Nov 09 2009 Martin Coyle
The Financial Action Task Force has called for greater transparency following the global financial crisis, particularly in the areas of beneficial ownership, legal arrangements, and secrecy laws. Paul Vlaanderen, FATF's president, said that vital parts of its standards were linked to transparency and recent events made it all the more pertinent that these were effective. He pointed to three areas of transparency that the organisation was reviewing.
The first concerned customer due diligence obligations and beneficial ownership. The task force was considering whether the current stance was the best tool for providing maximum transparency. Related to this, said Vlaanderen, was the issue of transparency of legal persons and legal arrangements. FATF wanted to improve the transparency of such persons and arrangements in order to provide authorities with better and timelier access to beneficial ownership information.
Vlaanderen, who was speaking at a recent meeting of the Caribbean Financial Action Task Force's council of ministers, said that secrecy laws and cross-border exchanges of information laws would also be examined. Particular attention would be paid to whether certain laws inhibited the implementation of FATF recommendations. The examination would also look at potential obstacles to cross-border exchanges of information within financial services firms and between regulators. As part of this FATF said that it would look at the broader issue of international cooperation between regulators, financial intelligence units and other authorities.
"These three issues will be addressed to ensure that no customer relationship, no legal entity or arrangement and no jurisdiction can provide a cover of secrecy for money launderers and terrorist financiers," he said.
Vlaanderen suggested that a lack of transparency had caused a number of problems, particularly in the Caribbean region. He told delegates that financial institutions had the ability to bring relatively small jurisdictions to "de-facto" bankruptcy.
"Some say that a lack of transparency was a choice of some jurisdictions to attract business; others argue that the policies of these jurisdictions amounted to naivety or lack of knowledge. However, whatever may have been the case, and I do pass judgement on either view, I hope we can work together to ensure that illegitimate lack of transparency in a wider sense of the word is no longer available to persons, entities, institutions and jurisdictions," he said.
Turning to the mutual evaluation process, Vlaanderen reminded members that the thorough implementation of anti-money laundering standards did not stop with the completion of an evaluation. A thorough follow-up was needed to address despite the costs involved. "Higher compliance means lower corruption and thus, lower costs to the economy. Higher compliance also means lower risks and thus better terms for the financial sector on the global financial markets, which is positive for the economy and investment climate of a country. These are strong incentives for countries to enhance their compliance: it pays to do well," he said.
