In this first monthly blog, our compliance expert looks at the European Union's AMLD, and asks the tough question: is it actually working?
Financial investigations across the world indicate that it's quite normal for criminals - tax crooks, corrupt politicians, drug dealers and so on - to use companies to hide who really owns assets.
To try to combat this, the European Union is continuously updating its Anti-Money Laundering Directive, with the aim of making it more difficult for criminals to reinsert money into above-board circulation.
Laws and regulations are becoming more and more stringent – look no further than the EU parliamentary vote for the creation of registers of who really owns companies, trusts and other legal entities. The parliament wants to make sure that once data is collected, it's consistent and usable. We know very well that sometimes in the internet era we don't have a problem in searching for and collecting data, but we do have some problems in using it properly.
Just recently the watchdogs in Italy - an EU country where corruption and tax evasion is high - expressed concern. It seems they receive too many reports from banks and intermediaries, and so can't properly treat the abundance of data - yet are concerned they will face consequences if they don't report data that turns out to belong to a criminal. So we are also living the paradox: the actors are reporting any single name where they have a minimum suspicion to avoid fines if investigated by authorities.
What we need is education - proper procedures and professionalism from all the parties involved in the process, be it banks and intermediaries or service providers and professionals. You have to have experience and case history to properly manage these activities.
We know there is still a lot for all parties to do, and more is coming – not just in terms of AML. The OECD is looking at international standards on tax transparency, and some big economies are deemed to be non-compliant or only partially compliant so far.
So what next? We know the path has been drawn and the walk started. For all involved parties there will be a long and tricky way to go, and step by step has to be done properly, preferably with minimal costs (internal or external). Companies doing business in the EU have many compliance burdens; they may need to find partners to help them minimise bureaucracy and get back to the basics of business.
Read more about compliance and Know Your Client legislation.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.
