- Professor John Heathershaw (Associate Professor of International Relations at University of Exeter),
- Thomas Mayne (Research Fellow, Department of Politics and International Relations at University of Exeter),
- Professor Jason Sharman (Sir Patrick Sheehy Professor of International Relations at University of Cambridge),
- Dr Tena Prelec (Research Fellow, Department of Politics and International Relations at University of Oxford),
- Professor Ricardo Soares de Oliveira (Professor of the International Politics of Africa at University of Oxford),
- and Professor Alex Cooley (Professor of Political Science, Barnard College at Columbia University)
- Evidence suggests that regulated industries – this submission concentrates on the banking and real estate industries – fail to properly implement the risk based approach mandated in the anti-money laundering regulations in relation to high risk clients, especially politically exposed people (PEP). This is predominantly a failure of compliance, most likely due to a lack of effective enforcement, although the anti- money laundering regulations could be improved to address the issue of PEPs from corruption hotspots or ‘kleptocracies’.
- The FinCEN files suggest that banks are the most likely regulated industry to file ‘defensive’ Suspicious Activity Reports (SARs) in order to escape legal liability, rather than blocking the transaction (or further transactions) and closing the client’s account. Meanwhile, real estate agents and conveyancers are not incentivized to files SARs, whose numbers in these sectors remain low.
- Until professionals in regulated industries are prosecuted or sanctioned for failing to report suspicions or knowledge of money laundering, compliance will remain low. The same can be said for those submitting false information to Companies House. Although plans are afoot to grant Companies House more powers to investigate such individuals, the reforms lack a clear timeline, as do the proposed tightening of the regulations regarding Limited Partnerships, which have been identified as a common vehicle for money laundering.
- The use of Unexplained Wealth Orders (UWOs) in targeting PEPs whose sources of wealth are unclear is already in jeopardy, after one such UWO was dismissed, when the judge failed to take into account the corrupt political economy of the PEP’s country of origin. The judge’s reliance on enforcement actions from the PEP’s country of origin appears to undermine the very point of UWOs in the case of foreign
- PEPs: the order’s aim is surely to counteract, and not reinforce, claims of legitimate wealth by those in power in corruption hotspots.
Download full document: ECC0059 — Economic crime (PDF file)