FIB: New AML directive ‘provides clarity’

There is growing support among some within the European parliament for the creation of a European Union-wide public register of companies’ beneficial ownership to tackle money laundering.

There is growing support among some within the European parliament for the creation of a European Union-wide public register of companies’ beneficial ownership to tackle money laundering.

The push from several officials and members of parliament comes as the fourth anti-money laundering (AML) directive is currently being debated in the assembly.

They argue such registers would bring much-needed transparency to the system and is a crucial step towards total financial integrity in the European Union.

The global amount of money laundered each year is estimated to be about €600bn and this crime remains one of the biggest threats to the European Union.

In particular the fourth AML directive provides for a more targeted and focused risk-based approach to customer due-diligence.

It seeks to enhance clarity and consistency of the rules across member states by providing a clear mechanism to identify beneficial owners, which would lead to greater transparency. The changes call for more reliable information to be available about the ownership and control of companies, trusts, and other legal persons or arrangements, making it more difficult for money launderers to hide their dealings.

The International Commercial Crime Services’ Financial Investigation Bureau (ICC FIB), which conducts enquiries and investigations into money laundering and fraud for its members, sees this as a positive development.

An ICC FIB spokesman said, “The requirement for greater transparency, which banks need in their customers’ activities and transactions is one of the driving forces of this directive and should be welcomed by financial institutions."

“To an extent it mitigates the lack of clarity that existed before as to what constitutes adequate customer due diligence in different countries.”

Indeed, the ICC FIB has through its checks, helped many banks identify suspicious transactions and potential losses arising from fraud and money laundering.

Without naming the parties involved and going into specific detail, the ICC FIB was on one occasion asked to inspect a transaction, which included bonds issued by a South American company. Its investigation found that the bonds were forged and the ICC FIB advised its member accordingly, who was then able to avoid the deal altogether.

The criminals had used the name of a leading European bank - which had nothing to do with the transaction whatsoever - to carry out the fraud.

In a recent editorial about the way forward for regulatory compliance, ICC FIB stressed that regulatory compliance needed to be flexible and forward looking in order to adapt to the evolving methodologies of money launderers.

“To successfully identify and curb this crime, well-developed and defined legislative processes need to be in place. These become the stepping-stones on which banks base their compliance procedures and policies.”

However it cautioned that as compliance becomes the norm for banks, money launderers would look for ways to “clean” and conceal the true source of the funds prior to entering it into the legitimate banking systems.

“This would entail further compliance requirements, with increased onus on the banks to police and identify the proceeds of crime.”

The ICC FIB has a substantial database provided by its members on the modus operandi and parties involved in suspicious financial transactions from around the world. For more information or to become a member, go to this link.