International Approaches to Combating Financial Abuse and Promoting Stable Financial Markets
| Published date | 01 April 2002 |
| DOI | https://doi.org/10.1108/eb027305 |
| Date | 01 April 2002 |
| Pages | 257-262 |
| Author | William Witherell |
| Subject Matter | Accounting & finance |
Journal of Money Laundering Control — Vol. 5 No. 4
ANALYSIS
International Approaches to Combating Financial
Abuse and Promoting Stable Financial Markets
William Witherell
INTRODUCTION
The Organisation for Economic Cooperation and
Development (OECD) governments1 recognise that
the economic and social benefits of open markets
for international trade, investment and capital flows
can only be enjoyed fully in an environment of
sound regulation and international cooperation.
Criminal activity and other forms of financial
abuse, including tax abuse, can impose high costs
on economic and social development, distort resource
allocation, challenge stability and integrity of the
financial system and undermine confidence in demo-
cratic institutions. Growing interactions between
national economies and markets and advances in
communications and information technology have
aided international financial abuses and raised new
challenges for policy makers, regulators, supervisors
and law enforcement authorities.
The focus in this paper will be on some interna-
tional approaches the OECD, the Financial Action
Task Force on Money Laundering (FATF), and the
Financial Stability Forum (FSF) — in cooperation
with other international organisations and national
governments — are using to address various aspects
of the problem of abuses to the global financial
system. It is evident that a spectrum of approaches
is needed. Measures appropriate for combating
money laundering by drug cartels are unlikely to be
the same as those most appropriate for encouraging
companies to adopt sound corporate governance
practices. Yet, at the same time, there are many con-
cerns relevant to most, if not all, financial abuses, such
as the need for improved transparency; and there are
frequently linkages between individual abuses such as
money laundering, bribery and corruption, tax
crimes and securities fraud. The integrity of the
global financial system requires that the international
community see these abuses as a series of interlinked
issues that call for a coherent and complementary
set of responses. There follows an example of the
initial stage of a collective international response to
a perceived problem.
SHARED ANALYSIS: OECD REPORT
ON THE MISUSE OF CORPORATE
VEHICLES
International action in response to the emergence of a
common concern typically begins by carrying out
shared fact-finding and analysis of the issues and by
seeking to identify possible approaches to address
the problem. A recent example that was highly
germane to the subject of the 19th Symposium, the
hiding of wealth, is the OECD's Report on the
Misuse of Corporate
Vehicles
for Illicit Purposes.2 This
study was proposed last May by the Working
Group on Offshore Financial Centres of the Financial
Stability Forum and was presented by the author to
the Forum at a recent meeting in London. The
OECD Ministerial Council at their annual meeting
last May welcomed the report, as did the G7 Finance
Ministers in their July report to Heads of State and
Government, Fighting the Abuses of
the
Global Finan-
cial System, in which they stated their concern that
'corporate vehicles, under certain conditions, can be
misused for money laundering and other illegal pur-
poses'.3 Of course, corporate vehicles (ie, corpora-
tions,
trusts, foundations and partnerships) underpin
most commercial and entrepreneurial activities in
market-based economies and have contributed
immensely to the prosperity and globalisation that
have occurred during the last half century. Neverthe-
less,
there has been a growing realisation that corpo-
rate vehicles are often misused for money laundering,
bribery/corruption, shielding assets from creditors,
illicit tax practices, self-dealing, market fraud, and
other illicit activities.
This report examines the extent and means of
misuse of corporate vehicles for illicit purposes. In
particular, the report has found that the types of
Journal of Money Laundering Control
Vol.
5, No. 4, 2002, pp. 257-262
© Henry Stewart Publications
ISSN 1363-5201
Page 257
To continue reading
Request your trial