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Campaigners welcome moves to tackle tax evasion, but highlight ongoing loopholes in global controls against dirty money

February 16, 2012

Task Force

WASHINGTON DC / LONDON - The Task Force on Financial Integrity and Economic Development (TF) welcomes moves  to tackle tax dodging announced by the global body charged with fighting financial crime.

Under revised standards from the Financial Action Task Force (FATF), tax evasion will be an offence that can lead to a money laundering charge and banks will obliged to be on the look out for suspected tax evasion by their clients. The new recommendation will provide authorities with a powerful tool to help prosecute individuals and corporations attempting to dodge financial obligations, hide ill-gotten gains or fund illegal activities.

Although they carry no legal weight, FATF recommendations are considered the basis for national and international legislation to prevent the money laundering that allows tax evaders, financiers of terrorism, drug and human traffickers, corrupt politicians and other criminals to spend the profits from their crimes

Yet despite this progress the TF fears that FATF has failed to tackle one of the biggest problems with the current international financial system: the difficulty of accessing information about the real persons who have ultimate control over a company. These “anonymous companies” are a key part of the structure that enables criminals to set up the bank accounts they use to stash their funds. This represents a failure of political will by FATF member states, leaving a significant loophole that undermines progress elsewhere.

“FATF is probably the most influential international body you’ve never heard of and its recommendations have been adopted into law by many governments, said Robert Palmer of Global Witness and a TF member. ‘But without an effective way of determining who ultimately owns a company, a tax evader, corrupt politician, terrorist or organised crime syndicate can still hide their identity and their money behind anonymous shell companies”.

The TF is calling on FATF to require all countries to have a public register of the ultimate person with control over a company, known as the beneficial owner. This could easily be integrated into the process of forming a company in any given country, and existing companies could be required to file beneficial ownership information with their next regular certification.

TF is also calling on FATF to ensure that the anti-money laundering laws it has pressured countries to adopt are actually enforced in practice.

“Thanks to FATF, laws are now in place in most countries requiring banks to ‘know their customers’ and be on the look out for suspicious transactions”, said Heather Lowe of Global Financial Integrity also a TF member. “But without review of whether the banks are carrying out these checks and prohibitive fines when they’re caught harboring dictators’ stolen money or other illegal funds, banks often see little incentive to do more than tick the ‘we’ve checked our customer’ box  and actually turn the money down. Look at how easy it was for Ben Ali, Mubarak and Gaddafi to stash billions of dollars in western banks.”

FATF has said that it intends to focus on enforcement in the future. This welcome commitment should be accompanied by naming and shaming countries that don’t do enough, including its own members.

Robert Palmer
Global Witness / Member of the Task Force on Financial Integrity and Economic Development
Tel  +44 (0)20 7492 5860

Heather A. Lowe
Global Financial Integrity / Member of the Task Force on Financial Integrity and Economic Development
Tel: +1 202-293-0740

Note to editors:

Dietlind Lerner
Communications Director of The Task Force on Financial Integrity and Economic Development
Tel: +1 202-577-3455

Note to editors:

FATF’s 40 Recommendations, as well as its reviews of member countries’ compliance with them, can be seen at www.fatf-gafi.org

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