
ABOUT GFI: Global Financial Integrity (GFI) is a Washington, D.C.-based think tank, producing high-caliber analyses of illicit financial flows, advising governments on effective policy solutions and promoting pragmatic transparency measures in the international financial system as a means to improve global development and security and reduce inequality.