AMLPolitically Exposed PersonsSanctions

The policy that came in from the cold

By March 28, 2018 May 28th, 2019 No Comments

The policy that came in from the cold – A UBO register for foreign buyers

As Russian diplomats across Europe get ready to leave their embassies, the repercussions of the poisoning of Sergei Skipal and his daughter in Salisbury are being felt across a range of policy areas. One area that has rightly received focus is economic crime policy, which last week was used to exude soft power and pressure on Russia. The UK Government announced that it will be taking plans to create a register of Ultimate Beneficial Owners (UBO) of foreign companies investing in high-end property off the shelf with the intention to bring in new legislation by the summer. This is nearly three years earlier than planned, after a similar clause failed to make it into the Sanctions & Anti-Money Laundering Bill earlier this year.

The politicians didn’t stop there, however. The UK’s Labour party released a statement urging the government to do more to stop the Russian money that flows through Scottish Limited Partnerships, which partially enabled the Global Laundromat scandal. The government could take the current political situation as an opportunity to refocus economic crime policy and decide what it needs to achieve in terms of both crime and diplomacy. By utilizing new tools, properly enforcing regulations and creating legislation there is a chance that something positive could come from this sinister affair.

Three’s a crowd – Terrorists, Transnational Crime & Rogue State Actors

Transnational organized crime is worth $784 billion a year. These highly sophisticated networks operate under the radar on a truly global scale and have a considerable destabilizing effect on global security. There have always been concerns about how these very-well resourced groups interact with terrorist organizations. Last week, the Senate committee on Financial Services met to discuss this, in a hearing titled “Exploring the financial nexus of terrorism, drugs traffickers and organized crime”. While a range of issues were discussed three were particularly unsettling.

Firstly, the nature of the threat is changing. No longer is the nexus purely between Transnational Criminal Organisations (TCOs) and terrorists groups, there is growing convergence with rogue state actors. The examples of Venezuela, Colombian cartels and Hezbollah were repeatedly used to illustrate this point, which also brought up the highly controversial “Project Cassandra”. Witnesses in the hearing also described how Russian mafia (and perhaps state) influences are also growing in Latin America, while their control of the Northern (drug trafficking) Route out of Afghanistan remains safely in their control. But perhaps the most unsettling was the argument made by witness, Derek Maltz that until cooperation between law enforcement and other government agencies improves, the success of America’s fight against drugs, crime and terror will continue to hang in the balance.

Long lease – GTOs extended for another 6 months

First launched in March 2016 for a trial period of six months, Geographic Targeting Orders (GTOs) have now been renewed three times, most recently last week. A GTO focuses on a specific US zip code like Miami-Dade or Manhattan where property is expensive and many of the buyers are foreign. They require insurance brokers to find out and report on who the ultimate beneficial owner (UBO) of the property is when it is bought in all cash by an individual or a company. Their overall aim is to shut off luxury real estate as an avenue to launder vast quantities of money.

The question is, have they been successful at doing this? The fact that they have now been renewed three times by FinCEN and extended to a wider set of areas would suggest that they have been. Last year, FinCEN released a report that showed 30% of buyers who were subject to a GTO had also been the subject of a SAR. Which although interesting, is hardly surprising given that someone buying property entirely in cash would also have historical transactions which appeared out of the ordinary. It may be too early to tell their level of success but if proven useful, the concept of GTOs could be a welcome tool for cities and countries around the world that are vulnerable to high-end money laundering through property.

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