31 Jan 2020
On January 23, 2020, the Internal Revenue Service published a news release titled “Global tax chiefs undertake unprecedented multi-country day of action to tackle international tax evasion.” The announcement highlighted a coordinated effort across the United Kingdom, United States, Canada, Australia and the Netherlands to combat money laundering and tax evasion in response to recent findings related to financial crime in Latin America. The effort specifically included purposeful “evidence, intelligence and information collection activities such as search warrants, interviews and subpoenas”.
While the results of the “day of action” are yet to be released in measurable outcomes, the announcement certainly demonstrates a show of force across regulatory and law enforcement communities in fighting both the direct and indirect facilitation of illicit money flows around the globe. Interestingly, the five countries involved happen to be significant in their anti-corruption and money laundering roles globally, and the inciting information from the target Central American financial institution was likely another reminder about how international cross-border activity creates significant secondary and tertiary financial crime risk for all organizations.
Canada has picked up its efforts to reform anti-money laundering measures in 2019 after a series of high-profile financial crime incidents in recent years. Those incidents can be tied directly to international entities and illicit correspondent activity that resulted in new regulations addressing corporate transparency, suspicious transaction reports (STR), and virtual currencies. Stricter AML laws may enable Canada to raise its recently lowered Corruption Perceptions Index (CPI) score.
Australia also experienced a drop in its 2019 CPI ranking, and a steady decline in the measure since 2012. Record AML fines within the financial sector in the last three years have caused some alarm, and mostly recently calls for tightened anti-financial crime controls through AUSTRAC. In late 2019, regulators ran a campaign targeting “illegal money transfer dealers, or unregistered remittance dealers”. Australia’s four largest banks have been undertaking reviews of their AML and tax evasion controls in response to the negative publicity.
The Netherlands battled a a series of notable AML failures among its financial institutions last decade and set forth regulatory reform in 2018 aimed at expanding jurisdictional scope, adjusting reporting thresholds and obligations, specifically designating high-risk jurisdictions, and improving customer screening. Again, those failures can claim lack of controls over international customers and transactions as part of their root causes.
Regulatory reform from key countries combined with the actionable intelligence and cooperative effort demonstrated last week are likely to result in more decisive outcomes in preventing, detecting, and reporting money laundering and tax evasion. Since all five countries have seen their fair share of embarrassing financial crime failures in recent years, these failures could be seen as positive triggering events for meaningful regulatory reform, joint efforts, and deeper analysis of the financial connectivity with higher risk global regions. A day of action may end up meaning weeks, months, and years of action, which could provide real meaning to the legislative and regulatory reforms as intended.
Michael Carter is an expert consultant and thought leader in the area of financial crimes that includes Anti-Money Laundering, sanctions programs, and counter terrorism financing. His Twitter feed curates the latest updates in money laundering, sanctions, fraud, bribery, and corruption developments.
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