Global Financial Integrity

Are International Institutions Failing to Grasp the Big Picture on Beneficial Ownership?

Everyone Should Be Able to Determine with Whom They Are Doing Business, Writes GFI’s Heather Lowe

On Monday of this week, the Financial Action Task Force (FATF), the body setting international anti-money laundering standards, published new Guidance on Transparency and Beneficial Ownership, detailing a variety of ways in which countries can comply with FATF Recommendations 24 and 25 (which relate to transparency and beneficial ownership of legal persons and arrangements) and sending the message that complaining about the difficulty of compliance is no longer an option.  FATF consulted with the Organization for Economic Cooperation and Development (OECD) on this publication, recognizing that identification of the beneficial owners of legal entities and arrangements is not only a money laundering issue, but a fundamental element of the OECD’s new multilateral automatic exchange of financial information.  What neither FATF nor the OECD appears to have yet grasped, however, is that beneficial ownership – knowing who is ultimately behind a company – is a matter of sound business practice.  Everyone should be able to determine with whom they are doing business.

That lack of understanding was evident on page 21 of the Guidance, where FATF made it clear that it was supportive of countries choosing to create publicly accessible registries for information, as the UK is in the process of creating.  FATF stated that:

“although this is not required by the FATF Recommendations, some countries may be able to provide public access to information through a searchable online database.”

The rationale behind this, they say, is that it:

“would increase transparency by allowing greater scrutiny of information by, for example, the civil society, and timely access to information by financial institutions, DNFBPs and overseas authorities.”

While we civil society folks appreciate what appears to be an attempt by FATF to demonstrate that they have heard civil society’s drumbeat on this issue, unfortunately what this shows is that they have not yet understood the variety of reasons for that drumbeat.

The “Big Mo” in the Drive to Address Illicit Financial Flows

GFI Participates in High Level OECD Side-Event on Curbing Illicit Flows during UN General Assembly Meetings

On September 24th, tucked away in a quiet conference room in the basement of the UN General Assembly building, an extraordinary conversation took place on the future of global development.  But, despite the gathering of representatives from the OECD, UN, World Bank, USAID and the Mexican, Australian, and Nigerian governments, the event received exactly zero media coverage.

Titled “Curbing Illicit Financial Flows for Domestic Resource Mobilization and Sustainable Development in the Post-2015 Era,” the focal point of the two-hour discussion was how the international community could, as the program description put it, “identify concrete international actions needed” to curtail illicit financial flows out of developing country economies.  While other events were given more airtime and other issues may require more immediate attention, some ideas presented at the panel could be transformational in terms of how countries address the scourge of illicit flows and how the development agenda is funded.