Under the Shell

UNDER THE SHELL Ending Money Laundering in Europe Transparency International EU is part of the global anticorruption movement, Transparency International, which includes over 100 chapters around the world. Since 2008, Transparency International EU has functioned as a regional liaison office for the global movement and as such it works closely with the Transparency International Secretariat in Berlin, Germany. Transparency International EU leads the movement’s EU-focussed advocacy, in close cooperation with national chapters worldwide, but particularly with the 25 national chapters in EU Member States. Transparency International EU’s mission is to prevent and address corruption and promote integrity, transparency and accountability in the EU institutions and in EU internal and external policies, programmes and legislation. www.transparency.eu Author: Laure Brillaud Methodology: David Artingstall Design: www.beelzePub.com © 2017 Transparency International EU. All rights reserved. Printed on 100% recycled paper. © Cover photo: CC0 1.0 Every effort has been made to verify the accuracy of the information contained in this report. All information was believed to be correct as of April 2017. Nevertheless, Transparency International EU cannot accept responsibility for the consequences of its use for other purposes or in other contexts. This project has been funded by the European Commission. Co-funded by Accountancy Europe: Accountancy Europe represents 50 professional organisations from 37 countries that represent close to 1 million professional accountants, auditors, and advisors. This publication reflects the views only of the authors, the European Commission and Accountancy Europe cannot be held responsible for any use which may be made of the information contained therein. UNDER THE SHELL Ending Money Laundering in Europe CONTENTS ACKNOWLEDGMENTS ....................................................................................................................................................................3 ABBREVIATIONS ...................................................................................................................................................................................4 GLOSSARY ..................................................................................................................................................................................................5 KEY STATISTICS ...................................................................................................................................................................................6 FOREWORD ................................................................................................................................................................................................8 EXECUTIVE SUMMARY ..............................................................................................................................................................11 KEY FINDINGS ...........................................................................................................................................................................................11 HEADLINE RECOMMENDATIONS ......................................................................................................................................................13 1. LAW ....................................................................................................................................................................................................15 1.1 COUNTRIES LEADING THE WAY… ........................................................................................................................................18 1.2 COUNTRIES DRAGGING THEIR FEET… ................................................................................................................................19 1.3 LEGISLATIVE GAPS AND LOOPHOLES .................................................................................................................................. 20 A flawed legal definition of beneficial owner ................................................................................................................ 20 Insufficient coverage of beneficial ownership registers .......................................................................................... 20 Restricted conditions of access to beneficial ownership information ............................................................. 26 Lack of data verification and sanction mechanisms ................................................................................................ 29 Insufficient regulations of bearer shares ......................................................................................................................... 30 Insufficient regulations of nominees ....................................................................................................................................31 1.4 KEY RECOMMENDATIONS ........................................................................................................................................................ 32 Adopt a comprehensive definition of beneficial owner ..............................................................................................32 Extend coverage of beneficial ownership transparency requirements .......................................................... 33 Grant public, free and open access to beneficial ownership registers ........................................................... 34 Put in place robust data verification and sanction mechanisms ........................................................................ 34 Strengthen regulations governing the use of bearer shares ................................................................................. 35 Strengthen regulations governing the use of nominees .......................................................................................... 35 2. PRACTICE ...................................................................................................................................................................................... 37 2.1 ENFORCEMENT GAPS AND LOOPHOLES ............................................................................................................................ 37 Gaps in enforcement of customer due diligence obligations ................................................................................37 Inadequate management of money laundering risks ................................................................................................. 40 Low level or quality of suspicious activity reporting (SAR) .................................................................................... 40 Weak oversight of self-regulated professions .............................................................................................................. 43 Lack of adequate resources of competent authorities ............................................................................................. 44 Ineffective control mechanisms and sanctions ........................................................................................................... 44 Lack of statistics on AML enforcement efforts ............................................................................................................ 45 2.2 KEY RECOMMENDATIONS ........................................................................................................................................................ 46 Strengthen enforcement of customer due diligence obligations ........................................................................ 46 Identify and mitigate risks ......................................................................................................................................................... 46 Strengthen regulation and oversight of self-regulated sectors ...........................................................................47 Provide adequate resources to responsible oversight bodies ............................................................................. 48 Strengthen suspicious activity reporting systems ..................................................................................................... 48 Properly enforce controls and sanctions ......................................................................................................................... 48 Systematically collect and publish AML enforcement statistics ......................................................................... 48 3. HOT SPOTS ................................................................................................................................................................................... 49 3.1 REAL ESTATE SECTOR................................................................................................................................................................... 49 3.2 GAMBLING SECTOR ........................................................................................................................................................................51 3.3 TRUST AND COMPANY SERVICE PROVISION ................................................................................................................ 52 3.4 VIRTUAL CURRENCIES ................................................................................................................................................................

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