The European Bank for Reconstruction & Development (EBRD) marked International Anti-Corruption Day by hosting a discussion with Charmian Gooch, co-founder of Global Witness, on ‘Banking Corrupt Money: How anonymous companies are used to loot State coffers’.

Charmian Gooch set out the background to the setting up of Global and explained that the motivation to take up the cudgels for her and the two co-founders, Patrick Alley and Simon Taylor, was the illegal, but audacious, timber trade on the Thai-Cambodia border that provided the financial fuel for the Khmer Rouge, which the international community appeared to be watching in relative silence. The three of them felt something had to be done to wake the world and force it to act! With that conviction firmly in their minds, they went and secretly filmed what was actually happening on the ground. It is to their credit that they moved with a real purpose, despite all the attendant risks to their life and security. The results were then laid bare and governments were finally forced to act, albeit a small measure! Thus, Global Witness was born and has subsequently marshalled its efforts on a number of fronts, not least in highlighting and taking to task the corrupt who ruthlessly exploit natural resources in those very locations (such as DRC) that can least afford it.

For more than 20 years, a common theme for Charmian and her colleagues has been the use and abuse of the legitimate financial system to move ‘dirty money’ through a number of channels, especially banks, lawyers and corporate vehicles (of which over 70% are anonymous companies, worth some US$56billion).

It is the use of anonymous companies that has been the subject of much recent debate, particularly following the making public of the so-called Panama Papers. This also proved to be the subject of much focus at the UK Anti-Corruption Summit in May this year, where dismantling of corporate secrecy was seen as a key action to enhance transparency, curtail the movement of dirty money, curb corruption and prevent financial abuse by politically exposed persons (PEPs). That the UK is the first member of the G20 to introduce a central public registry of company beneficial ownership, undoubtedly owes much to the efforts of Global Witness. It is now to be hoped that the UK’s G7 and G20 partners decide to follow suit.

Of course, the set up and use of anonymous companies relies on the help, assistance and advice of professionals, particularly accountants and lawyers. With that in mind, Global Witness employed its tried and tested covert filming methods to expose the role of the legal profession in setting up such structures. Charmain showed excerpts of the results of the filming, exposing the willingness of some lawyers to assist in establishing anonymous corporate vehicles, even in the face of obvious red flags. It made troubled viewing, but, on a more positive note, it appears that the release of the footage at least prompted the US to take some legislative action.

The work of Global Witness is a reminder that investigations concerning corporates are generally complex, time consuming, and expensive; luxuries that are not readily available to many law enforcement agencies across the globe, least of all in those countries that suffer most from state looting. Many agencies are looking at new ways of joint and co-ordinated working, particularly through the setting up of joint investigation teams (JITs) or, for instance, via membership of the International Foreign Bribery Taskforce (IFBT), which has representatives from the Australian Federal Police, the Federal Bureau of Investigation, the Royal Canadian Mounted Police and the City of London Police’s Overseas Anti-Corruption Unit. Equally, intelligence sharing, including spontaneous exchange, is an ongoing international imperative, with financial intelligence units (FIUs) creating gateways to share intelligence. However, all such efforts are subject to complex national laws, competing jurisdictional claims and the willingness of those involved to share the information/intelligence. The creation of joint teams, such as the IFBT, is a move in the right direction.

For her part, Charmian made the following pragmatic recommendations on possible ways forward:

  1. The creation of public registries across the globe, requiring the disclosure of all beneficial owners. But for this to succeed, she emphasised that there must be a genuine ‘global buy-in’. Although, not an end itself, it would be a major step in the right direction and would help to close another loophole for criminal and corrupt officials.
  2. Further efforts in accordance with The Extractive Industries Transparency Initiative (EITI). EITI requires all its member states to have in place provisions relating to the disclosure of beneficial ownership, and for those states applying for candidature after 1 January 2017, there must be provision of a roadmap for the disclosure of beneficial ownership information. EITI’s Rules are comprehensive and fit for purpose; their implementation, though, is key.
  3. Further building on the work to date of ‘Publish what you pay’, the global membership-based coalition of civil society organisations in more than forty states that calls for an open and accountable extractive sector.

Charmian concluded her keynote address by inviting the EBRD to consider, in conjunction with other international financial institutions (IFI), how states might be further encouraged to commit to a public registry. She emphasised that such a move is not anti-business, but rather anti-secrecy, and that the current acceptance of, and complacency towards, opaque corporate frameworks and behaviour must change. As she emphasised, the digital era has tilted the landscape even further towards transparency and this must be embraced!

Other useful links:

The Global Witness Video can be accessed on their website

EITI Standard 2016: https://eiti.org/node/4922

 

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