Economic crime (ECC0059 )


  • 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)

Executive Summary

  • 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.

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