The bail out of the troubled banking sector in Cyprus has taken on serious political overtones as the crisis deepens. During the past few weeks Cyprus has been accused of failing to combat money laundering and fraud and that Russian oligarchs seek refuge for their money in this “tax haven” country.
according to Jonathan Guthrie of the Financial Times, in discussing the decision of HSBC to close down its operations in Panama (Corruption Perceptions Index score in 2012: 38 out of 100). The decision was purportedly to increase profits – but maybe not in the way one would expect.
How banks implement international financial sanctions may not strike many as the sexiest news story of the day, but its importance comes alive when one remembers that holding a banking license and taking deposits from the public at large is not a right, but a privilege. It is bestowed on certain companies by the public through government regulators and it should make banks accountable to that same public.
On July 10, Transparency International issued a report showing that the world’s biggest companies are disclosing more about their measures for preventing corruption, but not so much of their financial data in the countries where they operate.
The recent global financial crisis highlighted the need to broaden the discussion about regulation and oversight of the financial system. Transparency and related risk assessments of financial institutions have surged to the top of the agenda.
In our study on transparency and disclosure of measures for reducing corruption risk among the world’s largest companies published today, financial companies constitute the single largest industry sector. Among the 24 financial institutions in the survey there are 19 banks, four diversified financial service providers and one insurance company. They are incorporated in 11 different countries: six in the US, four in China, three in Australia, three in the UK, two in Canada and one in each of the following countries: Brazil, France, Germany, Japan, Spain and Switzerland.
This week the heads of state from the G20 are meeting in Mexico, where we hope they will take action to meet their 2009 promise to end bank secrecy. One step already taken is making tax evasion a predicate offence for money laundering.
What does that mean?
Money laundering is defined as taking the proceeds of a crime and making them legitimate.