Project BOWNET - Identifying the beneficial owner of legal entities in the fight against money laundering Presentation of the final results

Transcription

1 Project BOWNET - Identifying the beneficial owner of legal entities in the fight against money laundering Presentation of the final results With financial support from the Prevention of and Fight against Crime Programme of the European Union European Commission DG Home Affairs BOWNET - Identifying the Beneficial Owner of legal entities in the fight against money laundering

2 The issue of Beneficial Ownership (BO) has become crucial in the international and EU AML framework: UNCAC 2003 FATF 40 Recommendations Third EU AML Directive EU initiatives (e.g. Confiscation Dir., Interconnection BRs, CBAR, etc) OECD (Behind corporate veil Report 2001) World Bank/UNODC (Puppet Masters Report 2011) WEF Global agenda on Organised Crime 2012 Private field (e.g. Wolfsberg Group guidelines)

3 This issue of the ownership structure (OS) of legal entities is relevant also for other initiatives in the economic and financial field: Directive on the Interconnection of Business Registers Eurostat Project - Euro Groups Register (EGR) ( European Business Register EBR ( European Commerce Registers Forum ECRF ( EU Project BRITE EU Project SPOCS ( Project BRACCO (braccoproject.infocamere.it) Previous studies on nationality of registered groups (e.g. ISTAT study: in 2010 in Italy 11,8% of groups controlled by foreign entities)

4 Project BOWNET Duration: 20 months (March 2011 November 2012) 6 EU Partners: - Transcrime / Università Cattolica Sacro Cuore Milan Coordinator - EBR European Business Register - Direction V (anti Financial crime), Italian Ministry of Economy and Finance - FIU Denmark - State Prosecutor for serious Economic Crime - UniCredit S.p.A. - PricewaterhouseCoopers S.p.A. 3

5 BOWNET Research questions BOWNET Research questions can be grouped in 3 blocks. Each block stems from the previous one and corresponds to a specific range of activities. 1 What information is used to identify BOs? What are the problems in BO identification? 1. Survey on EU FIU, LEA, ARO practices in BO investigations 2. Survey on EU intermediaries practices in BO identification 3. Analysis of AML software 2 Where is this information stored? Who is providing it? What are the gaps in the dissemination of this information? 4. Survey on data provided by EU Business Registers 5. Desk Analysis of EU Business information providers 3 How to address the existing gaps? How to improve the access to information and the identification of BOs? 6. Range of proposals for new support systems to be used in the identification of BOs 7. Policy implications 4

6 Block 1 What information is used to identify BOs? What are the problems in BO identification? 1. Survey on EU LEAs, FIUs, AROs 2. Survey on EU financial intermediaries and professionals 3. Analysis of AML software 5

7 1. Survey on EU FIUs, LEAs, AROs Aims at understanding: Data used by EU FIUs, LEAs, AROs in investigations about the BO and the OS of suspicious corporate entities (especially in crossborder cases) Current practices in collecting and processing this data Problems and needs in terms of data, datasets, tools which could improve BO and OS investigations Methodology: Questionnaires disseminated via ARO platform, FIU platform, Egmont group, Europol 45 respondents (56.2% response rate) Interviews with selected stakeholders Contributions provided by Project BOWNET partners 6

8 2. Survey on EU financial intermediaries and professionals Aims at understanding: Information used by EU financial intermediaries and professionals (often referred as covered entities) in CDD activities involving BO identification of their customers Current practices in collecting and processing this data Problems and needs in terms of data, datasets, tools which could improve BO and OS investigations Methodology: Questionnaires disseminated to EU Banks, Banking associations, Professionals and industry representatives 21 respondents (52.5% response rate) Interviews with selected stakeholders Contributions provided by Project BOWNET partners (Unicredit and PWC) 7

9 Information used to identify BOs Data on companies shareholdings List of companies board members and managers Police and judiciary records Tax agency records Internet/blogs News/press SDN, PEP and other watch-lists Social networks Intermediaries (N=21) Attribution of the score: 100 = all the respondents assign to the element the highest possible value FIUs, LEAs, AROs (N=45) Data on shareholdings and board memberships are the most used in OS and BO investigations by both EU LEAs, FIUs, AROs and intermediaries Intermediaries make a wide use of SDN, PEP and other watchlists too 8

10 Data sources used in BO identification National legal entities FIUs, LEAs, AROs Foreign legal entities National Business Registers national LEA/FIU and police agencies archives Tax agencies archives Financial institutions/ intermediaries archives Companies websites Private databases (e.g.: Dun&Bradstreet, BvD, etc.) News/press archives Foreign Business Registers Foreign LEA/FIU and police agencies archives Companies websites Financial institutions/ intermediaries archives Private databases (e.g.: Dun&Bradstreet, BvD, etc.) News/press archives Foreign tax agencies archives N= Business registers remain the most accessed source, especially in national investigations In cross-border investigations, business registers and foreign LEA/FIU databases equally relevant Lack of use of commercial (private) business information providers 9 N=45

11 Collection of information from foreign BRs FIUs, LEAs, AROs Through formal claim made by the relevant foreign LEA/FIU/Police agency Web access Through informal request made by the relevant foreign LEA/FIU/Police agency Through formal claim N= Collection through relevant foreign FIU/LEA is generally preferred to direct web access This is often due to costs, language problems, problems in identifying and accessing the BR, type of payment (credit card) but also because of the added value guaranteed by foreign FIU cooperation) 10

12 Data sources used in BO identification Intermediaries National Business Registers National legal entities Documents provided by customers Foreign legal entities Documents provided by customers Foreign Business Registers Companies websites Companies websites Private databases (e.g. Dun&Bradstreet, BvD, etc.) Private databases (e.g.: Dun&Bradstreet, BvD, etc.) News/press archives News/press archives Documentation from other bank divisions and branches financial institutions/ intermediaries archives National LEA/FIU and police agencies archives Foreign tax agencies archives Tax agencies archives N=21 Foreign LEA/FIU and police agencies archives N= Role of business registers still relevant, especially in national cases Documents provided by the clients represent another relevant source of information, especially for foreign legal entities consistent with Deloitte study 11

13 Documents required by intermediaries for verifying BO and OS of their customers Intermediaries List of shareholders with relevant shareholding Memorandum or articles of incorporations ID information List of members of Board of Directors Trust instruments Partnership agreements Business licenses List of senior managing officials N= Intermediaries verify the BO of their customers through requiring various documents, first of all the list of shareholders with relevant shareholdings 12

14 Use of software for collecting and analyzing data on shareholders and directors for BO identification purposes FIUs, LEAs, AROs Intermediaries Yes 53.3% No 46.7% No 65.2% Yes 34.8% N=45 N=21 Just half of the FIUs, LEAs and AROs (53.3%) use software when collecting and analysing data on the OS of suspicious corporate entities. Interestingly, the percentage among Intermediaries is even lower (34.8%). 13

15 Main problems in data collection FIUs, LEAs, AROs Getting authorizations Getting to access foreign BRs High costs to access information/data Receiving information/data in timely manner Quality of the information Different formats of the information extracted Identifying the relevant data source Sharing information with other police forces Different languages of the information extracted Integrating information from different sources High costs in training people to use new SW N= Access to foreign BR seems to be the major concern to FIUs, LEAs, AROs due to authorisation problems: i.e. difficulties in obtaining the required information 14

16 Main problems in data collection Intermediaries Identifying the relevant data source Receiving information/data in timely manner Identifying the relevant foreign BRs Quality of the information ( e.g. incomplete, outdated) Checking the truthfulness of documents provided by customers High costs to access information of thebrs Sharing information with other bank divisions Different languages of the information Integrating information from different sources Lack of cooperation with LEAs Different formats of the information High costs in training people to use new SW N= Main concerns: identification of the data source (and the foreign BRs), timeliness and quality of the information 15

17 Improvements in data and databases Data on foreign companies shareholdings Improve the availability of Foreign Business Registers FIUs, LEAs, AROs Improve the access to Tax agencies records Foreign police and judiciary records Tax agency records Data on national companies shareholdings Foreign LEA/FIU and police agencies archives Financial institutions/ intermediaries archives Private databases (e.g.: Dun&Bradstreet, BvD, National Business Registers News/press archives N=45 N= LEAs and FIUs ask for better access to data on foreign companies shareholdings and to foreign BRs 16

18 Improvements in data and databases Improve the availability of Improve the access to Intermediaries Data on foreign companies shareholdings Data on national companies shareholdings Foreign police and judiciary records National police and judiciary records Tax agency records Social networks Foreign Business Registers National Business Registers Foreign LEA/FIU and police agencies archives financial institutions/ intermediaries archives National LEA/FIU and police agencies archives bank divisions/branches archives Tax agencies records Private databases (e.g.: Dun&Bradstreet, BvD, etc.) News/press archives N=21 N= As FIUs and LEAs, improvements should be made to improve the access to BRs and to data on companies shareholdings 17

19 Should a new support system be developed. which services should it provide? Collecting information/data from business registers Reconstructing the OS and identifying thebo of the selected corporate entity Integrating information/data extracted from different sources Identifying the connections among shareholders, board members, PEPs, etc. Harmonizing different formats of data/information Visualizing connections and OS of selected corporate entities Social network analysis Intermediaries (N=21) FIUs, LEAs, AROs (N=45) Both EU FIUs, LEAs and intermediaries ask for new support tools able to collect information and data from business registers 18

20 3. Analysis of AML software Aims at understanding: Type of software used in AML activities and in particular for BO identification purposes Type of service provided by the software Type of data processed Methodology: Desk analysis of 35 AML software on the market Used both by EU FIUs, LEAs, AROs and private users Whenever possible, trial of the software Interviews with selected users and software houses 19

21 Data processed by existing AML software Customer ID Data provided by the users* Transaction data (e.g. value, currency, etc) PEPs Blocked persons Blocked companies ML high-risk country rankings SWIFT payment Alert history* Sanctions (FinCEN, e-ctfsl) Company data (e.g. balance sheets,etc.) Shareholding and BO data N=35 0% 20% 40% 60% 80% 100% The most frequent data processed are customer ID data and other information provided by the users. Only 9% of the AML software is developed for using also data on shareholding, BO and OS 20

22 Type of service provided Customer identification Watch-list filtering (e.g. SDN, PEP, etc) Attribution of risk score Alert generation, examination and Link analysis and SNA Transaction monitoring Visual presentation* Collection of data from business registers N=35 0% 20% 40% 60% 80% 100% Customer identification (i.e. customers identity cross check with other sources of information) is most provided service Almost none of the AML software analysed is able to collect and process data directly from business registers and other similar data sources 21

23 Block 1 - Findings Data and Datasources used Data on shareholders are the most used in BO and OS investigations, followed by data on directors Business registers are most used sources to collect this information Commercial BIPs not very used, especially by FIUs and LEAs For intermediaries also documents provided by clients play a central role in BO identification, especially in case of foreign legal entities Practices in collecting and processing data EU FIUs and LEAs prefer accessing foreign BRs passing through relevant foreign FIU/LEA counterparts (due to costs, language, access and authorization problems and because of FIU/LEA cooperation). Only few EU FIUs, LEAs and AROs use software to collect and analyse data on shareholders and directors for BO identification purposes 22

24 Block 1 - Findings Problems Lack of software able to collect and analyse data on shareholders and directors of legal entities Access to foreign BRs, costs and timeliness of information are main problems for EU FIU/LEA/ARO in accessing information used in BO identification Identification of the relevant data source, timeliness and quality (accuracy) of data are main problems for financial intermediaries and professionals Needs and improvements EU FIU, LEA, ARO and intemediaries ask to improve the availability of data on the shareholding of foreign legal entities and the access to foreign BRs EU FIU, LEA, ARO ask for new software able to collect data from BRs (and to reconstruct OS of legal entities) 23

25 Block 1 What information is used to identify BOs? What are the problems in BO identification? Q&A 24