Real estate _ GAB _ The Global Anticorruption Blog anti money laundering process

In the past year, india has been among the most zealous countries in the world in stepping up the fight against money laundering and related economic and security issues. The effort that probably got the most attention was last year’s surprise “ demonetization” policy (discussed by harmann in last week’s post), which aimed to remove around 85% of the total currency in circulation. But to assess india’s overall anti-money laundering (AML) regime, it’s more important to focus on the basic legal framework in place.

The most important legal instrument in india’s AML regime is the prevention of money laundering act, which was enacted in 2002, entered into force in 2005, and has been substantially amended since then. The act defines a set of money laundering offenses, enforced by the enforcement directorate (india’s principal AML agency), and also imposes a range of reporting requirements on various institutions.Anti money laundering process

furthermore, the law gives the enforcement directorate the authority to freeze “tainted assets” (those suspected of being the proceeds of listed predicate offenses), and to ultimately seize those assets following the conviction of the defendant for the underlying offense.

How effective has india been in its stepped-up fight against money laundering? On the one hand, over the past year (since the demonetization policy was announced), banks logged an unprecedented increase of 706% in the number of suspicious transaction reports (strs) filed, and reports from last july indicated that the total value of the assets frozen under the prevention of money laundering act in the preceding 15 months may have exceeded the cumulative total of all assets frozen in the prior decade-plus of the law’s operation. And the government further reported that its crackdown on shell companies had discovered around $1.1 billion of unreported assets.Anti money laundering process

Yet these encouraging numbers mask a number of serious problems with india’s AML system, problems that can and should be addressed in order to build on the momentum built up over the past year. Here let me highlight two areas where greater reform is needed: continue reading →

The fascination surrounding art theft and forgery has long been the subject of much exploration. Only more recently, however, has the art market come under increased scrutiny regarding its connection to money laundering and corruption. It’s not just that stolen artworks often end up in the hands of criminals: even the market for non-stolen art is especially vulnerable to money laundering and corruption. With more banks cracking down on illicit activities, art has become an “efficient instrument for hiding cash.” as an article in the new york times observed, no business seems “more custom-made for money laundering, with million-dollar sales conducted in secrecy and with virtually no oversight.”

anti money laundering process

Considering the attention paid by anticorruption and anti-money laundering activists to the role of the real estate market and the market for other luxury goods to facilitate money laundering and bribery, it is perhaps a bit surprising that there hasn’t been more attention to the art market—which is perhaps even more deserving of scrutiny. Continue reading →

Windfall gains often create opportunities for corruption. The big inflow of money increases the opportunities and incentives for kickbacks and bribery as a means to capture new funds. Well-known examples of this phenomenon include disaster relief efforts, resource booms, and humanitarian aid. Yet the concern is not limited to those contexts. Changes in the price and value of land in a given area can also create the opportunity for windfall, and associated corruption risks.

The corruption risks in the land sector and real estate industry have been discussed broadly as pervasive; routine land administration and land grabbing provide ample opportunities for corruption to flourish where land governance is weak.Anti money laundering process yet these discussions sometimes overlook another sort of corruptogenic windfall in land markets, one that is often hiding in plain sight: the effects of gentrification of urban centers. Experiences from cities around the world exemplify three common ways in which these windfall gains from gentrification provide opportunity for corruption. Continue reading →

The following is based on a march 24 talk I gave at the washington office of the council on foreign relations. It is posted in a slightly different form on “ latin america’s moment,” the council’s blog on latin america.

One of the most promising developments in U.S. Foreign relations is the all out war on corruption being waged across latin america. From “ operation car wash” in brazil to investigations of presidential wrongdoing in bolivia, el salvador, honduras, guatemala, and panama, across the region independent, tenacious prosecutors and investigators are out to end the massive theft of state resources that for so long has hobbled political development and throttled economic growth.Anti money laundering process americans should be cheering for these corruption warriors, for we have much to gain if they succeed. Less corruption translates into more stable, reliable political allies; it means faster, more equitable growth and that means shared prosperity and less northward migration. Finally, less corruption in government will offer american firms new opportunities. Think what the end of corruption in brazilian public works would mean for U.S. Engineering and construction companies.

But given the stakes in latin america’s corruption war, america should be doing more than cheering from the sidelines. It should be doing everything it can – without infringing the sovereignty or sensibilities of latin neighbors – to see its corruption warriors succeed. Here are five things to start with: continue reading →

Earlier this month transparency international UK published a report entitled “corruption on your doorstep: how corrupt capital is used to buy property in the UK.” the britain-specific recommendations are part of TI’s broader “unmask the corrupt” campaign, a call by TI, and echoed by others, to establish public registries of beneficial ownership.Anti money laundering process A similar call to unveil the individuals behind the shell corporations used to buy luxury condos in manhattan garnered a lot of attention stateside during last month’s new york times “towers of secrecy” series on the city’s high-end property market (see here, here, here, here, here, and here). The anticorruption rationale for mandating disclosure of real property beneficial ownership seems straightforward: as both the TI-UK report and the NYT series argue, buying real property in new york and london is an appealing way to launder stolen funds, because high-end real estate purchases allow a corrupt actor to inject millions of dollars into the legitimate market without having to deal with pesky anti-money laundering regulations, completing the purchases through shell companies that disguise the true beneficial owner. Requiring public disclosure of the beneficial owners of real property would in theory have two related benefits: first, requiring purchasers to reveal beneficial ownership information up front would dissuade some from using real property as a means of laundering money, and second, if law enforcement authorities have ready access to this information, it will make it easier to instigate and conduct investigations, as well as to seize assets later on.Anti money laundering process

Indeed, transparency in real property beneficial ownership seems like the kind of thing all anticorruption advocates should support, which is why it may seem a little counterintuitive when I say TI and others are taking the wrong tack. Pushing for central public registries of beneficial ownership of real property will not likely achieve the two objectives, and may have serious drawbacks. Here’s why: continue reading →

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