News

Editor’s Note: This month, the ACAMS moneylaundering.com legal team provides a brief overview of the momentum for AML reform created by whistleblowers, and the remaining hurdles they reveal.

On Oct. 3, the International Consortium of Investigative Journalists, or ICIJ, released the Pandora Papers, prompting calls within Congress to address foreign corruption.

Transparency International, or TI, followed by citing the need for meaningful reform to end exploitation of legal entities, naming the 10 most featured countries in the leaked records and again calling on the Financial Action Task Force to advise that all nations build public registers of ownership data, which the intergovernmental group subsequently pledged to do on Oct. 21.

The Pandora Papers, according to TI, show that corporate services providers still operate with little to no scrutiny in many countries despite the damning evidence revealed by the Panama Papers more than five years ago.

Seeking to quell the public uproar that ensued after the Panama Papers hit the stands, several heads of state, including former U.K. Prime Minister David Cameron and Panama’s President Juan Carlos Varela, took initial steps to eliminate corporate opacity.

Officials in the European Union, United Kingdom, Australia and other countries launched inquiries in response to the leak, and at least 150 investigations into the entities and individuals named therein had begun by December 2016, the ICIJ reported at the time.

The European Commission cited the Panama Papers when releasing a new package of proposals to amend the Fourth Anti-Money Laundering Directive, introduce new tax-transparency rules, establish a list of uncooperative tax jurisdictions and adopt whistleblower protections.

The proposals became the foundation for the Fifth Anti-Money Laundering Directive in June 2018. 5AMLD specifically aimed to improve beneficial ownership transparency and strengthen AML supervision across the EU, with the first deadlines for implementation arriving in January 2020.

In February 2020, the European Commission officially censured eight EU nations for failing to transpose the 5AMLD into national laws and regulations by the deadline, then sent warning letters to Germany, Portugal, and Romania for incorrectly transposing several provisions of the earlier directive, 4AMLD.

Eight months later, in September 2020, the ICIJ released the FinCEN Files, revealing additional, significant and widespread AML failures in Europe, including by several banks that regularly processed high-risk payments with little regard for rules against illicit finance.

Responding to the FinCEN Files in a joint statement, Moneyval and CETS 198, shorthand for a coalition of nations party to the Council of Europe’s 2005 convention against money laundering, acknowledged that weaknesses in global anti-money laundering efforts have persisted.

A year later, a final report on Datacros, an EU project to develop better tools for identifying anomalies in how legal entities are owned and structured, found that around 1 percent of European firms list shareholders with ties to countries on Europe’s blacklist of tax havens or the Financial Action Task Force’s gray list of jurisdictions with strategic AML deficiencies.

The report also concluded that high levels of complexity in the structure of several companies made it nearly impossible to identify their beneficial owners.

Calls for improving beneficial ownership transparency in the U.S. culminated in January of this year with congressional adoption of the Anti-Money Laundering Act. AMLA introduced beneficial ownership reporting requirements, expanded whistleblower protections and reformed the Bank Secrecy Act to cover the cryptocurrency and antiquities sectors.

With implementation of AMLA still underway, the Pandora Papers have prompted some U.S. legislators to urge further steps to increase the visibility of inbound funding streams and voice concerns that exemptions in the legislation create loopholes for illicit finance to continue unabated.

FATF President Marcus Pleyer addressed the Pandora Papers during a Group of 20 meeting this month, and emphasized the need for action to combat the use of anonymous shell companies and trusts for illicit purposes.

Contact Silas Bartels at sbartels@acams.org