STEP, the global professional body for trust and estate practitioners, has today released its Tackling Economic Crime report outlining practical recommendations for preventing economic crime.
STEP have said : ‘With 2024 being the biggest election year in history, many governments will be looking at how they can progress the fight against economic crime.’
Tackling Economic Crime has been released as part of the professional body’s policy engagement work with governments and international bodies, in a bid to help inform discussion on the topic.
The report provides analysis on the effectiveness of existing measures, and practical recommendations on how to address gaps in the system.
Geoff Cook TEP, Chair of STEP’s Public Policy Committee, claims that the organisation’s members have the collective ‘expertise’ to provide ‘effective solutions’.
He said: ‘STEP has a key role to play in tackling economic crime. As lawyers, accountants, fiduciaries and other practitioners who specialise in trusts and estates, STEP members’ significant practical expertise can assist in creating workable and effective solutions.
‘We are urging policymakers to focus on strengthening existing lines of defence and building on what has come before. We would like them to close up any gaps that may be exploited by criminals and take a more joined-up approach to ensure rigorous standards are enforced globally.’
The report notes that the measures taken so far have led to a surge in global reports and widespread information, which STEP say ‘could be highly effective in identifying and deterring financial crime’.
STEP have outlined six practical recommendations to address issues they claim are obfuscating the fight against financial crime.
The suggestions, based on STEP’s report are as follows:
Invest in improving the quality and processing of SARs(stock appreciation rights)
SARs are a vital source of intelligence in economic crime, yet a lack of detailed guidance for applicants is leading to a huge volume of incorrect and often unnecessary reports. Investing in improving the quality and processing of SARs would free up government resources and reduce the volume of applications to just those that are required, ultimately leading to greater effectiveness.
Introduce a ‘compliance passport’
The industry has become dominated by compliance checks and due diligence, which is driving up costs for customers, increasing the burden on practitioners and regulators, and resulting in huge duplication of effort and resource. STEP recommends the introduction of a ‘compliance passport’ to demonstrate compliance across jurisdictions. The EU is taking steps to adopt such an approach with the Europe digital identity programme. Such a solution would reduce distortions in the transparency regime and enhance the certainty of an individual’s anti-money laundering (AML) compliance.
Verify beneficial ownership information
In many countries, there is no verification of beneficial ownership data submitted to company and trust registers. This means information collected may have very little practical use in the fight against money laundering and other illegal activities. STEP recommends that an obliged entity should be responsible for verifying information submitted. This would make it significantly harder for criminals to conceal their identities behind complex structures.
Require entities without a registrable beneficial owner to provide a fuller explanation
Some entities reasonably believe they do not have any registrable beneficial owners. While the reason for not registering may be legitimate, this creates a gap that could be taken advantage of by those seeking to hide ultimate beneficial ownership. STEP recommends that authorities require entities without a registrable beneficial owner to provide a fuller explanation as to why this is the case. This would provide greater certainty and understanding so they do not waste resources investigating cases that have legitimate reasons for making such a claim.
Strengthen whistleblowing frameworks globally
Whistleblowing is a crucial source of evidence for authorities tackling corruption, fraud and other economic crimes. However, in some jurisdictions, whistleblowing is still not encouraged, resulting in compromised safety and potential criminal prosecution for many who engage in it. STEP recommends that those jurisdictions with deficiencies in this area review and strengthen their frameworks.
Agree one ‘global standard’, to which all are held
While many jurisdictions have adopted FATF’s recommendations and standards, there are some notable exceptions. This leaves the systems in those jurisdictions exposed to significant criminal risks and can undermine global efforts to tackle economic crime. In addition, some countries and regions have devised their own lists and standards for rating countries’ AML and tax practices. This has led to the problem of proliferating lists based on different standards. STEP recommends that all jurisdictions agree to one global standard, to which all are held. International financial regulation must proceed on the basis of non-discrimination and a level playing field
The full Tackling Economic Crime report can be found here https://www.step.org/knowledge-hub/tackling-economic-crime
