Transparency plea as crackdown on illicit finance begins

The UK Government has issued a global call to action for greater transparency on company ownership in an effort to tackle global illicit flows of money.

As the World Bank and International Monetary Fund met for their annual Spring Meetings, the UK issued the call and pledged a contribution into a fund operated by the two organisations which is destined to tackle corruption, money laundering, and illicit finance.

The UK said greater transparency about who owns, controls, or benefits from companies is a cornerstone of preventing and combatting corruption, organised crime, and tax evasion.  The work funded by the UK’s contribution will support low-income countries to implement registers of company ownership, building on existing work with countries such as Nigeria and Kenya.

Attending the spring meetings in Washington D.C. this week, Andrew Mitchell, the UK’s deputy foreign secretary and minister for development and Africa, announced the call to action in his capacity as the UK’s Governor to the World Bank.

He explained every year, Africa loses an estimated almost $90 billion due to the ease with which corrupt individuals can move money transnationally through anonymous shell companies. This drains important financial resources away from low-income countries and weakens their ability to achieve economic stability and financial independence.

Global financial corruption undermines progress towards the UN’s Sustainable Development Goals and tackling climate change, and directly affects the UK’s security and opportunities for trade.

Greater transparency will enable low-income countries to stem the flow of illicit finance, hold the corrupt to account, and enable them to deliver the services and public investment necessary for their long-term prosperity.

Mitchell said: “We must mobilise a global coalition of countries and international organisations to drive greater transparency about who really owns anonymous shell companies.

“More and more transparency will mean fewer and fewer places for dirty money to hide, ensuring low-income countries can channel their resources into tackling urgent development issues, such as climate change and boosting economic growth. This will ultimately benefit us all.

“The UK’s support announced forms part of wider work with the World Bank and IMF to strengthen anti-corruption and illicit finance measures in their policy advice, financial instruments, and programmes. It also delivers on the UK’s commitment in the International Development White Paper to support low-income countries in building their long-term resilience to corruption and illicit finance risks.”

Ted Datta, senior director, Financial Crime Industry Practice at Moody’s said, “The UK’s £2 million contribution to World Bank and IMF trust funds, aimed at supporting low-income countries in implementing registers of company ownership, is a step towards tackling financial crime as a global community. Africa, for example, loses an estimated $90 billion annually to corrupt individuals moving money through shell companies, this initiative has the potential to make a significant impact.

“Moody’s research found 21 million “red flags”  for shell companies around the world, which could indicate the presence of malpractice. While shell companies can serve legitimate purposes, they are often exploited as vehicles for financial crimes such as fraud, money laundering, and tax evasion.

“Governments and businesses face the complex task of gaining transparency into these typically opaque entities. By working with other countries and international organisations as a community to standardise ownership information and make it more accessible, this latest initiative can become part of the overall effort to stem illicit financial flows that cost the international financial system so dearly.”