It’s too easy to set up a company without revealing who benefits from itby Avinash D Persaud / April 27, 2017 / Leave a comment
On 20th March, the Guardian revealed that it had received documents from a three-year investigation by the Latvian and Moldavian authorities into what has been dubbed the Global Laundromat. According to the newspaper, these documents show that between 2010 and 2014, British registered companies and British-based banks helped move out of Russia at least $20bn of the proceeds of criminal activities.
This should come as no surprise. In 2016, the Home Affairs Select Committee concluded that the London property market was the primary avenue for the laundering of £100bn of illicit money a year. The investigative journalist Roberto Saviano has said of the international drugs trade: “Mexico is its heart and London is its head.”
London has not become the global capital of money laundering by accident. Money launderers and those financing terrorist activities have two main requirements. The first is a place crowded with financial transactions, in which their own will be easy to lose. The second is a place where those who enable the setting up of companies and opening of bank accounts are prepared to turn a blind eye to who is the owner of a business. Secrecy over the beneficial ownership of companies is the main conduit of money laundering.
Three academics—Michael Findley, Daniel Nielson, and Jason Sharman—undertook an experiment, detailed in their book “Global Shell Games.” They tried to set up a company in the way that a money launderer would (refusing to provide ownership information and other markers), emailing 7,400 solicitations to lawyers and corporate service providers in 182 countries. Contrary to what you might think, tt is more than three times harder to obtain an untraceable shell company in tax havens than in rich, developed countries such as the UK and the United States.
At the moment, the UK is a member of two organizations, the OECD and the European Union, which routinely publishes blacklists of countries that are deemed “high risk” when it comes to money laundering and a “danger to the international financial system”. The UK, US, and Switzerland have never been blacklisted. Instead, the usual pariahs of the west—Cuba, North Korea, Iran and so on—appear, along with small states such as Antigua or St Kitts and Nevis.
This motley collection of countries present the most marginal threat to the international financial…