A Fair Cop

A simple guide to money laundering, confiscation and corruption

A great deal has been written about dirty money, the harms that it causes and the difficulty of addressing a global problem wreathed in secrecy; a lack of transparency that hides powerful interests. To try and understand what is going on, this article examines a piece originally published on the World Bank blog entitled “Hiding in plain sight: Ending the corrupt abuse of anonymous corporate structures is a development imperative”. Pleasingly, it is clearly written and well-constructed by the authors, Alexandra Habershon and Solvej Krause, but is otherwise commonplace; the analysis is not unusual, the identified problems are ones that fill today’s agendas in international conferences, campaigning articles and news reports.

The blog was part of a series of ten which unpacked the main report entitled “Enhancing Government effectiveness and transparency in the fight against corruption”, so the other blogs and the report itself were also examined, for completeness.

The blog tackles four issues which are set out in order below. The opening paragraph describes the key issue of the moment: Covid, and a global response that was riddled with corruption and dirty money. It summarises a key emerging issue of “beneficial ownership transparency”, yet also points out that the problem is not new, ten years previously, the World Bank had articulated the problem in its seminal work, “The Puppet Masters”. This report had highlighted that “nearly all cases of grand corruption … rely on corporate vehicles … to conceal ownership and control of tainted assets”.

The blog explains who is the blame: “individuals” who set up companies and “professional service providers” and “third-party gatekeepers”. It explains that a huge investment in compliance has “not achieved observable reductions in corruption, financial crime, or money laundering”. The scale of the human misery is then set out and a primary cause is identified: “a lack of transparency of beneficial owners of corporate structures”.

The traditional solutions are then proffered. The World Bank is committed to the solving problem within an $82 billion financial package called IDA19. The Bank offers support to governments to access beneficial ownership. The automatic exchange of tax information is promoted. The blog then concludes that the “pandemic has only reinforced the global consensus around the need for greater beneficial ownership transparency”.

In fact, hiding in plain sight, is the established narrative of solutions, which the blog serves to reinforce. Other factors are mentioned but seemingly obvious solutions are never explored. It is as if these other factors are forces of nature that cannot be tamed.

First among these potential solutions is the fact that “companies, foundations and trusts” are legal structures. The laws that allow them to exist are all controlled by governments. Any lack of transparency is created by those governments. The listing, or lack of listing, is all within the gift of governments. Against this background the World Bank’s promise of “providing support to governments to access beneficial ownership” seems, at best, insufficient. Surely all corporate vehicles permitted by governments to exist should have government verification of their information? This is a basic element of competent administration, to know if something on a government list is true. The World bank identified –  ten years before the blog – that these details were vital to the global struggle against corruption, financial crime and money laundering, so the omission of verification on registration looks absurd. Rather than providing support to some governments to chase elusive beneficial ownership allowed by other governments, surely the Bank should be promoting competent administration of company creation by all governments. This is a clear and cheap way to sort out this obvious problem.

Secondly, the human misery identified in the blog: “corruption, fraud, tax evasion, and illegal exploitation of natural resources” is clearly criminal activity. If we agree with this logic, the people behind the legal structures, the “individuals, professional service providers and third-party gatekeepers” are surely criminals. Yet there is no mention at all of the resources normally used to control criminality. There is no mention of support for arrests, prosecutions and confiscation. This omission of the most obvious way to control criminality feels wrong. Instead, the huge investment in compliance, identified as failing to achieve anything “observable”, is simply a repetition of a failing narrative.

Thirdly, the blog correctly describes the impact of this lack of transparency as devastating and notes that, “developing countries tend to pay the heaviest price because of lost public funds”. In the face of this wholesale tax evasion, the World Bank surprisingly, does not call for a diversion of resources towards investment in tax inspectors and enforcers. Instead help is going to be provided to “exchange information to reduce tax evasion”. Is that really it?

Finally, there is a mystery that is glossed over. Apparently, there are jurisdictions which are “safe havens” for “illicit wealth for investment, safekeeping or spending”. The havens are not listed but described as those that offer the “greatest degree of secrecy”. On first reading the term “havens” suggests tropical islands that are also financial centres. This may be what the authors intended. However, a glance at any tropical island compared to London and New York, tells you that whilst there may be some temporary safekeeping in such havens, the investment and spending is taking place in the global north, particularly in rich urban centres. The focus of the global effort is often directed at secrecy jurisdictions based on small islands, but perhaps the global north should examine the mirror to see where these secrecy jurisdictions really are.

Our corporate structures are registered without verification of ownership. This is just a type of secrecy. Those same corporate structures invest in real estate and their owners spend millions on lavish living and exclusive education for their children. Could it be that the dirty money is not actually in “safe havens” but being invested and spent in plain sight, is it just pretending to be in “safe havens”?

The blog does not mention another aspect of investment and spending in the global north. The public purse spends vast sums on corporates that deliver government-funded services, like utilities, health and welfare. Millions of people are housed at the public expense in real estate owned by corporate bodies. The failure of governments to verify corporate information means that there is a substantial hole in the public procurement regime. There are controls of how public money is spent (supposedly) but nothing to ensure who the offshore recipients really are. This means that the controllers of the public purse are handing it over without knowing to whom. They cannot know because there is no verification process.

The blog confirms the global narrative, diverting us towards the rabbit-hole of beneficial ownership, the expense of money laundering compliance and the futility of tilting at offshore havens. This directs our attention away from solutions within the direct control of national governments: the competent registration of corporate structures; the enforcement of criminal laws; the collection of taxes and the easiest of all, the control of money going in and out of the public purse to make sure that it is clean.

In our recent book Nicholas Gilmour and Tristram Hicks explore these solutions and put them in the context of a War on Dirty Money

In 2011, the World Bank called out the ‘Puppet Masters’ and condemned them. Sadly, on this analysis of the current World Bank narrative, they are still pulling the strings.

A recent RUSI commentary by Helena Wood invited the Financial Action Task Force to promote innovation via its forthcoming Review of Asset Recovery. The article attracted positive comments on LinkedIn including an observation from Richard Gould (a former FATF Evaluator) that “The potential to use the methodology in the way recommended by Helena is, in my opinion, already there. The FATF plenary just needs to open its eyes to what can be done”.

I agree with both Helena and Richard and would like to draw the attention of the FATF to a specific example of how one important global region approached the issue about a decade ago. Between 2009 and 2012 in Europe the Council of the European Union’s Review of Financial Crime and Financial Investigations used a mutual evaluation model that recognised and promoted innovation and good practice. We explore this in Chapter 13 of ‘The War on Dirty Money’, but a summary is given below.

I took part in two of these evaluations of Financial Crime and Financial Investigation, which of course included the topic of Asset Recovery. I was part of the visiting EU delegation to Hungary and later received the EU delegation that visited the United Kingdom. The EU evaluation process was very similar to the FATF Mutual Evaluation Report (MER) process: a pre-visit questionnaire, a visiting delegation of nine experts, a draft Report followed by an agreed Final Report and a formal presentation (in Brussels). The reports are still publicly available for review and, in my opinion, given that policy change in this area can be very slow, it is quite likely that some of the recommendations are still relevant today.

The resulting Reports were very detailed, focusing on the operational effectiveness of law enforcement and criminal justice agencies and how they achieved their results. Not dissimilar to the part of the FATF MERs that look at ‘Operational Effectiveness’ but more in depth, reflecting the focus of the reviews and the fact that, with similar resources, the delegations were not distracted by looking at Technical Compliance to regulations.

In one important respect the Council of the EU Reports differed from the FATF MERs. It is this aspect which could be specifically examined by the FATF and its Regional FATF-Style Bodies to see if some or all of it could be introduced in the FATF process

At the end of the reports were two sections: “Recommendations to [name of Member State]” and “Recommendations to the European Union, its Member States, institutions and agencies”. This was the culmination of the Report. It was a very specific way to promote innovation and improvement in both directions. This way of concluding an evaluation was respectful to the Evaluated Member State and a way to celebrate the work involved. A common reaction of participating agencies to the publication of an Evaluation Report is to breathe a collective sigh of relief and go back to work. However, under the European Union methodology there was an opportunity, in Plenary Session with their peers, for a Member State’s officials to showcase their excellence in legislation, procedure or operational effectiveness. In summary, this was a positive, respectful and useful way to conclude the process. For example, the Report on the United Kingdom included a Recommendation to other Member States that: “UK legal measures, which have proved to be highly effective, such as civil recovery, cash forfeiture and POCA investigatory powers need to be thoroughly explained and discussed at EU level.” The Report went on to promote: “The role and powers of financial investigators as well as their training system need to be presented at EU level and taken into account when common EU standards or training projects are being developed. Measures to mainstream financial investigations, including incentive schemes and the “Payback” campaign, need to be presented as an option and discussed at EU level.”

The EU Reports gave specific insight to practitioners and policy-makers on international cooperation, highlighting the best elements of success. The process was engaging and rewarding, because it culminated in something tangible that contributed to international cooperation in a specific, meaningful and practical way. It served as a way to focus minds.

Richard Gould suggests that the current FATF process already has the potential to do this and I agree. This modest proposal aims to realise that potential by making the search for innovation explicit and formal. This formality would provide a way to present and promulgate innovation in a way that can be tested in other countries and revisited as necessary. It is particularly relevant to international cooperation, where innovation only works if everyone is on the same page.

This adjustment to the FATF MER process could be made at negligible expense and, over time, would enhance the practice of asset recovery around the globe.

A wise Professor asked me why I thought there were so few criminal cases of corruption in the UK. My first thought was that, “It’s because there is no Corruption Squad”. I looked into it some more and discovered that it was not quite as simple as that. I had to rope in some experts to cover things of which I was not quite sure. I am very grateful to Gary Walters, a specialist corruption investigator, Richard Gould former head of investigations at the UK Serious Fraud Office and Professor of Criminology at Manchester University, Nick Lord. I had thought it would be a quick blog, based on my own years of experience, but this article took ages to write.

I had already done a couple of blogs for the University of Sussex Centre for the Study of Corruption. These were discussing the Law Commission’s review of the UK’s excellent confiscation regime. The first, published in December discussed bribery and asset recovery, the second looked at the alleged backlog of unpaid confiscation orders, suggesting that they are an accounting artefact that should be written off. Then the Professor asked me the question about corruption.

This piece on corruption looks at how corruption is viewed by Britain’s investigative agencies. In my view the system is rigged against corruption being investigated or prosecuted. The Sussex Centre for the Study of Corruption said my argument was too long for a blog and I am delighted that they promoted it to “Working Paper”. Here it is, I hope that you like it.

A major bank’s CEO is facing public prosecution in relation to money laundering. There are lessons for civil society, public prosecutors and AML professionals; will they be learned?

GAB | The Global Anticorruption Blog

GAB is pleased to publish this analysis by Emile J. M. Van Der Does De Willebois, Coordinator of the World Bank/UNODC Stolen Asset Recovery Initiative, of the significance of a decision of the Gerechtshof Den Haag, the Dutch appeals court in The Hague. As he explains, for too long authorities in the developed world have ignored the role lawyers, bankers, and other “enablers” play in facilitating corruption in the developing world.  Let us hope that the court’s decision marks a turning point in holding them accountable for their role in corruption crimes.  

Last month, a Dutch appeals court ordered the public prosecutor to initiate the criminal prosecution of the former CEO of the nation’s largest bank. The court directed that Ralph Hamers be put on trial for money laundering and other crimes the Amsterdam-based banking giant ING committed during his sevenyear tenure as its chief executive…

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The confiscation of criminal proceeds is a key global weapon against corruption, intended to ‘take the profit’ out of the crime – with the aim of returning that money to the public and, hopefully, deterring future corruption. The UK confiscation regime has been criticised, but in this blog post I show that the criticism is misplaced and in fact the UK sets a global example of how to use this tool in the fight against corruption and other crime.

In December 2020, the Law Commission of England & Wales finished a consultation on the post-conviction confiscation regime. They described this as a “once in a generation”, “root and branch” review. The project started in November 2018, the consultation had over a hundred questions, arising from a report of over 700 pages. It is a detailed and thorough piece of work.

The background to their review is the ground-breaking Proceeds of Crime Act, 2002, which transformed the ability of the UK justice system to confiscate the proceeds of crime. By any sensible measure POCA has been a world-beating success. The average annual revenue reaped by virtue of the Act increased more than eight times, from £15m to £130m per year, in the two decades before and after 2002. It was a transformational change:

Total value of receipts in England & Wales and Northern Ireland

Average in the 10 years pre-POCA 1992-2002:                      £15m   p.a.

Average in the 10 years post-POCA 2003-2012:                    £130m p.a.

Average in the 5 years 2013-2017:                                        £206m p.a.

(Source: FOIA response from the Home Office)

In addition, the number of people who have been deprived of criminal assets under the Act was transformed from a few hundred each year to an annual average of somewhere between 5,000 and 10,000 (the Home Office does not publish this information regularly, so this is my estimate, based on ten years’ service on the UK Criminal Justice Board).

In 2018, just as the Law Commission started its project, the Financial Action Task Force, the global standard setter for Anti-Money Laundering, reviewed the United Kingdom. It conferred on the UK the highest aggregate grading for any jurisdiction at the time. For the specific immediate outcome of “Confiscation” the UK was evaluated at a “Substantial level of operational effectiveness”, meaning that the “Immediate Outcome is achieved to a large extent.” Only 20% of jurisdictions achieve this level of success (out of just over 100 evaluated).

It is surprising, then, that the Law Commission found that the confiscation regime was perceived as ineffective. It explained that “The perception that the confiscation regime was ineffective took hold from various media reports and the NAO report of 2013 which drew attention to the high value of unpaid orders”. Yet the conclusions of the NAO Report contrasted starkly with the record of ten consecutive record-breaking years of asset recovery since POCA was first enacted. The NAO concluded that “that the process was not working well enough and did not provide value for money”, whilst simultaneously finding that the regime generated £133m, comfortably exceeding the £100m cost of administering the regime (in 2012/2013). In other words, unlike any other aspect of the criminal justice system, it not only generated a substantial amount of money but actually turned a tidy profit.

The key focus of criticism has been the supposedly high value of unpaid orders. This was first reported in the press around 2005 and has been almost the exclusive focus of media reports on the confiscation regime every year since. But the reality is that almost all these unpaid orders are uncollectable, they are an artefact of the system. . The fact that almost all the amounts were in fact uncollectable is not disputed. This was confirmed by the National Audit Office itself in 2013 and by the latest Law Commission Review. The NAO found that 81% was uncollectable[1] in 2013; by 2018/2019 the Law Commission found that this had increased to 92%. A significant part of the uncollected amount is the value of “hidden assets”. Hidden assets are typically criminal assets abroad that have been found by British financial investigators. Their recovery is not possible because the equivalent confiscation regimes do not exist in the relevant jurisdictions which host the assets. Some success over the years has been achieved by British technical assistance to these regimes, but this could be more strategically directed to the direct benefit of the UK and the international effort against corruption and crime.

The nature of the uncollected backlog is fully explained in an excellent paper by Helena Wood of the Royal United Services Institute, who concludes: “In sum, to judge the success of the system on the uncollected total is to misrepresent the results”


It quotes the NAO report at some length, making clear that its headlines have contributed to the adverse perception of the UK confiscation regime. The Commission states that the NAO Report “has influenced strongly the continuing debate about POCA’s effectiveness to the present day” and further find that it “included eye-catching data which appeared to demonstrate that the regime was not working” – strong words when set against a convention that UK government bodies do not criticise one another.

The NAO Report directly triggered a Public Accounts Committee review of the regime and a concurrent Home Office Committee review of the same topic. The current Law Commission review is itself driven by the perception of failure created by the NAO.

The Law Commission consultation has finally found a solution that had escaped the NAO, the Public Accounts Committee and the Home Affairs Committee. They are to be commended for proposing, in Question 77:

“We provisionally propose that the court should be able to direct that enforcement be placed in abeyance where it is satisfied that an order cannot be enforced.”

In other words, the simplest solution would be to administratively write off these uncollectable amounts, to avoid misleading the public and undermining public confidence in the system.

If this simple solution is adopted, the undeserved and misleading publicity surrounding the UK’s confiscation regime might finally be laid to rest. The UK has an excellent system which is rightly applauded by the FATF and emulated by experts all over the world. It is high time it was recognised at home and actively promoted abroad.

[1] In 2012/13 the uncollected amount was £311m of £1.61bn, in 2018/19 it was £161m out of £2bn according to the relevant HMCTS Trust Statements.

The Law Commission is taking a “once in a generation” opportunity to turn a good law bad. The review consultation closes on 18 December 2020, so there is still time to stop them. The paper has 104 questions, by Question Five, I was wondering how Britain had gone from the vaulting ambition of the new millennium to the stunted legal treacle of 2020. What on earth has happened?

The Law Commission has already consulted experts, they even mention me, in Appendix 3 (on page 677, if you were wondering) and if sheer size is a measure of anything, they have been busy. However, I want to begin at the very beginning, such a very good place to start. Questions 1 to 5 address the crucial question of objectives. The ‘why are we here?’ question that should be on every working-from-home screen-saver. If we assess objectives wrongly then it is a double waste of time and money. First, we set off doing something wrong and then we have to turn back and start all over again. That’s why it’s important to have your say. The Commission themselves say that this is a “once in a generation” review. Have look at their proposal for objectives and see what you think. Does it sound reasonable to you? Read and contemplate their question, have a long cup of coffee and mull it over. Here is their summary of questions 1 to 5:

“Do consultees agree: 

That there ought to be a statement of the statutory objectives of the confiscation regime set out clearly in law? 

That the statutory objectives ought to be:

a) A primary objective of depriving a defendant of his or her benefit from criminal conduct, within the limits of his or her means; 

b) Secondary objectives of:

i. deterring and disrupting criminality; and 

ii. compensating victims (where such compensation is to be paid from confiscated funds)?”

I mean, there is nothing to dislike about this on a first reading, so why did it jar with me?

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The global anti-money laundering regime is in crisis, not from lack of resources but from lack of understanding. We need to get back to basics, right back to Eve, the first woman (in the Christian tradition) and the first thief and money launderer. Eve was the one who took the Fruit of the Forbidden Tree and gave it to Adam. When she took the fruit, she committed the crime of money laundering, as this article will explain.

Prevention versus enforcement

Preventing money entering the global financial system is obviously not working as numerous recent scandals and massive regulatory fines have repeatedly shown. Unless the authorities confiscate money from launderers, thereby altering their behaviour, the AML regime will never really work. One of the key reasons that authorities fail to confiscate the proceeds of crime both domestically and internationally is because they don’t recognise that Eve was the first money launderer. If the authorities could accept this as true, we might manage to make the European Union’s 5th Anti Money Laundering Directive will work AND reduce crime around the world, as this article will also explain.

The Financial Action Task Force Strategic Review

Every year hundreds of thousands of people in the worldwide financial sector generate information about money they suspect to be the proceeds of crime, they do this so that law enforcement can identify and recover it. Every year they assume that courts confiscate at least some of the money. The courts could do this, in most countries, but they don’t.

The World Economic Forum noted that fraud and financial crime was a trillion-dollar industry, reporting that private companies spent approximately $8.2 billion on anti–money laundering (AML) controls alone in 2017. Source.

This year the Financial Action Task Force, the global guardian of the AML regime, is undertaking a strategic review. The time is right to take a look at the endgame of the AML regime, the confiscation of the proceeds of crime. Critics say that not enough is confiscated from criminals compared to the amount of suspect money in circulation. This article says the problem is far worse than that, the regime has no clear idea of what confiscation even is. Subsequent articles will examine why confiscation is perceived to be difficult, how these difficulties have been overcome and how to measure its impact on crime.

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A decade of funding cuts and now the need to police a public health emergency means an ever-increasing need to do more with less. In the mid-nineties the gap between resources and demand led to innovative solutions like computerisation and intelligence-led policing. We need to innovate again. One way to focus stretched resources would be to focus them on the people causing the most harm in society, the ‘real’ criminals. Unfortunately, despite seemingly endless discussion, we have never been able to settle on a working definition that the public understands and yet is operationally and legally robust. A definition which would allow us to really focus our resources on criminals and assess the results.

Strangely the UK did come up with a brilliant, legally robust definition, that fits what an ordinary member of the public would think of as ‘being a criminal’, but it was overlooked. It had been wrongly named and therefore misunderstood. It’s time to look again at Section 75 of the Proceeds of Crime Act and understand what it means to ‘be a criminal’.

One of the main hurdles to fighting crime in the UK is that we have not agreed who are the real criminals. One person’s criminal is another person’s climate warrior. A persistent parking nuisance might well be a criminal if they keep blocking your drive. Even dabbling your finger in some water may be a crime, it depends where you do it.

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