The EU is eyeing up a new agency, Chinese entities are facing a significant number of sanctions from the US and the Cayman Islands is opening up the books on corporate ownership.

We share our financial crime highlights from the week of 7 October 2019.

Finance Ministers Support EU FinCrime Agency

It’s been a difficult year for Europe when it comes to money laundering. There have been numerous scandals and although reprisals from regulators seem to be bringing some banks to their knees, it’s doing little to stop the issue.

The EU is now considering creating a new dedicated financial crime agency to tackle dirty money or considerably strengthening existing agencies. The discussions come following the scandals and demonstrably weak national oversight of the issue by some member states.

New rules could result in being subject to greater control and having to comply with more regulations for financial services. But it could also affect intermediary services as well as have consequences for other industries, you can read our case study on Latvenergo for a detailed example.

A meeting of EU Finance Ministers saw support grow for a supranational agency that would take over supervisory capacity from member states and align financial crime goals.

Finnish Finance Minister, Mika Lintila, commented: “We need to be ready to discuss some forms of EU supervisory body. It should have an independent structure and decision-making”.

It’s a position that’s certain to face heavy opposition. Many nations are unlikely to support a supranational body that would see them lose power and have to share highly sensitive information.

However, the talks are ongoing and officials expect to see a new framework announced before the end of the year.

Sanctions Across China

The US government announced Monday it’s sanctioning 28 Chinese entities over their role in alleged human rights violations in northwest China.

This action places these entities on the Export Administration Regulations (EAR) Entity List, prohibiting US suppliers from selling to them without a special license—the same action the government took against Huawei in May.

Those sanctioned this time include the Xinjiang Public Security Bureau and its subordinates as well as eight tech companies working in the video surveillance and facial recognition space.

The Department of Commerce asserts that its decision, which takes effect this week, is unrelated to the country’s ongoing trade war with China. Instead, it was prompted because these entities “have been implicated in human rights violations and abuses in the implementation of China’s campaign of repression, mass arbitrary detention, and high-technology surveillance against Uighurs, Kazakhs, and other members of Muslim minority groups.”

Still, since the announcement comes just three days before trade talks with China are set to resume in Washington, it does nothing to assuage the escalating tensions between the two nations. And with China considering retaliation, it could complicate discussions.

Practically speaking, this move isn’t sure to have a lasting impact on commercial activity. But it shows commitment from the U.S. to make motions against behavior it deems to be worthy of sanction. And while companies can still do business with these entities, ensuring compliance with the licensing requirements of the Entity List is critical to moving forward under the current policy.

This announcement once again highlights the importance of knowing your suppliers and having in place compliance processes that enable a quick and nimble response to sanctions news.

Opening the Books

The Cayman Islands is finally committed to opening up its books to inspection. But unfortunately, that’s not happening any time soon.

The decision came, in part, after the British territory and established tax haven analyzed its capacity to facilitate money laundering in 2015. That analysis revealed “internal and external money laundering and terrorist financing threats” to the surprise of no-one.

Opening up its books will be significant in eliminating financial crime from the territory. Authorities in the territory have pledged to publish the identities of everyone who owns a company there. However, that won’t be achieved until 2023.

It’s difficult to judge how laudable the move is considering that it simply brings the British territory in line with the Sanctions and Anti-Money Laundering Act 2018. And that by 2023, the area is sure to have seen a significant exodus by those who have been using the territory for illicit means.

The news has been welcomed by some UK MPs who brought the legislation forward:

There have been numerous allegations of the Cayman Islands facilitating government corruption and money laundering of other nations over the years. The islands themselves became a byword for illicit money in multiple films.

But this new action of opening up the books is a significant step in tackling that image, something that the government of the Caymans wants to achieve “Financial secrecy is not tolerated in our jurisdiction,” the Cayman government said in a statement.

However, bad actors have four years to leave the islands and find a new, non-British overseas territory, tax haven. And there are quite a few of those.

Watch our interview with Moneyland author, Oliver Bullough, to find out the full extent of the issue.

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