London, 7 December 2018 - A landmark G7 initiative to combat money laundering and terrorist financing today awarded the UK the highest rating it has ever given, in a move greeted with disbelief by Global Witness, Transparency International and Corruption Watch. The Financial Action Task Force (FATF) awarded the UK with flying colours despite the government admitting that hundreds of billions of pounds in dirty cash are laundered through London each year.
“This gold star for the UK’s anti-corruption efforts suggests the anti-corruption watchdog is asleep on the job,” said Ava Lee, Anti-Corruption Campaigner at Global Witness. “The Task Force should be insisting the UK walks its talk by properly resourcing promising new policies to tackle financial crime. Hundreds of billions of dirty pounds are washing through our banks and property market every year, as the government openly admits. Giving it so much credit before we’ve seen real change makes a mockery of the whole process.”
In recent years, the UK has introduced several groundbreaking new initiatives with the potential to tackle corruption at the source, if implemented effectively. It has created the first open data register of the real owners behind companies, measures pushing for accountability for senior bankers, and laws which require high profile individuals to explain how they acquired suspect wealth. These are promising policies on paper but the current lack of enforcement and resourcing means they have yet to work in reducing the flow of dirty money through the UK.
The FATF review glosses over fundamental failings. The information in the UK register is accepted at face value without any verification, and the government has not given Companies House the mandate or resource to investigate suspicious entries. This lack of scrutiny is particularly concerning, given the central role UK companies have a played in some of the biggest money laundering and corruption scandals of recent years, including the Panama Papers and the Russian and Azerbaijani Laundromats.
The UK’s record for holding those who break financial rules to account is also poor. FATF’s review reports that the majority of prosecutions for money-laundering are for low-end offences, with those convicted given softer sentences. High-end investigations - which is where the most problematic cases are found - account for less than 1% of UK Law Enforcement Authorities’ investigative work.
“These are good policies in principle. But they will only be as good as their implementation, and that means putting money and resources behind them. The UK should be recognised for making some promising first steps, but the job is far from done. By giving it a seal of approval at this stage, FATF risks turning a process that could bring historic change into a fig leaf for one of the world’s money-laundering hotspots,” said Lee.
The success of the new system is put at further risk by political uncertainty. As the UK nears its Brexit date, the UK must safeguard existing regulations and continue to collaborate closely with governments in the EU and beyond to tackle financial crime. Otherwise the potential gains from these new measures could all be lost.
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