Follow the money

The G7 needs to prioritise the fight against money laundering and terrorist financing by empowering national authorities to ‘follow the money’ and disrupt and deter criminals – and reduce the harmful effects of crime on society

The world faces unprecedented crises. Climate change, COVID-19, the war in Ukraine, rising inequality and many other issues demand and warrant the focus of world leaders. At the same time, financial crime continues to flourish in the shadows and cannot be ignored. Dirty money fuels criminal gangs, the drugs trade, corruption, environmental crime and much more. The Financial Action Task Force recognises the progress that countries have made, but G7 leaders need to ensure that the fight against financial crime is not overlooked or neglected. 

One of the most crucial areas is improving transparency of beneficial ownership. Criminals, sanctions evaders and kleptocrats routinely use anonymous shell companies to help hide their dirty money. Numerous politicians have promised to tackle the issue over the years. However, despite pledges made a decade ago, FATF evaluations show that only 9% of countries have effectively implemented laws dealing with shell companies and other secretive company structures.

This is not good enough. That is why the FATF strengthened its standard on beneficial ownership earlier this year to ensure national authorities can find out who ultimately controls a company. In the future, countries will need to have a register holding beneficial ownership information or have a mechanism that is also efficient. This is an important and positive step forward to end the anonymity of corporate beneficiaries. If countries effectively implement the new rules they have signed up to, tracing assets will be considerably easier. 

Tangible results

However, to get tangible results we need more than 9% of countries to live up to their pledge. The G7 needs to lead the way and fully implement the new rules as fast as possible. This will act as a catalyst for other countries. I am pleased that at the FATF’s ministerial meeting in April, ministers – including all G7 ministers – committed to promptly implement the FATF’s global beneficial ownership rules. Some are already taking further steps to boost transparency, such as through the creation of interconnected registries. My personal vision is a world of global beneficial ownership transparency making it impossible for criminals to hide their dirty money behind opaque legal structures.

Other potential loopholes are also being closed. The FATF is focusing on legal arrangements such as trusts. It is also working to help tackle money laundering and terrorist financing risks in the real estate sector. The FATF is publishing a report that makes several recommendations. The starting point is for those working in the real estate sector to understand and mitigate their risks, and to notify authorities if they have suspicions. The FATF urges countries, including all G7 members, to ensure that national authorities work with their real estate sectors to prevent them being used for laundering illicit funds. This means taking a risk-based approach to property transactions and doing basic due diligence. It will make a difference.

Looting our planet

Another area the G7 has prioritised is the fight against climate change. Criminals make billions from looting our planet. However, a recent FATF report showed how, at the moment, few countries prioritise the fight against money laundering from environmental crimes. For the criminal networks involved, it is a low-risk, high-reward crime. This needs to be reversed. The FATF asks all countries to include environmental crimes in their national money laundering risk assessments. By working together, sharing insights and taking collective action, we can put a sizable dent in the illicit profits for environmental crimes and help save our planet.

The FATF is doing its part in other ways. As countries prepare for the next round of FATF evaluations that assess countries’ anti-money laundering and counter-terrorist financing systems, FATF members have agreed to make future evaluations more targeted, more frequent and more focused on major risks. These changes aim to lead to more effective action, including more prosecutions of complex money laundering cases and an increase in criminal asset seizures. 

By prioritising and empowering national authorities to ‘follow the money’, G7 members can help disrupt and deter criminals, terrorists and the corrupt. In turn, this will reduce the harmful effects of crime on society. For over a decade, the G7 has led in setting the global agenda on fighting crime and corruption. The FATF urges all G7 members to prioritise the fight against money laundering and terrorist financing in the years ahead.