The global anti-money-laundering system relies on the private sector to weed out dirty money. The study shows this “risk-based” regime to be broken
But to what end? The book’s authors are putting the finishing touches on a study that suggests little has changed. The banks and corporate-service providers —firms that set up companies for others—meant to be in the front line of the fight against financial crime do a terrible job of differentiating between legitimate would-be clients and those waving red flags.
The three academics behind the study—Jason Sharman of Cambridge University and Daniel Nielson and Michael Findley of the University of Texas at Austin—undertook what they call a “mystery shopping expedition”. They registered shell companies with varying risk profiles and then sent more than 30,000 emails to banks ands in every country of the world to set up bank accounts.
The global anti-money-laundering system that has evolved since the 1980s under the Financial Action Task Force , a multilateral agency, relies heavily on the private sector to weed out dirty money. Banks must follow “know your customer” rules and identify a would-be client’s real, or “beneficial”, owner.
This “risk-based” regime is broken, suggests the study. The authors found that the varying risk profiles made “almost no difference” to banks’ willingness to open an account;is being “pushed onto a private sector which can’t or won’t do it,” says Mr Sharman. “Banks are unable or unwilling to make the fine-grained risk judgments the system demands, because they use standardised, generic procedures.
Although the conclusion fits broadly with previous research by the authors, Mr Sharman says he was surprised by the level of risk-insensitivity, because “some of our approaches were ridiculously dodgy”. Other experts will also be taken aback: scholars surveyed by the authors before they went shell-shopping predicted that the study would show the system to be working much better than it was before the transparency reforms of the past five years.knows the system is far from perfect.
France Dernières Nouvelles, France Actualités
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