Episode 04: Mark Hays - Anti-Money Laundering Campaign Leader at Global Witness
AML Talk Show Hosted by Martin Woods
Good morning, everybody. I'm in London. It's 10 o'clock. It's Thursday the 5th of December. I love the great pleasure of sat in front of me is Mark Hayes, who's the campaign leader for anti money laundering for Global Witness. Mark, tell my audience, my delegates, who are global financial crime professionals, a little bit more about yourself about your role with Global Witness the connection of the anti money laundering to the wider work of Global Witness?
Sure, I'd be happy to and thank you for having me here today. My role at Global Witness, is to lead a global campaign that's focused on combating money laundering in the context of combating corruption in the natural resources sector, as I'm sure some of your audience knows, Global Witness for about 25 years has really looked at the links between Natural Resources corruption and conflict and throughout our investigations into scandals spanning timber, illegal timber, illegal mining, corrupt deals in the oil sector, with many others have discovered that a key element of any of those scandals has been the way in which the global financial system facilitates, the laundering of the proceeds of those crimes. And so our campaign looks at promoting financial transparency and accountability measures in key financial centers, particularly in the West as a way of combating that kind of corruption from the other end of the pipeline, as it were. And our team is pushing measures looking at accountability for financial institutions for beneficial ownership transparency and a range of other measures.
Good morning, everybody. I’m in London. It’s 10 o’clock. It’s Thursday the 5th of December. I love the great pleasure of sat in front of me is Mark Hayes, who’s the campaign leader for anti money laundering for Global Witness. Mark, tell my audience, my delegates, who are global financial crime professionals, a little bit more about yourself about your role with Global Witness the connection of the anti money laundering to the wider work of Global Witness?
Sure, I’d be happy to and thank you for having me here today. My role at Global Witness, is to lead a global campaign that’s focused on combating money laundering in the context of combating corruption in the natural resources sector, as I’m sure some of your audience knows, Global Witness for about 25 years has really looked at the links between Natural Resources corruption and conflict and throughout our investigations into scandals spanning timber, illegal timber, illegal mining, corrupt deals in the oil sector, with many others have discovered that a key element of any of those scandals has been the way in which the global financial system facilitates, the laundering of the proceeds of those crimes. And so our campaign looks at promoting financial transparency and accountability measures in key financial centres, particularly in the West as a way of combating that kind of corruption from the other end of the pipeline, as it were. And our team is pushing measures looking at accountability for financial institutions for beneficial ownership transparency and a range of other measures.
Without talking about any particular engagement right now, which may be a subject of some secrecy, regulatory-wise, where are you engaged, where are you focused on trying to change or rectify policy or government policy within specific countries or jurisdictions?
It’s a really interesting time for our campaign. There’s been a watershed moment around beneficial ownership transparency in last few years. When a previous colleague of mine started this work about 10 years ago, she told the story of walking into the rooms of regulatory, agencies, banks and others, and proposing, why don’t we simply make it so that the ownership of these legal entities is more transparent. And she was pretty much literally laughed out of the room. Fast forward to now 10 years later, we have 20 European jurisdictions looking to bring these beneficial ownership registries online.
A UK registry has been online and, though it has flaws, is really setting the standard for how these registers should be pursued. And for the first time ever, we have legislation in the US that may actually have a chance of being passed that would establish at least a central registry of beneficial ownership. Despite a strange and polarized political environment around the world there really are a lot of things to be excited about. I think the big question is, once these registers online, will it be effective? And how will they transform the global anti money laundering framework and help combat the scale of global corruption that continues to be massive?
And what do you think changed those 10 years when your colleague was laughed out of the room and where we are now, with these beneficial owners registered in some countries and participated in other countries.
You could make a whole industry just trying to prognosticate about that, or look backwards. I come at this work from a campaigner’s perspective. My background is not actually traditionally in finance. My background is more in environment, public health advocacy and policy work. And you talk about policy advocates around the world. And what they’ll say is oftentimes, the work you do is unglamorous and painstaking over multiple years, and you are building the case the political will, the visibility for the issue. Perhaps that work alone, will push you over the edge more often. There’s a critical moment of crisis moment that becomes an opportunity. And I think you can point to the HSBC scandal in 2012. The DOJ investigation into the facilitation of money laundering there, you can point to the Panama Papers is another key watershed moment that really jumpstart at some of these efforts. I think that’s a fair way to render it. It’s building the case and then waiting for the moment to strike and see if it works.
The connection with global instant commodities and where we are in the world right now. There’s a huge conference in Madrid about the environment, about global warming. And many of your present campaigns reference deforestation. When we met, our first interview was with David Lewis, and he’s tied squarely money laundering and the FATF to environmental issues. What are you seeing in terms of let’s reverse this, and I’m reading some of your papers right now, the reverse flow struck, me as an anti money laundering professional, I’ve always been looking at where did the money come from, but your campaigns, quite rightly are looking at where is the money going to? It’s money going out of the banks, going out of the investment funds, and where’s it going to? What can we do in a global financial services community to help you to make sure that money is not harming communities?
That’s a great question. I think I’ll start by zooming back a bit and thinking about what is it that actually facilitates illicit Finance? And what are those who seek to do it gain from it. Obviously, it’s the money. But it’s not only the money, it’s the wealth of power and the access that the individuals gain from those resources. But not just the resources, when you look at, the one 1MDB case, which I know is something we’re going to discuss, the individuals involved in those, that case, certainly stole or allegedly stole a great deal amount of money and use it to live a high life as it were. But that highlight isn’t merely about indulgence. It’s about generating a new reputation, reputation laundering as it were. And those relationships that undergird the decisions on where the money should go, whether or not the money should go through whether or not that investment should be secured, are not just a means to an end but an end in of itself, and so When you have individuals who are buying property, getting access to elite schools, that’s not only about securing access to money and power, it’s about how they wield it.
It’s a full circle thing. I say in that way, because the business professionals, the government officials, who at the end of the day are making decisions about how to use those natural resources, about whether or not to invest in more fossil fuel exportation, when we’re in the middle of a climate crisis. Those decisions are being influenced by their relationships and by the people they’re talking to. That’s why I think Global Civil Society is saying we need a bigger seat at the table for civil society, the decisions, the priorities in forming that can’t be based on those relationships alone.
Actually, the current election in the UK talks about companies and the primary objective of directors of companies in the United Kingdom is to represent shareholders where as, it’s a different form of capitalism. In the US, It’s more about wider communities and stakeholders and communities. I always talk about this, I think banks only operate in communities, because they consent to that community to be there, whatever your business is, and there is this distinction and distract, if you will and your papers reference at London, Berlin, New York, Paris, against Philippines, Indonesia, Brazil, deforestation, we don’t see this. How can you help me and help my financial crime professionals on this podcast, see it and connect it, what is it we connect to? What difference can we make sat in London to help to protect the rain forests, those communities and protect the future of the planet earth for our children?
It’s a great question. One of the challenging aspects of it is that we look at corruption often as defined by what’s legal or illegal. But the conversation that’s being had here in the UK, and the US in particular is, what influence is being brought to bear on policymaking is ethical or unethical and people can draw that line differently. But the fact of the matter is there are many people around the world who feel as though, to quote some political officials in the US, “this system is sometimes rigged”. So financial professionals who are in the middle of the financial flows that really dictate where our resources are at, where, what decisions should be made by politicians about how to use those resources. I think taking a wider view about who these financial transactions are benefiting, who’s actually behind the deals that are being facilitated. I think they get a little less abstract. You look at the 1MDB case. You had senior executives of major banks, you had individuals in sovereign wealth funds. Who should have known that the investments that they were facilitating had a bigger impact than simply just making themselves money and making their partner’s money.
They’re investing in large scale oil deals. They have to ask themselves, the question, who stands to gain from this? And what is the social impact of at the local level? By taking this money, is it really a sound investment for the real beneficiaries? I think with 1MDB, that’s the critical thing that’s often missed. We focus on the antics of Jolo, the political corruption in the Malaysian government, but at the end of the day, that’s 4.5 million US dollars that they may never get back, it is larger than the health budget there. And that’s going to have a knock on effect for millions of people in Malaysia for decades. Financial professionals, can’t live in themselves, is this transaction legit, but they need to look more broadly, is the transaction, the underlying investment, an ethical one?
That comes down to the fees themselves, you look at that particular case, the exorbitant fees one particular bank. And I am going to quote from the book now, and the book again for the listeners, very good read for financial crime professionals is The Billion Dollar Whale, which is a story about 1MBD thus far because it’s still to play out. It’s interesting that how greed paid apart, exorbitant fees, but I do like what Global level witness have done. They’ve taken that number, that 4.5 maybe $6 billion. Isn’t that the health budget?
For a whole entire nation and how many people suffer, but also 1MBD , The Billion Dollar Whale talks to, this reputation laundering, this reputation creating and I often say to people in firms, I don’t believe reputation risk for the institution is the issue, but reputational risk for the individual is the issue. When we leave planet earth, the money stayed behind what we leave is our sad family hopefully, because they’re gonna’ miss us and our reputation. Contrast Razzaq in Malaysia right now with something like Nelson Mandela and I think Razzaq’s grandchildren want to change their name in the future with Mandela’s, they will sit with their chest further out and maybe that’s something we need to push to our individual executives to say, What is your reputation, what decisions are you making, that are impacting your grandchildren and your children. But let me get back to on track and say, who is financing them and then be prepared to name names, because it is within your documents, which organizations, which banks are financing the destruction of rain forests around the world?
That’s actually to be honest a difficult question for me to answer simply because I wasn’t part of the recent report. We did a report looking at financing in deforestation Brazil and you can talk about the companies that are the end recipients. The Cargill’s, the ADMs, the commodity traders and the agricultural giants that are recipients of that flow. But to be honest, I haven’t spent much time working on the case that looks at the financiers, it’s hard for me to name names at this moment. But I think, I’d argue that in some ways it’s immaterial in a sense that while we need personal accountability for the institutions, this kind of financing is standard practice for a broad swath of the industry. This investing in these companies, these major blue chip, private and publicly traded companies is the way to make money.
I think there’s a massive disconnect, because on paper, many of these companies look like good investments, solid investments, they have sound financial statements. What’s missing is this lens of but what are you actually financing? The math on deforestation is clear. These are the lungs of the earth. Whether or not they’re willing partners in places like Brazil, under the Bolsonaro government to extract without thought, it behoves institutions to think not just only what the impact is around but frankly now it’s in their self-interest. It’s a planetary crisis that will come back to haunt them.
It’s in self invest long term, but if it’s built on short term, so how do we change people’s thinking even from the money laundering perspective. The problem our listeners have is they are constantly in conflict internally within their our own organisations. Because bankers want good news they want the news is the green light, we can take the money.
Right, irrespective of the morality of it etc. They’re constantly in conflict on a short term, bonus driven, commission driven picture. How do we make these bankers and these executives, and everybody else think longer term?
There two ways to answer that question. First of all, again, if you’re talking about the climate crisis, I dispute the notion it’s a long term issue. Scientists say we have 10 years to turn this around. That’s a small sliver of one person’s lifetime. We’re already seeing radical changes in the climate and as an author, in the US one said, I have to paraphrase “the economy is a wholly owned subsidiary of the environment”. And we’re now we have a bill that’s come to pay and it’s a massive bill, it’s going to get larger and larger, the longer we ignore it. And so institutions need to be thinking not just about quarterly gains, but there are starting to be instability in markets, massive losses, whether you look at insurance sector, they’re dealing with climate right now. And I suspect that within a couple of years, you’re going to see massive shocks to markets and financial institutions that are directly related to climate related disasters.
They need to be thinking, how can they avoid and mitigate that risk now. And I would argue, rather than thinking about just covering their own assets, as it were, they need to be thinking of how they can reorient their investments and things that will actually stave off this crisis. Because if we make that investment, the public sector needs to drive that and they’re going to drive up through public investments, or they’re gonna drive through regulatory action. But the private sector can get ahead of that if they realise that those things will create new incentives in the marketplace and create massive economic opportunities if they play their cards right. We need to marry both the accountability piece, simply pulling institutions needs to stop investing in deforestation or other things or sooner or later, if they don’t, regulators will do it for them. They can get ahead of that game now and they can seek a competitive advantage and have a new incentive to actually profit from stabilising the climate. But I think they have to expand the thinking in order to do that.
Let’s get back into money laundering, let’s link into accountability, why do we see no individuals held accountable for their conduct, criminal or otherwise, within banks, within financial institutions for laundering money?
I think it’s because, it’s both an institutional mindset and a strategy to avoid that accountability. The institutional mindset is this, we are a group of individuals, but at the end of the day, this is about making money for shareholders, about the institution’s, protecting the institution in its, perpetuity. Institutions, I think Goldman Sachs is a good point, that case it still remains to be seen what will happen, but there are criminal charges pending against not just individuals like Leisner and Robinson, who have now pled guilty to charges, but to senior executives and perhaps institution as a whole. As your audience would understand, they’d argue, look, there’s sort of plausible deniability here. If there was a problem, there might have been negligence. Don’t knock the individuals that are just sort of doing their duty. And I think-
Their duty is just to make money for the bank at all costs?
Yeah. As long as they were playing their role and checking their boxes, everything was fine. And again, I think this is mindset shift, shift that either needs to happen institutionally in terms of changing behaviour of the banks, or the regulators need to do it for them. And I would argue that, the UK has done some good work in establishing, say, the senior managers regime-
But it has to be implemented doesn’t it?
It has to be implemented and I think-
Before that, let’s just go back, we had the approved persons regime didn’t we?
It’s an adjustment of the same thing. Which used to be called, the FSA.
And now we call the FCA. A friend of mine once said, when it was formed, it was the FBI.
It’s the FBI today. It’ll be the FBI tomorrow. Why do these people think a change of name, something changes. What’s the huge difference between an unenforced approved persons regime and unenforced senior management regime?
I think the only major difference is, at least you have something to work with, but you’re going to need political change to force those agencies to hold those individuals to a greater account. And I think unfortunately, in the UK, despite some of the big improvements, you have a problem where the financial incentive to continue to accept dirty money without looking, or looking the other ways is still pretty insatiable. And so either you need to reform the regulatory institutions, or I think what you really need to do is put people in jail. Otherwise, I don’t think there’s going to be a change in behaviour as long as those fines either live in institutions, which are barely a footnote on a balance sheet, as long as individuals are able to sort of pass the buck down to middle managers. That’s not going to change. So the regulatory institutions and law enforcement need to pursue greater accountability.
In the US, there’s been a lot of talk about the deferred prosecution agreements. On the one hand, sometimes those agreements do allow for greater insight and sort of a deeper reach into say, asset recovery. But I would argue, white collar criminal prosecutions in the US are actually down over the last few years, despite the fact that we’re in the midst of some of the most largest scandals ever seen. I think the problem is if you say you’re for law and order that has to apply equally to the white collar class as well as to blue collar class.
I don’t like to colour crime and actually I quote, the late Robert Morgenthau, who, when he was the DA of New York, he said “crime in the streets, crime in the suites justice must be fair, and equal to all” but it’s not is it, that’s our problem. It’s not. I remember saying to Stephen Platt last, in fact, early this year, the mistake that the Volkswagen executives made was to not do this in banking. It seems to me that bankers get a free pass. And until we have this individual accountability, and it’s back to you on out your advocacy and lobbying, are you lobbying for that specifically to say, to some regulators around the world, you really need to and you just said yourself, send some people to prison to change conduct and behaviour?
Yes, definitely. I think, in the UK, we’d like to see greater enforcement of the regime in the US. we’re advocating for the same. I think, sometimes the biggest opportunities come outside of a specific regulatory regime. I think the best example right now is actually outside of the banking sector, is dealing with oil and gas where there’s a major criminal prosecution being pursued against executives with Shell and Eni, and their role in a massive oil bribery scandal in Nigeria called the OPL 245 case. The only reason we know anything about that case is because a few middlemen decided to sue each other in an Italian court because they weren’t getting their fair shake of the deal. But it’s become one of the largest cases of its type. And one of the first times that you actually have senior executives of a major oil industry company that could face real criminal charges. That’s a good thing. But the fact that it’s such a unique outlier is not.
We have powerful tools like the FPCA and the Anti-Bribery Act here. But until agencies enforce them… Lobbying is kind of a hard thing. I mean, I think it speaks to your point earlier, if you have the rules on the books, it’s not necessarily about getting legislators to legislate more, it’s about getting regulatory agencies to do their jobs.
Yeah. In terms of bribery and corruption. We have a strong piece of legislation here in the UK, I don’t think it’s very well used. I remember being at an event with the former head of the SFO, David Green, and one of the cases he referenced was an individual salesperson who won the prize of being the salesperson of the year, and it was a holiday for two/four, in Cyprus or wherever. He gave that to his client, and the company self-disclosed that. And that was an SFO investigation. So, serious fraud, but not so serious bribery. Because I mean, that was a case that we’re talking about publicly this is a case we’ve done, you think, really, that’s serious bribery?
But it’s a measure of as well, perhaps. And it comes down to a couple things. Let me ask you and invite you, rather than telling you, which country launders with the most money in the world?
I think it’s a competition between US and the UK.
It’s the same answer we’ve had from a number of people and I would like to advocate on behalf of the UK and we are the best place in the world to launder money, which sounds really ridiculous thing to say. But I’m trying to embarrass the country, to say this is the best place in the world to launder money and to commit fraud. Now when you said about fraud in the US, and a deferred prosecution, one or a down sides of that is, good lawyers are out of match practice. The courtrooms are empty, because they’re all been settled to agreement.
You come to trial as a defendant, take your chances because these guys prosecutor haven’t done a trial for a long time. They’re not well practiced trial lawyers, because their trials aren’t taking place. And some people talk about the deferred prosecution is pay to play. It’s been overplayed. And now, we’re looking to introduce it over here. But it’s the instant automatic get out. Why do executives in banks protect junior bankers? Is it because they are all contaminated in the system?
It’d be interesting to be a fly on the wall, to understand that. My impression is that it’s sort of a mutually assured destruction pact. If junior bankers see that their senior executives are going to put one over on them. Why should they protect their senior executives in return, there’s safety in numbers as it were. But I also think that, like any institution, loyalty and tribal mentality plays into it. I think, bringing it back to 1MDB, if you could put yourself in the shoes of the folks at Goldman Sachs, who were desperately seeking new entrees into Southeast Asia and investment, and I think, the authors of the Billion Dollar Whale do a really good job of describing this context where the major financial crash, banks were looking to find new ways to bring more money in. And here are a couple of aggressive senior executives, building relationships, that give them access to massive amounts of potential investment opportunities. Goldman rode a wave to supremacy along those relationships and those opportunities. The sense was, we have to protect the golden egg. We’re a team, we’re winning. Anything that threatens that it’s not about right or wrong. It’s about, how do you protect-
But is it that right or wrong?
These are Ivy league educated individuals who are, at best turning a blind eye to the bleeding obvious that we might see in the United Kingdom, or at worse being complicit in a course of conduct that is exploiting a nation, ripping off the health system and charging exorbitant fees that are just totally unjustified.
That’s why the culture of impunity that we have seen in other places that sometimes we in the West like to sort of foist upon other countries and say, look, this country does have good governance it just has a culture of corruption. Arguably, places in the West have perfected that level of impunity, and we’ve simply turned it into the more sophisticated idea of, what’s the word, I’m looking for? Largesse or noblesse oblige. It’s just sort of, this is the way things are done.
You protect your-
I mean, to that point, it depends on one’s definition of corruption. Roberto Saviano the author of Gomorrah says that this, London is the most corrupt city in the world, on his definition of corruption. And if you look at the Looting Machine, I can’t remember the name of the author the Looting Machine but, all the commodities and funds coming out of Africa, it’s the West, just exploiting everything that’s in Africa. Obviously, your campaigns and your investigations, reference this constant engagement of major Western banks engaged in working and working with commodity companies oil and gas companies to exploit other nations, be it by way of corruption, bribery or deforestation.
It’s not unfair to say that it’s a predatory economic model. And if we’re going to get out of this trap, we need to rethink how we approach this.
OK, but let’s first ask who we are, not we as talk about the banks and we talked about the executives, but we is my wife and I next year booking a holiday, do we try and find the place in Asia that is not constructed with illegal timber? Do we actually make sure that when we go to the pub tonight, or when we go to Sainsburys, we decide we won’t buy San Miguel, because San Miguel as a corporation, and I’m referencing your documentation now as a Global Witness –
– are extensively engaged in deforestation, and actually are harming the lungs of planet Earth. Do we carefully select the fruit we eat and instead should state, this came from Dole Philippines or was it from Dole, wherever, and we start to actually as a consumer that we, let that micro level of we, my wife and I in a supermarket as a consumer, should carefully select what we’re doing to change the conduct and practices of the major corporations.
I think it’s a yes and answer. And the reason I put it that way is individuals who are engaged in this have an opportunity to send a message to companies that are willingly or unwillingly facilitating environmental destruction, human rights abuses, by the choices they make with their pocketbook. But I think it’s a mistake to assume that the onus is only on consumers and that individually actual alone can be the way to make that change. It’s certainly part of it, what we have as a collective action problem. And what we also have is a campaign of misdirection. If you look at the fossil fuel sector, we know that a small number of companies are responsible for most of the emissions that have created rapid accelerated global warming. We know that if we were to radically change our energy mix, and to create new regulatory reforms that would force those companies to change their business model, we would get to where we need to go much, much faster.
But instead, the PR campaigns put up by those companies, the cultural Zeitgeist is about how we need to drive less and walk more. Yes, we do. And that is part of building a new culture that combats those things, but it cannot happen without collective actions, and that requires politicians to act and companies to act or have choices made for them.
Their internal policies, their agreements, we have Wolfsberg in banking, we have Soft Commodities Compact in the commodities industry, are they worth anything, do they have any value.
I think at best, each one is different. I can’t speak to them in the particulars. But in general, voluntary agreements can be helpful. But at best, they’re a starting point for a conversation about what the new oversight regime needs to be to change the marketplace and change the Political Economy of it. If you only have voluntary agreements. At best, you’re going to have some good actors who step out but bad actors will continue to undercut that. And at worst, they’re actually PR mechanisms. There’re simply a way for companies to green wash or whitewash practices.
They’re a charade then, for some companies?
Yeah, I think, again, there might be particulars that are helpful but it’s important for people to look at those not as unique, discrete policies that may or may not accomplish a certain set of goals, but systemically that’s standard practice across any industry, we’re talking about – timber, oil, gas – what do we do when we’re faced with a social problem?
One of our strategies, create a voluntary agreement. Give us time and energy to sort things out. Some of those people are legitimately trying to do something good with that. But it’s overridden by the fact that those policies tend to be a lowest common denominator practice. And so. regulation is often a bad word. But some of the biggest, in the US, for example, auto emissions, automakers fought clean car air standards, they fought seat belts, they fought airbags over 57 years they fought getting lead out of gasoline each time they said this will kill the industry. Fast forward, the car industry is unfortunately more robust than ever before. Cars are cleaner safer than they ever were before. In fact, they made money off of those things. People need to stop looking at regulatory systems as punitive and look at them as guiding where business should go.
But, regulation, back to money laundering, nowhere is better regulated and nowhere has stronger anti money laundering laws and regulations than this country. And yet, you said we compete the United States of America to launder more money than anybody else. So it has to be enforced doesn’t it?
Yeah. But I think you can look at the US as a good example. In fact, the UK in the US can learn from each other. So the US, arguably, and despite some of the decline and white collar prosecutions, aggressively pursues –
Because it is a competitive business in law enforcement
– Exactly yeah. It’s competitive business to get the collar to get the credit. But arguably, I think if you talk to those long for some folks, it’s a bit of protecting the stability of the US financial system.
If you speak to Bill Browder, he would say it’s part and parcel for the UK, nobody wants the parcel. Nobody wants to take any action. The most serious frauds committed in this country are not investigated by the Serious Fraud Office, which seems bizarre because the most serious frauds in this country are committed by bankers and financial service professionals in the regulated sector, be it miss selling of pensions, mortgages, payment, protection, insurance, etc. And that’s become an industry practice. And the tolerance of the government to that is absurd. The government probably has the same level of tolerance to money. Post Brexit do we foresee on the horizon, money laundering standards and anti-money laundering standards and regulations in the UK will soften, will reduce or harden?
That’s a critical question. I’d like to say that they would remain, I think you’ve seen last couple years with a Skripal poisoning. Just a real recognition of how this exposure to dirty money is not only about the impacts globally on health, human rights and environment, or even about the stability of financial markets here it’s a national security issue, money laundering. There’s some good literature that looks at how rogue actors in China and Russia have exploited vulnerabilities in the western financial system, not only to prop up their own power at home, but to literally reshape the geopolitics of this era, and they’re doing it effectively.
Even if you don’t care about those others things, which I’d argue are probably the priorities. If you care about sort of the sovereignty of the UK or the US. Other people are undermining it. They’re using our own tools to do it. And so whether or not the government is conservative of labour, it needs to recognise that as a threat to the sovereignty of the UK. If they don’t, and if they instead double down on an economic race to the bottom, it’s going to take a bad problem and make it worse.
Gerald Ryle said in a previous interview, if you took the bad money out of London, the economy would suffer. He said the entire economy is built on bad money.
Perhaps but, we talked about why the US pursues aggressive prosecution, this sort of thing. The US can arguably afford to because people aren’t going to stop bringing their money to the US for a variety of reasons. There’s lots of reasons why you want to invest in US, whether your money is licit or illicit, so to speak. I think perhaps that even though the UK may be more vulnerable, I think it could be a lot of storm and drum. I mean economies that have been forced to shift their priorities. If they do so shrewdly, can bounce back and become more resilient, you really should be making the opposite argument. If we’re so dependent on this dirty money, is that a stable long term economic base for the country? People should be doing things now to diversify the UK economy to get it away from this reliance on laundered money and stop worrying about what happens when we pull the plug on that.
It’s a bit like the car industry and what you said about that-
You end up with a cleaner, a healthier society to live in.
What we need is courage to do the right thing, not only because it’s the right thing, but because actually it’s the smart thing. But until people get out of that short term mindset that’s never going to happen.
We spoke about beneficial ownership and the potential influence in the change of beneficial ownership approaches, by publications such as the Panama leaks. Have You heard any new rumours about the London leaks? … You’re giving me a wry smile, so you can plead the fifth on that one, if you-
Well, perhaps it’s in my interest to plead the fifth, I want to make sure I’m in the know. But I think perhaps what’s safe to say is that we probably haven’t seen the last of these kind of leaks. I think now that the dam is broke, people are recognising that. While this is no substitute for good oversight and transparency, it’s a powerful tool in an asymmetric world.
Do people leak, to Global Witness, would you like them to leak to you?
We have worked with whistle blowers on a number of occasions. When people bring us information, we have a duty to make sure that information is independently corroborated and can stand up in court. But yes, I mean, I think one of the roles we play that’s unique in the advocacy universe, which is really where I come from is being able to leverage information like that, turn it into a compelling journalistic analysis of these problems, but then turn that into an advocacy opportunity. In a short answer, yes.
I’m waiting for that, how do the listeners access all of your fabulous reports and your data and use that in our own due diligence processes for new clients coming on, and as we said earlier on, money going out, so how do they access your information?
Go to our website, globalwitness.org. Our reports are designed with a number of audiences in mind. Case in point, we have teams who developed reports looking at the massive scale and scope of the Jade industry in the Myanmar, and we write those reports not only for the general public, but bring those reports to policymakers, to law enforcement, to individuals doing intelligence resource within regulatory agencies, and give them some forensic analysis that helps them build that case. We are not law enforcement, we cannot take those cases forward. But we can, as I say, leave a trail of breadcrumbs. That goes for investors as well.
I think one of the most interesting things about the beneficial ownership issue for example, is that the development of this new transparency standard about knowing who fundamentally owns a company was built around the idea that it could fill a gap in the anti-money laundering regime to help people know their customer. But increasingly, we’re getting interest from corporate entities who have massive supply chains upstream and downstream. Multiple joint ventures and even companies as large as Coca Cola have discovered that they don’t always know who they’re doing business with. I think our hope and our desire is that a beneficial transparency standard is not seen as merely a way to combat bad behaviour, but as a way to promote good behaviour and becomes a new industry standard. Because if the information is public, it’s not only going to help law enforcement pursue bad actors, it’s going to help companies conduct better due diligence and conduct better business.
I’ll get in the recipe for Coca Cola. Coca Cola wants transparency in its supply chain.
I think, for corporates, obviously, the way it’s structured, they’re looking at their interests first, but it comes back to the long term versus short terms thing. I think that-
It’s also started thinking is I’m always encouraged to hear something like that, there are companies saying we don’t like being blindsided here. Because I see and I’ve encountered it. When I was at Wachovia Bank and I’m known for I didn’t look at the bank, I blew the whistle on a second piece of laundering. And a very senior compliance officer said to me “that had nothing to do with you” I said, I’m the head of anti-money laundering. He said “this had nothing to do with you, this was in the US.” I pondered: do we compartmentalise it now. We launder in the US, but we don’t launder in the UK? So I’m told there to keep your nose out. Whereas, Coca Cola, are saying put your nose in?
Yeah. I think in that instance, perhaps a better example is in the US in our efforts to pass beneficial ownership transparency. Companies like Dow Chemical have gone on record supporting federal legislation. That legislation right now would not make that information public – yet. But to paraphrase the language that Dow and other companies have used, even if this information isn’t made public for the time being, and we can’t access it, it’s going to change the behaviour in the industry, the expectations that businesses have of one another, with regulators, it’s going to incentivize greater transparency, because that’s bringing the floor up as it were, and reshaping the standard practice. And that’s really what we’re looking for is not necessarily to penalize bad actors, we are, but also to make better behaviour the more common standard.
And this is at a federal level because I’m thinking about Delaware, an acronym, it stands for Dollars, Euros Laundered And Washed At Reasonable Expense. But what does Delaware do, it it’s not forming companies?
I think that’s one of your situations where – let’s challenge the assumptions made about particular places – on the one hand, Delaware has been notorious for facilitating this behavior for a long time, but I think as an example of the sea change that has occurred. Delaware is now on record, supporting federal legislation like beneficial ownership information. Granted that, means that Delaware itself has to do less in that process. There are other proposals that will require each state in the US to collect this information. That’s where Company Information begins. But a federal registry is achievable. And it would be adequate to meeting the task of providing the kind of information that law enforcement needs. And the reason Delaware moved is, I would argue, a combination of carrot and stick.
We and others really tried to raise the visibility around the role that they were playing in this and how that simply was unsustainable. Once they saw the writing on the wall, and were approached by advocates in that space and said, look, you actually have an opportunity to leave a better legacy, as we were talking about earlier, and there are public officials there, I think, who responded to that. It’s a combination of self-interest, enlightened worldview, and really recognising that the things we’re scared about are so scary. In the US, the reason we’ve been able to move as far as we have in this polarized political environment is you have a bill in Congress, where Dow Chemical doesn’t have the best record on the environment has the support for this bill and a group like Friends of the Earth in the US supports this bill. That’s a rare unicorn of federal policy in this day and age.
But it’s also, you said law enforcement want it to, Dow want it, Coca Cola want it, even communities want it. Law enforcement protects communities anyway. So it’s a wider, stronger narrative. And the United States adopting such a policy is a huge domino, because at that point in time, does the offshore world collapse from what it presently is? Because at that point in time, if America says it’s all about transparency and beneficial ownership, why am I banking only offshore anymore? Why bother?
That’s a great question. What we’ve heard and what we’ve advocated for in the US is that law enforcement will tell you they go overseas, there’s a part of agency seeking information from another regulatory agency in the US. Agencies are not shy about pushing other countries to provide them information. But in the meantime, they’re getting pushback from officials in British Virgin Islands saying why should we do this when you haven’t done it? In some ways, the US has been a lagger. If we step up to the plate and actually commit to that it is going to be a sea change.
I think, to bring it back to this question of what should businesses be doing? The mantra often of businesses is innovate or die, they should be thinking about this situation as an opportunity for innovation. If the offshore industry can transform itself, because of the massive transformational change that would happen if the US bought this online. Again, that’s an opportunity to take themselves into the better part of the 21st century. If they don’t, maybe the offshore sector needs to rethink its purpose. But I think that’s the kind of threat that businesses face in the normal business environment. They shouldn’t treat this any differently.
Actually, we’ve, I’ve said it time and time again, when we step on board or airline, we’re asked “Who does the case belong to?” If you say it belongs to a BVI company, well, it’s not going to get on the plane is it? And yet we tolerate this. Do you think as well, something we’ve done wrong in this space, particularly from a anti money laundering and beneficial ownership perspective, we’ve allowed the customer to run the relationship?
I think that’s a fair point. I think, let me think about that for a second.
The point I want to make, you can’t say to the man at the airline, is it your case and you can’t, it’s none of your business. Because it’s a hell of a lot of my business and it’s the business of everybody else who’s sat on this aeroplane with you. So if you don’t tell me, either the bag’s not getting on the plane and you’re not, until I’ve got full transparency to the benefit of everybody else on the plane?
Yeah, I think a good example of this is, driver’s licenses or registering your automobile. We don’t live in a world where someone can drive up, crash your car, leave the car, no one knows who actually made the crash. Your individual rights are where the bumper of that car begins. But yet we have this attitude around the business world where, if I’m involved in finance, if I’m involved in business activity, it doesn’t really matter who I’m impacting, what I’m doing, it’s none of your business. But legal entities are creations of the state.
There’s a fundamental premise there that you get certain privileges to use that entity and there should be and in response to you have certain obligations. But in the effort, I think to create free flows of capital, to lower the barriers for business, we’ve forgotten that we have, there’s a public good at stake. Yeah, I would argue we need to redraw those lines. I think banks can do that. They actually have done that in certain cases where, when incentives shifted, they realised that their obligation lies beyond simply to their shareholders, even to simply serving their customer. They’re part of a community but unfortunately I don’t think that’s that’s part of a culture yet.
You talked early on about, and you sounded critical, of organisations using some of these mutual agreements and these collective statements, Wolfsberg etc. as well as PR. So Westpac in Australia have been alleged to have committed 23 million breaches of international wire transfer rules. They have publicly apologised for funding paedophiles going from Australia to rape children in Asia. I came back from Australia last week. When I was in Australia, I watched Westpac for weeks leading up to this with this PR campaign, this great bank for Australia, everything it’s done for Australia.
That’s shareholders money being spent on that. That’s just a narrative. We’re a fabulous wonderful bank. And it comes back to something you said about this tribal, this collective, we all work for each other and protect each other, at what point does somebody say, “We did something fundamentally wrong here” and I know the CEO resigned and the Chairman resigned, but where’s the space, I’ve been talking about this last 10 years, where’s the space with his honest family comes forward and says, “We don’t do any of this”. Why has that bank never come forward? Because it can’t survive? Can you not survive without being, without bending the rules or breaking? You can’t enter the club unless you agree to break the rules?
It’s a fabulous question. I guess I’d say two things on that. One, I do think there is an opportunity for an institution or the leadership of an institution like that to show real courage. I think people respond to that kind of authenticity in a variety of sectors. And if they do that, you take something that could be considered a vulnerability in that you’re sticking your neck out and turn it into a competitive advantage because it becomes a part of your brand that becomes part of what people know you for and just all around, we need more courage in the public sector, in the private sector, I think there’s a huge opportunity.
Again, there’s this interplay between what individual institutions should do of their own accord, what their responsibility lies, but also what they can do voluntarily, versus what is the role of oversight of governing bodies is that, take we’re talking about climate. I’ve been privy to conversations between companies talking with regulators talking with advocates who have said privately, we want to do this but we know the minute we do this so and so is going to cut in our business we know that if-
But, where is the PR campaign, which states, “We’ve done this for this reason”. Let’s take Standard Chartered now talking about how they’re saving elephants, by tracking money. They are actually saving workers breaking up ships, and yet Standard Chartered are all over your documentation, Global Witness documentation for financing the destruction of rain forests, for actually damaging the lungs of planet Earth. So, one PR campaign against another PR campaign. They got a policy that says we don’t do deforestation, but they do. How did they, where are the leadership? Where’s the leadership? Like they would say, “That’s not what this brand stands for. Forget how much money we’re making here. That’s not what we do”.
Yeah. I mean, I don’t know where it is, I think if it existed, it might have come forward by now.
Let me ask you another one while I am on a rock and roll, how many banks, or firms in the commodity sector say to Global Witness, will you please come in and present to our staff and train our stuff?
It does happen. But the problem is, is that, it’s same in the AML context, you can have a great conversation with a series of compliance officers, some of whom are actually dedicated, to combating money laundering. But if that information in that message doesn’t sink in with the senior management, whether or not they care, that’s not one of their priorities.
So You are not invited them to talk to senior management then, you talk to compliance officers.
On occasion, but I think they often see us as an adversary, rather than someone that can actually help them get where they need to go and try-
How dare you try to save the world? How dare you stop this deforestation. We are just trying to make some good money here, well bad money here. Money is money. Good bad or ugly, right?
I think, frankly, when you’re talking about these companies, you have to remember that they’re investor owned. If the executives aren’t going to respond to this one way or another, if they feel that they can’t or they shouldn’t, then, we’ve talked a lot about what the management is doing. But the investors have the opportunity to need to demonstrate.
We are all, we’re stakeholders, you said it earlier on, was it because the economy is as an investor in the environment and eventually on-
Wholly owned subsidiary of the environment.
And eventually it is going to have to pay, but even consumers, we have a stake in this because we can choose not to buy San Miguel, we can choose not to bank with whichever bank. We can choose to make different decisions based upon our reading of these information and documentation. So, again, if some of the listeners of KYC360 and this podcast wanted to actually engage with them and bring Global Witness in to speak to their staff, to motivate, to change, to actually bring about better conduct, how do they contact you to make that happen?
I think they can reach out to us at Global Witness and speak to myself or speak to our campaigns director again. On our website, there’s an opportunity to request information, to request speakers. I think the key thing to take in mind is that we’re not here to help you develop your new PR campaign around how to save the elephants. We’re here to give you insightful information into how your practices witting or unwittingly are causing grave harm and how you can avoid being complicit at a minimum, but also how you can chart a path forward. We’re there to be a source of information and insight and to help give you the tools you need to go there beyond that, though, it’s really up to you.
There’s a raft of individuals who can help you do that from a sectoral standpoint, the resources are out there, but it really has to be up to you to take the initiative. I think, individuals in these spaces often wring their hands and say, we’re part of large institution, we can’t do this. But, those individuals actually have a lot of power they can shape the course of those institutions and where they go, but they have to take the initiative.
There’s a vacuum out there, potentially, for courageous leadership in this space, at the executive level for people-
Let’s call it an opportunity. To switch gears in a rather interesting way I think, if you look at the ‘Me Too’ movement, what individuals who’ve been harmed by others who are harassing them, treating them unfairly, what they are often looking for is accountability for those individuals institutionally. But also authentic recognition of the harm done and authentic commitment to actually change behaviour. The power of that movement is interesting where you see without any regulatory action, media companies racking swiftly to hold those people accountable, it can be done. It can be done in the money laundering sector, it can be done in the bribery sector. People are yearning for real accountability. In some ways, they may care less about where, how it comes down, whether it’s the act of a law enforcement, official regulatory or simply action, but they know the difference between a fake apology and a real apology. If people are willing to step forward and make those amends, or push others to do so swiftly and in full, I think you’ll see a change in culture and behaviour of those institutions faster than you might believe.
Accountability: does Global Witness ever a criminal complaints against organisations around the world on the basis of your investigations?
We do. I think, our thinking going into that is where can those cases not only reveal some of the most egregious practices, but where can they set precedents that would empower others to come forward and enable law enforcement and oversight agencies to do the job more effectively.
We’ve been going for about 50 minutes, which is a long time. I think the conversation here is fabulous. Is there a message you’d like to leave to listeners about what you, what Global Witness does, what they can do to help your campaigns at a very high level or very simple level, either as members of the public or as financial crime professionals in institutions?
Our work is built on good information. Just as I had said earlier we’re able to provide that to different stakeholders. It’s only as good as the sources that we receive. We are a resource for those who have information that can help shed light on some of these cases. Individuals who are in that position who are witness to wrongdoing can come to us we’re good custodians of that information. No one is perfect, but we have a track record of waging strong campaigns and strong investigations that bring results.
More broadly, I think our investigations can create visibility for massive social problems and actually connect the local to the global. These issues can seem far away. Our cases can really shed light on these problems and bring new perspective, those who, as you’ve kind of described, people want to make the right choices, but they’re not sure where to start, or what other critical things they need to be focused on. By sharing and engaging in our campaign content online, that’s one way that we can make these issues more visible. One of the biggest challenges of work we do is that, we look at the spaces in between. There are campaigns that focus, rightly so, on species loss, things that are tangible and easy to touch and feel. But as we’ve discussed, sometimes the critical problem is that it’s the system’s driving those impacts, is where the problems lie. And so by thinking systemically and taking a record and putting that into your analysis, whether you’re a person on the street, or regulator or person in the bank, that can help you broaden your view and make those connections.
I think I’ll end on a bit of a philosophical note, but I think this is something we discussed prior: When you’re involved in a financial transaction, when you’re involved in facilitating a business relationship, when you’re involved in the body politic and participating in politics, we need to look beyond the pure transactional nature of those relations, of those dynamics and look at the relationships themselves. Who’s really involved in this operation? What do they stand to gain? What is the real impact? Are people acting in a way that’s honourable and ethical? Is there trust here that is not just based on who you identify with, but does this serve the common good, and if that’s the mindset people go for regardless, that’s going to have a dramatic improvement in the status quo.
Listen Mark, that’s been fabulous. Thank you so much for giving us your time this morning. I know you’ve flown in from Washington for other business and you took time out to see us here in London today. It’s been ever so helpful. And I would encouraged all your listeners to, do access and use the wonderful intelligence available to you, on the Global Witness site. I know that KYC360 reference some of this and carry connections to some of this information. It’s available in our due diligence for not only the money coming into the bank, or into financial institution, but the money going out for the financial institutions, and the potential harm that money might cause at a local, a national, international, even at a global level. I think hopefully you have made people think about differently. You certainly made me look at it differently, and made me more conscious of some of the decisions I’ll be making in the future. And that’s gonna be a positive thing. And hopefully, some of the listeners we’ll do the same thing. Mark Hays, thank you very much for your time.
Thank you so much for having me.