Tax evasion and money laundering: a complete framework

2021 ◽  
Vol ahead-of-print (ahead-of-print) ◽  
Author(s):  
Deen Kemsley ◽  
Sean A. Kemsley ◽  
Frank T. Morgan
Keyword(s):  
Money Laundering ◽  
Tax Evasion ◽  
Task Force ◽  
Regulatory Agencies ◽  
Content Type ◽  
Single Process ◽  
Financial Action Task ◽  
Tax Savings ◽  
Practical Implications ◽  
Complete Framework

Purpose This paper aims to define the fundamental nexus between income tax evasion and money laundering. The G7 Financial Action Task Force (FATF) designates tax evasion as a predicate offense for money laundering. We determine whether this designation is complete from a conceptual standpoint, or whether there is a stronger connection between tax evasion and money laundering. Design/methodology/approach This paper applies the FATF definition for money laundering – as well as generally accepted definitions for tax evasion and for a standard predicate offense – to identify the necessary conditions for each crime. This paper then uses these conditions to test opposing hypotheses regarding the nexus between tax evasion and money laundering. Findings This paper demonstrates that tax evasion does not meet the conditions for a standard predicate offense, and treating it as if it were a standard predicate could be problematic in practice. Instead, it is concluded that the FATF’s predicate label for tax evasion, together with tax evasion methods and objectives, imply that all tax evasion constitutes money laundering. In a single process, tax evasion generates both criminal tax savings and launders those criminal proceeds by concealing or disguising their unlawful origin. Practical implications The FATF could strengthen its framework by explicitly defining all tax evasion as money laundering. This would enable regulatory agencies to draw upon the full combined resources dedicated to either offense. Originality/value The analysis demonstrates that tax evasion completely incorporates money laundering as currently defined by the FATF.

Smuggling report fuels Paraguay corruption concerns

2021 ◽  
Keyword(s):  
Money Laundering ◽  
Tax Evasion ◽  
Task Force ◽  
Financial Action Task Force ◽  
Content Type ◽  
Financial Action Task ◽  
High Level

Significance The response from Tabesa and the finance ministry was disproportionately hostile. That may be linked to a much-delayed in-country review of illicit activities that is being conducted by Gafilat, the regional affiliate of the international Financial Action Task Force (FATF). Impacts The contraband cigarette trade is expanding the influence of Brazilian crime gangs in Paraguay. Reports of tax evasion and money-laundering in the sector will draw renewed scrutiny of high-level corruption. Failure to implement transparency measures will deter legitimate inward investment.

Panama faces FATF greylisting

2019 ◽  
Keyword(s):  
Money Laundering ◽  
Financial Institutions ◽  
Tax Evasion ◽  
Task Force ◽  
Capital Flight ◽  
Content Type ◽  
National Assembly ◽  
Legislative Proposal ◽  
Financial Action Task ◽  
Financing Of Terrorism

Significance The move comes despite the passing of a long-delayed legislative proposal by Panama’s National Assembly on January 31 to make tax evasion a criminal (rather than administrative) offence -- the latest in a series of efforts to improve Panama’s image. The Financial Action Task Force (FATF) -- the international standard-setting body for anti-money laundering and combating the financing of terrorism (AML/CFT) -- will publish an assessment of Panama this month, before deciding whether to 'greylist' it around June. Impacts Poor AML controls leave Panama vulnerable to the entrance of funds from the expanding cocaine trade in neighbouring Colombia. Greylisting would hit local financial institutions' access to US correspondent banks, raising international transaction and transfer costs. Capital flight is possible by financial institutions seeking to avoid international regulatory risks associated with Panamanian operations.

Anti-money laundering and counter-terrorism financing disclosure by money exchange providers in the GCC countries

2021 ◽  
Vol ahead-of-print (ahead-of-print) ◽  
Author(s):  
Md Abubakar Siddique ◽  
Haitham Nobanee ◽  
Osama Fayez Atayah ◽  
Mohammed Khereldin Bayzid
Keyword(s):  
Money Laundering ◽  
Design Methodology ◽  
Task Force ◽  
Content Type ◽  
Counter Terrorism ◽  
Gcc Countries ◽  
Terrorism Financing ◽  
Financial Action Task ◽  
High Degree ◽  
Practical Implications

Purpose The purpose of this paper is to measure anti-money laundering (AML) and counter-terrorism financing (CTF) disclosures by money exchanger providers in the Gulf Cooperation Council (GCC) countries. Design/methodology/approach The authors conduct a content analysis on firms’ websites to compare their AML/CTF disclosure against the recommendations of the Financial Action Task Force (FATF). The authors use a one-sample t-test to examine the degree of these disclosures. Findings Overall, money exchange providers in GCC countries do not demonstrate a high degree of AML/CTF disclosure (20.27%). Country-wise disclosure levels are: Qatar 31%, UAE 19%, Kuwait 17.1%, Oman 26.27%, Bahrain 23.27% and KSA 6.1%. Research limitations/implications The study contributes immensely to understanding the disclosure behavior of this sector. It also helps in assessing their compliance with FATF recommendations. Practical implications The results show poor AML/CTF disclosure and compliance by money exchange providers, which should lead to increased regulations by policymakers and more disclosure by practitioners. Social implications Money laundering (ML) and terrorism financing (TF) can adversely affect societies. This study should help regulators to identify vulnerable areas in ML and TF activities, compare disclosures by companies in their countries with those of other countries and identify areas for improvement. Originality/value The study is a novel attempt. No study has been undertaken before to investigate AML and CTF disclosure by money exchange providers either globally, regionally or in any country.

scholarly journals Could banning virtual assets be a breach of the doctrine of legitimate expectation?

2021 ◽  
Vol ahead-of-print (ahead-of-print) ◽  
Author(s):  
Md. Zahurul Haq ◽  
Kazi Fahmida Farzana ◽  
Moniruzzaman Md
Keyword(s):  
Money Laundering ◽  
Design Methodology ◽  
Legal Status ◽  
Task Force ◽  
Content Type ◽  
Legitimate Expectation ◽  
Legal Obligations ◽  
Global Standards ◽  
Financial Action Task ◽  
Practical Implications

Purpose This paper aims to examine the validity of a state’s prohibition on virtual assets in the context of its global commitment to battle against money laundering. Design/methodology/approach This was empirical legal research exploring how a general lack of expertise to apply a risk-based approach in anti-money laundering strategies might have implications for invoking the Financial Action Task Force (FATF) exclusion provisions in virtual asset regulation. Findings Invoking the exclusion provisions for banning virtual assets without meeting the prerequisites may put the financial system at risk and make a jurisdiction’s legal obligations appear breached. Research limitations/implications Anti-money laundering (AML) policymakers will take precautions and avoid misuse of the liberties they enjoy under FATF exclusion clauses/provisions. Practical implications The results of this study will help ensure more informed decision-making on the legal status and regulation of virtual assets. Originality/value The study helps ascertain the limits of privileges accorded to states under FATF exclusion provisions in applying global standards against money laundering.

Designated non-financial businesses and professions

2017 ◽  
Vol 20 (3) ◽  
pp. 247-261 ◽  
Author(s):  
Michael Newbury
Keyword(s):  
Money Laundering ◽  
Financial Institutions ◽  
Design Methodology ◽  
Task Force ◽  
Objective Assessment ◽  
Content Type ◽  
Counter Terrorism ◽  
Terrorism Financing ◽  
Financial Action Task ◽  
Practical Implications

Purpose The purpose of this paper is to highlight vulnerabilities in Australia’s anti-money laundering/counter-terrorism financing (AML/CTF) regime through Australia’s non-compliance with the Financial Action Task Force (FATF) recommendations on the regulation of designated non-financial businesses and professions (DNFBPs). It is intended that through examination of the justifications for and against AML/CTF regulation of DNFBPs, the paper will provide support for the position that Australia’s AML/CTF regime should incorporate regulation of DNFBPs. Design/methodology/approach The paper presents findings from research conducted in 2015 that focused on some of the principal arguments for and against the extension of Australia’s AML/CTF regime to DNFBPs. Review and consideration of the merits of these arguments is undertaken to support the conclusion that AML/CTF regulation should be extended to DNFBPs, in line with the FATF recommendations. Findings The current exemption of many DNFBPs from AML/CTF regulation perpetuates vulnerabilities within Australia’s AML/CTF regime; until this is addressed, criminals will continue to exploit these vulnerabilities and the regulated AML/CTF sector will continue to shoulder an unfair burden of Australia’s AML/CTF response. Practical implications This paper provides an objective assessment of factors for and against the regulation of DNFBPs in Australia. It may be of value to government policymakers, regulators, financial institutions and DNFBPs. Originality/value This paper complements existing research on this subject and provides a specific focus on some of the main arguments for and against the extension of Australia’s AML/CTF regime to specific DNFBPs.

scholarly journals The anti-money laundering expectations gap in Iran: auditor and judiciary perspectives

2021 ◽  
Vol ahead-of-print (ahead-of-print) ◽  
Author(s):  
Vahid Molla Imeny ◽  
Simon D. Norton ◽  
Mahdi Moradi ◽  
Mahdi Salehi
Keyword(s):  
Money Laundering ◽  
Task Force ◽  
Content Type ◽  
Terrorist Financing ◽  
Expectations Gap ◽  
Highly Sensitive ◽  
Financing Risk ◽  
Significant Divergence ◽  
Financial Action Task ◽  
Practical Implications

Purpose This study aims to compare judicial and auditor expectations of audit in the detection and reporting of money laundering in Iran. It also aims to assess the implications of expectations gap for the reliability of data provided to the Financial Action Task Force (FATF) in its blacklisting policy. Design/methodology/approach Questionnaires were administered to auditors to determine perceptions of their anti-money laundering (AML) reporting obligations. These were also completed by Iranian judges who hear money laundering prosecutions and who agreed to participate in the research. The group was created through the “snowballing” technique. Findings There is significant divergence between judges and auditors regarding the latter’s AML reporting obligations. Self-perception among auditors regarding investigative duties is insufficiently aligned with expectations of the FATF, particularly where there is use of corporate structures, charities and trusts in which identity of true owners, of payers and payees of funds cannot be accurately verified. This gap presents a significant terrorist financing risk. Practical implications The expectations gap makes training in forensic accounting, as well as compliance with international reporting expectations, a matter of urgency for the Iranian auditing profession. The judiciary needs to be more aware of international expectations. Originality/value Data regarding judicial expectations of auditors’ AML reporting obligations is difficult to obtain and of a highly sensitive nature. This research has obtained such data which has relevance to the FATF blacklisting policy, and to international organisations tasked with disrupting terrorist financing networks.

A critical approach to trade-based money laundering

2014 ◽  
Vol 17 (2) ◽  
pp. 230-242 ◽  
Author(s):  
Melvin R.J. Soudijn
Keyword(s):  
Money Laundering ◽  
Task Force ◽  
Critical Approach ◽  
Content Type ◽  
Traded Goods ◽  
True Value ◽  
Police Investigations ◽  
Financial Action Task

Purpose – The purpose of this paper is to broaden the discussion on trade-based money laundering (TBML). The literature is too narrowly focused on the misrepresentation of the value, quantity or quality of the traded goods. This focus leads to the analysis of price anomalies as a signal of over- or under-invoicing. However, TBML can also occur without manipulation of these factors. Design/methodology/approach – A review of the literature and case study of police investigations. Findings – Financial action task force (FATF) definitions are seriously flawed. The question of whether detecting TBML on the basis of statistical trade data is effective should be much more open to debate. Police investigations show that goods are shipped at their true value within the context of TBML. Research limitations/implications – Using outliers to identify and act on cases of TBML has often been propagated, but scarcely been used to actually show TBML. Real findings are needed. Practical implications – Goods intended for TBML can also be paid for in cash. These cash payments are often out of character with the normal clientele. This should alert companies and compliance sections of banks alike. Originality/value – The critique on the FATF definition opens the field for a more fitting definition. The description of actual TBML cases makes it possible to better understand this method of money laundering.

Does holding offshore jurisdictions to higher AML standards really assist in preventing money laundering?

2021 ◽  
Vol ahead-of-print (ahead-of-print) ◽  
Author(s):  
Andrew James Perkins
Keyword(s):  
Money Laundering ◽  
Secondary Data ◽  
Cayman Islands ◽  
Content Type ◽  
Task Forces ◽  
Financial Crimes ◽  
Financial Action Task ◽  
Practical Implications ◽  
Combat Money Laundering

Purpose This paper aims to contend that when tackling financial crimes such as money laundering and terrorist financing, international regulators are seeking to hold offshore jurisdictions such as the Cayman Islands to higher standards and that this detracts from the pursuit of detecting and prosecuting money launders. Design/methodology/approach This paper will deal with the following perceived issues: firstly, to offshore jurisdictions as a concept; secondly, to outline the efforts made by the Cayman Islands to combat money laundering and to rate these changes against Financial Action Task Forces’ (FATAF’s) technical criteria; thirdly, to demonstrate that the Cayman Islands is among some of the world’s top jurisdictions for compliance with FATAF’s standards; and finally, to examine whether greylisting was necessary and to comment upon whether efforts by international regulators to hold offshore jurisdictions to higher standards detracts from the actual prosecution of money laundering within the jurisdiction. Findings Greylisting the Cayman Islands in these authors’ view was something that should have never happened; the Cayman Islands is being held to standards far beyond what is expected in an onshore jurisdiction. There is a need for harmonisation in respect of international anti money laundering rules and regulations to shift the tone to prosecution and investigation of offences rather than on rating jurisdictions technical compliance with procedural rules where states have a workable anti-money laundering (AML) regime. Research limitations/implications The implications of this research are to show that offshore jurisdictions are being held by FATAF and other international regulators to higher AML standards than their onshore counterparties. Practical implications The author hopes that this paper will begin the debate as to whether FATAF needs to give reasons as to why offshore jurisdictions are held to higher standards and whether it needs to begin to contemplate higher onshore standards. Originality/value This is an original piece of research evaluating the effect of FATAF's reporting on offshore jurisdictions with a case study involving primary and secondary data in relation to the Cayman Islands.

US will increase Paraguay money-laundering pressures

2019 ◽  
Keyword(s):  
Latin American ◽  
Money Laundering ◽  
Task Force ◽  
Border Area ◽  
Financial Action Task Force ◽  
Content Type ◽  
Lower House ◽  
Financial Action Task

Significance The bill, which now goes to the Lower House, is in line with demands from Gafilat, the Latin American affiliate of the Financial Action Task Force (FATF), which began a long-delayed evaluation of Paraguay’s performance on May 7. This will probably avoid Paraguay returning to the FAFT ‘grey list’ but is unlikely to placate the international financial community. Impacts Abdo Benitez will face an uphill struggle to get anti-corruption legislation through Congress. US pressures will mount with respect to purported terrorism finance in the tri-border area. Lack of progress will complicate relations with the international financial community.

The Nigerian Money Laundering (Prevention and Prohibition) Bill, 2016: a critical appraisal

2017 ◽  
Vol 20 (1) ◽  
pp. 79-88 ◽  
Author(s):  
Ehi Eric Esoimeme
Keyword(s):  
Money Laundering ◽  
Critical Appraisal ◽  
Task Force ◽  
Director General ◽  
Financial Action Task Force ◽  
Content Type ◽  
High Court ◽  
Customer Information ◽  
Financial Action Task ◽  
Financial Intelligence

Purpose This paper aims to critically examine the Money Laundering (Prevention and Prohibition) Bill, 2016. It also aims to determine the level of effectiveness of the preventive measures in the Bill. Design/methodology/approach The appraisal took the form of a desk study, which analyzed various documents and reports such as the Financial Action Task Force Recommendations 2012, Mutual Evaluation Reports conducted by the Inter-Governmental Action Group against Money Laundering in West Africa (GIABA) on Nigeria, the judgment delivered by Justice Gabriel Kolawole of the Federal High Court Abuja and the United Kingdom’s national risk assessment of money laundering and terrorist financing. Findings This paper determined that the Bill could achieve its core objectives if the following recommendations are implemented: section 15 of the Bill should be modified to include the definition of “Arrangement”; lawyers should be allowed to send their Suspicious Transaction Report to the Nigerian Bar Association, provided that there are appropriate forms of cooperation between the NBA and the Financial Intelligence Unit, and this approach is in line with the Financial Action Task Force Recommendations; the Bill should expressly prohibit retaliation by employers against whistleblowers and provide them with a private cause of action in the event that they are discharged or discriminated against by their employers, and this approach is being adopted by the US Dodd–Frank Act; a request for customer information, by the Director-General of the Nigeria Financial Intelligence Centre, should be made pursuant to an order of the Federal High Court obtained upon an ex-parte application supported by a sworn declaration by an authorized officer of the Centre, justifying the request for customer information. Originality/value This paper offers a critical appraisal of the Money Laundering (Prevention and Prohibition) Bill, 2016. The paper will identify the strengths and weaknesses of the Bill. This is the only paper to adopt this kind of approach.

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