Lifting the veil on beneficial ownership: The challenges facing the United Kingdom in effectively implementing the European Union 4th anti-money laundering directive

Research Institution / Organisation

University of Portsmouth

Principal Researcher

Paul Gilmour BSc

Level of Research

Masters

Project Start Date

May 2018

Research Context

Background and Context

Offshore financial centres (OFC) are overseas jurisdictions that provide financial services for non-residents. They typically have little banking regulation and favourable tax rules compared to where the customer resides and offer privacy to business activities (International Monetary Fund [IMF], 2003; Young, 2013). The use of shell companies and other complex corporate structures, can obscure knowledge of who ultimately controls business assets or activities. This natural person is known as the ‘beneficial owner’ (Financial Action Task Force [FATF], 2014).

OFCs have been the preferred location for many years for businesses to invest assets, legitimately hide their activities away from competitors and to avoid taxes (Unger, 2017). While such practices are legal, they have attracted much controversy through several recent exposés –like the leaked ‘Panama Papers’ and ‘Paradise Papers’ –which have highlighted involvement of the rich and famous and political elite.

Further, criminals can use OFCs without the fear of being identified by authorities to convert and disguise their proceeds of crime, to make them appear legitimate, through a process called money laundering (Chaikin, 2017). Countries, including the United Kingdom (UK) are therefore under increasing pressure to strengthen anti-money laundering controls and provide better transparency to offshore banking.

The European Union (EU) 4th anti-money laundering (AML) directive is the latest strategy in the fight against money laundering. Yet, the challenges facing the UK in effectively implementing it remains unclear. Böszörmenyi and Scheighofer (2015) offer an obvious explanation in asserting that fundamental rights to privacy hinder the exchange of information on beneficial owners. Whereas, Young (2017) provides a more cynical interpretation, by theorising that insufficient political will by Western states is partly responsible for insufficient progress on anti-money laundering controls. Establishing factors that most hinder beneficial ownership transparency in the UK will enhance future strategies to better combat offshore money laundering.

Aims & Objectives

The aim of this research is to ascertain the factors affecting the transparency of beneficial ownership, which hinder the effective implementation of the EU 4th AML directive within the UK.

The objectives are:

  1. To outline the goal of the EU 4th AML directive in combatting offshore money laundering.
  2. To outline the role of beneficial ownership in offshore money laundering.
  3. To compare how anti-money laundering law in the UK aligns with the EU 4th AML directive.
  4. To establish the factors that most hinder beneficial ownership transparency in the UK.


Research Methodology

​A systematic literature review is being conducted using both peer-review journals and grey literature sources.

Interim reports and publications

​Not available

Date due for completion

August 2019
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