What the Panama leaks mean for AML professionals

by: Pekka Dare (Director ICT Academic Faculty) on 


The media storm that has broken over the last few days in respect of the abuse of corporate structures and offshore tax havens has rightly increased the pressure on governments to finally tackle the issue with meaningful action.

But what do the Panama leaks mean for the anti money laundering (AML) industry and the professionals who work in it?

In the ICA programmes that I and my team deliver, we major on the challenges of identifying true ultimate beneficial owners (UBOs). For the last few years I have spoken at length about the work of International Consortium of Investigative Journalists (ICIJ) and the moves to increase transparency regarding legal persons and arrangements. 

Understanding who really pulls the string of a legal person or legal arrangement (such as a trust) can be extremely difficult, particularly if professionals from a law firm (I am looking at you, Mossack Fonseca!) or corporate service provider (CSP) are acting as nominee directors or shareholders. In the climate of rising standards expected by regulators in relation to KYC/CDD (particularly with higher risk customers and complex relationships), merely obtaining a signed declaration from a lawyer or from a firm itself as to the ownership structure is unlikely to suffice.

AML professionals need to be able to understand the practical approach to determining true ownership and control structures. While the new 4th EU Money Laundering Directive provides more detail as to the factors that could indicate significant control (such as the ability to appoint key officers of a company, or that shares are owned by immediate family members), the actual practical steps to satisfying the KYC requirements in the current regulatory climate are challenging indeed. Some of the questions we consider in workshops include:

  • What weighting do I give to share ownership?
  • What media searches should I undertake and how do I validate them?
  • How do I deal with unwrapping of complex structures?
  • How I understand different ownership structures, e.g. funds, private companies and free floats?
  • How do I undertake a risk assessment to correctly categorise the risk of a business relationship?
  • How do I evidence all of the above?

The new registers of beneficial ownership rolling out across the G20 (slowly) are arguably at least a gesture towards tackling the issue. However, with no apparent verification of the information submitted by corporate entities, the actual reduction in the amount of criminal abuse of corporate structures is likely to be limited. So the onus will remain on regulated firms and those working in AML roles.

Now is the time that AML professionals must demonstrate that they are driving up standards and that we are capable of achieving consistently high standards as a bona fide profession. It’s also time for industry bodies, regulators and firms to support formal qualifications in AML and particularly KYC/CDD.

So the Panama leaks have posed this question to AML professionals: ‘Are we up to the job?’

To answer this, the industry needs to ensure it has the right skill and qualifications. Let’s hope regulators and policymakers around the world recognise this need and provide tangible support and incentives for AML professionals to obtain the right skills in an increasingly demanding field.



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