UP TO THE TASK? The state of play in countries committed to freezing and seizing Russian dirty money
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TRANSPARENCY INTERNATIONAL | MAY 2022
UP TO THE TASK?
The state of play in countries committed to
freezing and seizing Russian dirty money
1
Transparency International is a global movement with one vision: a world in which government, business, civil society and the daily lives of people are free of corruption. With more than 100 chapters worldwide and an international secretariat in Berlin, we are leading the fight against corruption to turn this vision into reality. www.transparency.org Up to the task? The state of play in countries committed to freezing and seizing Russian dirty money Authors: Vincent Freigang and Maíra Martini Researchers: Sara Brimbeuf and Transparency International France, Vincent Freigang (Transparency International Secretariat), Damiaan Goetstouwers (Transparency International Netherlands), Steve Goodrich (Transparency International UK), Susanna Ferro (Transparency International Italy), Ines Pinto (Transparency International Secretariat), and Christoph Trautvetter (Netzwerk Steuergerechtigkeit) Acknowledgements: We would like to thank Eka Rostomashvili, Transparency International Australia and their expert advisers Gill Donnelly and Mark Zirnsak, James Cohen (Transparency International Canada), Enno Coordes and Mickael Roumegoux Rouvelle (Transparency International Germany), Transparency International Italy advisers Mario Chiodi and Nicola Mainieri, and Transparency International U.S. for their contributions Cover photo: Tom Brenner/REUTERS Every effort has been made to verify the accuracy of the information contained in this report. All information was believed to be correct as of 13 May 2022. Nevertheless, Transparency International cannot accept responsibility for the consequences of its use for other purposes or in other contexts. ISBN: 978-3-96076-210-2 2022 Transparency International. Except where otherwise noted, this work is licensed under CC BY-ND 4.0 DE. Quotation permitted. Please contact Transparency International – copyright@transparency.org – regarding derivatives requests.
TABLE OF CONTENTS
Executive summary ................................................... 6 II. No one to help ..................................................... 22
Introduction ............................................................. 10 Anti-money laundering requirements for
gatekeepers .................................................................. 22
About this report.......................................................... 11
Reporting suspicions to authorities ........................... 24
Joining forces ............................................................ 12
III. No impunity ........................................................ 27
Multilateral task forces ................................................ 12
Financial intelligence units.......................................... 27
National task forces ..................................................... 12
Specialised law enforcement agencies ..................... 32
I. Nowhere to hide ................................................... 15 Non-conviction based asset confiscation tools ........ 33
Beneficial ownership transparency of companies ... 16
Recommendations .................................................. 35
Beneficial ownership transparency of trusts ............ 17
Endnotes ................................................................... 40
Transparency of real estate ownership .................... 18
Transparency of luxury goods ownership ................ 20
The state of play in countries committed to freezing and seizing Russian dirty money
TRANSPARENCY INTERNATIONAL
ACRONYMS
AML Anti-money laundering
AMLD Anti-Money Laundering Directive (EU)
AUSTRAC Australian Transaction Reports and Analysis Centre (Australia FIU)
CSF Comitato di sicurezza finanziaria
EU European Union
FCDO Foreign, Commonwealth and Development Office (UK)
FIOD Fiscal Information and Investigation Service (Netherlands)
FIU Financial intelligence unit
FinCEN Financial Crimes Enforcement Network (US FIU)
FINTRAC Financial Transactions and Reports Analysis Centre (Canada FIU)
GTO Geographic targeting order
NCA National Crime Agency (UK)
NCBC Non-conviction based confiscation
OFAC Office of Foreign Assets Control (US)
OFSI Office for Financial Sanctions Implementation (UK)
REPO Task Force Russian Elites, Proxies, and Oligarchs Task Force
STR Suspicious transaction report
TCSP Trust and company service providers
TRACFIN Traitement du renseignement et action contre les circuits financiers clandestins (France FIU)
UWO Unexplained wealth order (UK)
4
UP TO THE TASK?
Photo: Yoruk Isik/REUTERS
5
TRANSPARENCY INTERNATIONAL
EXECUTIVE SUMMARY
Despite strong early pledges to sanction and track the illicit
wealth of Russian elites following the invasion of Ukraine, the G7
and other leading economies are not sufficiently equipped to
bring kleptocrats to justice.
Russia’s brutal invasion of Ukraine in February 2022 United States (US). A majority of these have also set
ignited a global reckoning over the dangers of up national task forces to implement sanctions, but
kleptocracy and the international community’s most are focused on coordination. Only the US’s
decades-long complicity. The initial response of the KleptoCapture task force has a distinct asset tracing
advanced Western economies was to unleash new mandate.
waves of targeted sanctions against Kremlin-linked
Transparency International found that insufficient
individuals. But denying safe haven to Russian
transparency measures – that kleptocrats have
kleptocrats calls for multilateral efforts, including
abused for decades – allow the elites to keep their
tracking down the illicit wealth they have diligently
assets out of authorities’ reach. What’s more, patchy
hidden across the globe.
regulation of private sector intermediaries and
In a welcome step, several governments – primarily under-resourcing compromise authorities’ ability to
Western economies such as those making up the act on available evidence and track down illicit
Group of 7 (G7) – are now joining efforts to share assets. Unless reforms are passed, most countries
intelligence and cooperate across borders as part of will also face significant legal challenges when it
a dedicated task force. To succeed, they must focus comes to confiscating and eventually returning
on two main objectives while respecting due these assets to the victims of corruption.
process and the rule of law:
+ implementing sanctions effectively, including as
a means of preventing the flight of assets that While high-profile yacht seizures have been
could be subject to criminal or civil investigation making international headlines, these are
+ securing meaningful action against those assets, only a small fraction of kleptocrats’ illicit
individuals and entities where there is sufficient wealth stashed abroad. But even these
evidence of their involvement in corruption, early successes have at times been
sanctions evasion or other crimes hampered by layers of secrecy and barriers
This study assesses how well countries leading to international cooperation. These cases
multilateral efforts to freeze and seize kleptocrats’ illustrate the obstacles to effectively deliver
assets are equipped to deliver on these objectives. on stated objectives facing even the most
The comparative analysis covers eight countries: willing authorities.
Australia, Canada, France, Germany, Italy, the
Netherlands, the United Kingdom (UK) and the
6UP TO THE TASK?
owners of properties owned through companies
I. NOWHERE TO HIDE using the beneficial ownership register. In France
and the Netherlands, however, information is
not available for foreign companies as they are
Anonymous companies and trusts make it easier for not required to disclose their beneficial owners
kleptocrats to purchase real estate or other luxury to any register when purchasing real estate,
goods and to launder their ill-gotten gains. We find creating a loophole. Current plans for beneficial
that, despite commitments and pledges to improve ownership registers in Italy and the US will also
transparency in beneficial ownership of companies leave this gap.
and trusts, current rules and practices are far from
satisfactory. Most countries’ real estate sectors are + Only Germany currently requires foreign
particularly vulnerable to dirty money due to a companies to disclose their beneficial owners to
significant loophole that allows for anonymous the authorities in order to purchase properties.
ownership of properties through foreign companies. In the UK, parliament recently approved
legislation to address this loophole.
Availability of information on
Availability of information on luxury
companies’ real owners
goods ownership
+ In Germany, France, the Netherlands and the
UK registers of companies’ beneficial owners are None of the countries systematically collect
in place, but all four lack sufficient data beneficial ownership information for yachts or
verification. private planes.
+ Australia, Canada, Italy and the US still rely on
the information collected by financial institutions II. NO ONE TO HELP
to identify the beneficial owners of companies,
which is known to be a deeply flawed approach.
In the past year, all but Australia have Lawyers, accountants, bankers, investment advisers
progressed or fast-tracked commitments to and real estate agents are uniquely placed to
establish registers. identify and report on criminals and sanctioned
individuals. Yet past scandals have shown them –
wilfully or unwittingly – facilitating cross-border
Availability of information on trusts’
corruption, money laundering and sanctions
real owners evasion. We found that the national frameworks do
not sufficiently extend regulation to non-financial
+ Only Germany, France and the UK have
gatekeepers. Even in the countries where key
registers for trusts, but all restrict access by
professions are under anti-money laundering
“legitimate interest” or registration
obligations, compliance remains patchy – especially
requirements.
in the real estate sector.
+ Australia, Canada, Italy, the Netherlands and
+ Key gatekeeper professions have anti-money
the US have no registers for trusts at all. Italy
laundering requirements in Germany, France,
and the Netherlands have not yet complied with
Italy, the Netherlands and the UK, but not in
the European Union (EU) requirements that
Australia, Canada and the US. Most
mandated beneficial ownership registers of
significantly, trust and corporate service
trusts by June 2017.
providers and lawyers in those three countries
are under no obligation to conduct customer
Availability of information on real due diligence, identify the beneficial owner of
estate ownership legal entity clients or establish their source of
wealth.
+ None of the countries systematically collect
+ In the US, investment advisers are not even
beneficial ownership information for real estate
obliged to conduct customer due diligence on
properties.
their clients, while in Australia they are regularly
+ In France, Germany, the Netherlands and the exempted from these duties. However, no
UK, it is possible to cross-reference the real country covered in the study provides authorities
7TRANSPARENCY INTERNATIONAL
with direct and immediate access to information financial crime law enforcement units. Only Italy
on end investors of investment funds such as and the Netherlands consistently publish
hedge funds and private equity. budget and staff figures for their specialist units,
while the UK publishes this data for the Serious
+ Germany, France, Italy, the Netherlands and
Fraud Office only.
the UK have reporting obligations for dealers in
luxury goods. However, Australia, Canada and + Of the countries assessed, only Germany does
the US only include jewellers in anti-money not have a federal law enforcement unit
laundering obligations. dedicated to anti-corruption or to investigating
financial crimes. While the federal police are part
of the domestic task force, they do not have
III. NO IMPUNITY specialised anti-corruption or anti-money
laundering teams.
To break the cycle of impunity and money
laundering, the ultimate objective of multilateral Asset confiscation tools
efforts should be to confiscate and return stolen
+ France and the Netherlands do not allow for
assets to the victims. This is only possible, however,
non-conviction based confiscation with a civil
if countries can efficiently gather intelligence and
burden of proof, but others have some
investigate complex, cross-border cases.
mechanisms available.
Considering the likely challenges of prosecuting
kleptocrats for their involvement in corruption and + Only Australia and the UK have unexplained
other crimes, the use of tools such as non- wealth order tools available to law enforcement.
conviction based asset confiscation could play a Unexplained wealth can be confiscated for
pivotal role in ensuring some level of accountability. organised crime offences in Germany. France
Yet we found that the powers, resources and tools also has an illicit enrichment tool available to
available to the authorities tasked with freezing, prosecutors.
seizing and confiscating illicit assets are inadequate.
+ In addition, Australia, the UK and the US each
have mechanisms that allow for civil forfeiture
Financial intelligence units proceedings against assets that run independent
of or in parallel to criminal procedures.
+ The financial intelligence units (FIUs) are under-
resourced in the majority of countries covered,
particularly in the UK and the US, where FIUs RECOMMENDATIONS
received 5,300 and 10,130 suspicious transaction
reports – respectively – per staff member,
Russia’s invasion of Ukraine has shed new light on
according to most recent annual data. Even
the systemic weaknesses that allowed kleptocrats to
Germany’s FIU, which is relatively better find safe haven for their illicit wealth abroad. Until
resourced after a series of reforms, continues to the gaps identified across the assessed countries
face serious challenges in effectiveness and are addressed, multilateral efforts risk being
implementation of a risk-based approach. undercut by the same deficiencies that created a
+ When compared to the size of their economies, problem of this scale in the first place. To ensure
FIUs are insufficiently funded across all that kleptocrats – originating from Russia or
countries. Australia, followed by Canada, have elsewhere – can be effectively deterred,
larger budgets for their FIUs relative to other governments leading the efforts to freeze and seize
countries, but their FIUs also have additional illicit wealth should:
regulatory and supervisory responsibilities. 1. Pro-actively identify and freeze the assets of
France, the Netherlands, and particularly the kleptocrats. Governments should explicitly
UK and the US dedicate substantially fewer
mandate that their task forces trace the assets of
resources to their FIUs.
designated and corrupt individuals. They should
also go beyond “freezing to seizing” and aim to
Law enforcement agencies confiscate the assets when they are linked to
grand corruption and other crimes, following
+ Governments do not consistently publish budget due process. To that end, governments should
and staff data for specialised anti-corruption or prioritise reforms that grant necessary powers to
8UP TO THE TASK?
law enforcement to proactively trace and exposed persons, and report suspicious
investigate assets linked to sanctioned transactions to authorities. Those found to be
individuals. enabling Russian kleptocrats and other corrupt
individuals should be held to account.
2. Fast-track key transparency measures. All
remaining countries should establish and 4. Effectively resource financial intelligence
maintain central registers with verified units and law enforcement, as well as
information about the real owners of companies strengthen mechanisms for confiscating
– including foreign-registered companies buying assets. Countries should ensure that law
real estate – and trusts. All should ensure enforcement and financial intelligence units are
information is available publicly in open data empowered and well-resourced. To move
formats so that foreign authorities, media and beyond sanctions, they should also ensure that
civil society can access the information and they have civil and criminal mechanisms to seize
support accountability efforts. Authorities should and confiscate assets – including through
record and publicly disclose information about unexplained wealth orders or non-conviction
the real owners of assets, including end based forfeiture – and eventually return these
investors of hedge funds and private equities, assets to the victims of corruption.
yachts and private jets.
5. Strengthen multilateral efforts. The REPO
3. Regulate and hold to account all professional Task Force should expand its current
enablers of financial crime. Banks, corporate coordination efforts beyond just Russian elites,
service providers, lawyers, investment fund making both the multilateral and domestic task
managers, accountants, real estate agents and forces permanent. These task forces should
luxury goods dealers should be obligated to publicly report on their work, including on the
identify the beneficial owners of customers, assets frozen, investigations initiated and
conduct enhanced due diligence on politically confiscation efforts.
Photo: Henry Nicholls/Pool via REUTERS
9TRANSPARENCY INTERNATIONAL
INTRODUCTION
Russia’s invasion of Ukraine has shone a renewed light on the
mechanisms and networks that have allowed kleptocrats to hide
and launder proceeds of corruption and other crimes.
In response to the Russian invasion of Ukraine,
Western governments have scaled up targeted The challenges of sanctions as an
sanctions against the Russian political and economic anti-corruption tool
elite. With over half of the elite’s wealth estimated to
At their core, sanctions issued by Western
be held offshore – among the highest shares in the
governments in response to Russia’s invasion are
world – effectively going after the assets of Russia’s
an administrative tool aimed at changing political
kleptocrats poses a particular challenge.1
behaviour. They seek to restrict the ability of
Globally, kleptocrats favour countries with a strong designated individuals to move, invest or dispose
rule of law, political and economic stability, and of their assets and to coerce them into ultimately
advanced financial services as destinations for their halting or reversing political actions. Sanctions are
ill-gotten gains. To achieve impunity, they exploit implemented by requiring private sector actors to
weak defences against dirty money, the opacity of freeze the assets held by their sanctioned clients
companies and a range of assets, and the limited for as long as these individuals or legal entities
capacity of the authorities tasked with investigating remain so designated. Ownership of the assets,
and prosecuting crimes. They also rely on an array however, remains firmly in the hands of the
of private sector intermediaries ready and willing to designated individuals or entities.
help launder and invest their stolen fortunes.
In cases where the wealth of sanctioned
These weaknesses have also made the effective individuals is thought to be the result of grand
implementation of stringent sanctions on Russian corruption, questions of justice and accountability
elites extremely difficult. Ownership of assets is become paramount.
often not easy to prove for a variety of reasons,
As mere tools to freeze assets, administrative
which include the secrecy provided by financial
sanctions are insufficient to achieve justice when
centres, under-resourced and under-powered law
designated individuals could be also linked to
enforcement agencies, and the challenges of cross-
illegal activities. Rather, the ill-gotten assets of
border cooperation.2
kleptocrats need to be seized and confiscated with
The challenges of effectively tracing assets – be it to the ultimate goal of repatriation to the people they
implement sanctions or in the context of civil and have been stolen from. To accomplish this,
criminal investigations – are many. It is not designated corrupt individuals and their assets
surprising that back in 2004 asset tracing was need to be subjected to civil and/or criminal
already highlighted by the then Group of Eight (G8) investigations that follow adequate due process.
as an area in need of improvement.3 What is Justice can only be achieved if the rule of law is
surprising is that almost 20 years afterwards many respected and the relevant evidentiary standard
of the identified shortcomings remain problematic for confiscation is met.4
across today’s Group of Seven (G7).
10UP TO THE TASK?
Effectively tracing assets requires active The analysis covers REPO Task Force members
coordination between domestic authorities and Australia, Canada, France, Germany, Italy, the UK
their foreign counterparts. Success hinges on the and the USi as well as the Netherlands.ii We
authorities’ ability to connect information held in assessed the extent to which they have established
different jurisdictions to link assets conclusively with policies, measures and practices towards ensuring
their real owners. that kleptocrats have:
To coordinate their efforts and address these 1. nowhere to hide: transparency in financial
challenges, the governments of Australia, Canada, transactions, investments and asset ownership
France, Germany, Italy, Japan, the United Kingdom
2. no one to help: efforts to regulate gatekeepers,
(UK) and the United States (US), together with the
including corporate service providers, real estate
European Commission, have set up the Russian
agents and investment fund managers
Elites, Proxies, and Oligarchs (REPO) Task Force.5
3. no impunity: tools and resources available to
Transparency International welcomed the
law enforcement and financial intelligence units
establishment of the REPO Task Force in March
to investigate, seize and confiscate assets
20226 and called on countries in the West to adopt
key policies and strengthen enforcement to crack The comparative assessment encompassed the
down on the flow of dirty money.7 The success of analysis of national legal frameworks in the covered
the task force will depend largely on the ability of its countries as well as publicly available information to
members to achieve two principal objectives while gain insight into fitness for purpose of existing
respecting due process and the rule of law: systems. We also analysed available data to identify
gaps in private sector compliance and law
+ implement sanctions effectively as a means of
enforcement action. We sought to validate these
ending Russia’s aggression on Ukraine and
findings through consultations with country experts.
preventing the flight of assets that could be
subject to criminal or civil investigation To some extent, gaps in information – often due to
poor-quality data provided by governments – have
+ secure meaningful action against those assets,
limited the comparative analysis, and we have noted
individuals and entities where there is sufficient
where this is the case.
evidence of their involvement in corruption or
sanctions evasion Essentially, this study examines the extent to which
countries have the minimum conditions in place to
achieve their stated objectives. We sought to
ABOUT THIS REPORT identify, in particular, legal loopholes and
enforcement deficiencies that could prevent the
This paper assesses the ability of the authorities in effective implementation of sanctions, and pursuit
key countries to effectively implement sanctions, of corrupt actors and their illicit wealth. Going
trace assets and address any weaknesses in their forward, task force members should also release
legal frameworks that have permitted the inflow of detailed progress reports so an assessment of their
dirty money in the first place. efforts in practice can also become possible.
i
The research excludes an assessment of Japan owing to ii
While the Netherlands is not a member of the REPO Task
constraints in publicly available information. Force, the country’s FIU is a member of the FIU working
group that supports the intelligence-sharing efforts.
11TRANSPARENCY INTERNATIONAL
JOINING FORCES
Governments of advanced Western economies are now
coordinating their efforts to implement sanctions against Russian
elites. Majority of countries examined in this report have also set
up dedicated national task forces.
MULTILATERAL TASK FORCES NATIONAL TASK FORCES
Countries set up the REPO Task Force to cooperate Most countries assessed in the report have also set
more closely to “find, restrain, freeze, seize, and, up domestic task forces to support coordination
where appropriate, confiscate or forfeit” assets of among ministries, anti-money laundering (AML)
sanctioned individuals.8 It is their stated ambition to supervisory authorities, FIUs and law enforcement
track the assets of Russian elites, initiate criminal or agencies. These task forces aim to address practical
civil forfeiture proceedings where appropriate, and challenges in the implementation of sanctions, such
bring kleptocrats’ facilitators to justice.9 This has as clearly defining responsibilities where no
raised the need for the task force’s members to dedicated body exists to coordinate the efforts13
promote closer coordination between international and ensuring that information can be shared
counterparts10 but also across their own ministries between ministries and agencies in compliance with
and investigative agencies. privacy laws.14 In France, the Ministry of Economy –
which leads the national task force – and the
Competent authorities – financial intelligence units
Ministry of Justice are also tasked with finding a
(FIUs) in particular – have an important role to play
legal framework that would allow the confiscation of
in asset tracing. The members of the REPO Task
assets that are currently frozen.15
Force – joined by the Netherlands and New Zealand
– have also set up a dedicated working group of Some appear to be relying more on existing
FIUs. The working group aims to boost cooperation structures to ensure coordination among
between and with authorities in the task force’s authorities. Of the analysed countries, three –
member countries, including by expediting and Australia, Canada16 and Italy – have not set up
increasing intelligence sharing.11 dedicated task forces to deal with Russia-related
sanctions. In Italy, a pre-existing committee on
The European Union (EU) has established a
financial security is responsible for ensuring
dedicated Freeze and Seize Task Force whose
sanctions compliance and coordinating between
objective is to ensure EU-wide cooperation to
government agencies.17
implement sanctions and confiscate assets where
national law allows for it, also in coordination with
the REPO Task Force.12
12UP TO THE TASK?
Table 1: Overview and mandates of country-level task forces for Russia sanctions
Country Task force Mandate
Australia
Canada
France Coordinate implementation and strengthen EU sanctions enforcement
Germany Coordinate implementation and strengthen EU sanctions enforcement
Italy Pre-existing committee that now coordinates EU sanctions enforcement
Netherlands Coordinate implementation and strengthen EU sanctions enforcement
Task force with mandate to coordinate government efforts to identify individuals
to sanction
New dedicated law enforcement unit Combating Kleptocracy Cell tasked with
investigating “corrupt elites”
United Kingdom
Enhanced inter-agency efforts to coordinate sanctions implementation led by
Dedicated sanctions
dedicated Office of Financial Sanctions Implementation (OFSI)
implementation body
OFSI granted statutory powers to request information from obliged entities on
and dedicated task force
sanctioned entities
Task force mandated with asset tracing as well as coordinating implementation
and strengthening sanctions enforcement
United States Office of Foreign Assets Control (OFAC) dedicated to administering and enforcing
Dedicated sanctions
sanctions
implementation body
OFAC has enforcement authority against entities and individuals found to be
and dedicated task force
evading sanctions
– yes; – no
France,18 Germany,19 the Netherlands,20 the UK21 Sanctions Implementation (OFSI). OFSI, which
and the US22 have each set up distinct domestic task otherwise leads the compliance and enforcement of
forces with the mandate of implementing the Russia sanctions, has explicit statutory powers to compel
sanctions. While the REPO Task Force was obliged entities to produce evidence and
established with a broader mandate of asset documentation on the nature and amount of funds
freezing and civil and criminal asset seizure,23 the held or controlled by designated persons.25 It can
existing national-level task forces – except for the US also demand documentation to detect or obtain
task force – are less ambitious at least in their stated evidence of the commission of a criminal offence.
goals. Most of them mention only the However, it does not have a mandate to take steps
implementation or enforcement of sanctions as beyond sanctions, such as the confiscation of assets.
their objective, but do not provide any details of
In the US, the domestic law enforcement task force
how this can be achieved.
KleptoCapture has a distinct mandate to conduct
In the UK, the Foreign, Commonwealth and active asset tracing to support sanctions
Development Office (FCDO) established a task force implementation.26 One of its primary objectives is to
“to coordinate cross-government work to sanction identify and crack down on sanctions evasion. This
oligarchs, helping to build cases against the list of approach has, in turn, enabled the confiscation of
oligarchs it has identified as targets”.24 However, the frozen assets by linking them to the crime of
government did not specify how the task force was sanctions evasion.27 In addition, the US has
to work with existing structures such as Her launched the Kleptocracy Asset Recovery Rewards
Majesty’s (HM) Treasury Office for Financial Program, which offers rewards payments for
13TRANSPARENCY INTERNATIONAL
information leading to the seizure, restraint or the Netherlands task force has stated it is merely
forfeiture of assets linked to foreign government “re-examining” whether there are companies or
corruption more widely.28 In April 2022, the White individuals whose assets could be frozen.
House further proposed a legislative package that
This distinction in mandate is important as
would create a criminal offence “making it unlawful
kleptocrats’ assets are usually hidden behind layers
for any person to knowingly or intentionally possess
of secrecy provided by shell companies and trusts,
proceeds directly obtained from corrupt dealings
often registered in the name of nominees, proxies
with the Russian government”.29 The proposal aims
and family members33 across different countries.34
to streamline the US government’s efforts to seize
The approach of only trying to match the name of
and forfeit Russian kleptocrats’ assets.
designated individuals to assets or relying on
In the UK, the National Crime Agency (NCA) has set obliged entities – such as financial institutions,
up a new Combating Kleptocracy Cell which is lawyers, real estate agents and accountants – to
tasked with investigating corrupt elites through their freeze assets is unlikely to yield good results.
assets, targeting key enablers and supporting
Active efforts to link high-value assets to their actual
sanctions enforcement.30 This mandate appears to
beneficial owners are therefore paramount to
cover corrupt elites worldwide and is not focused on
effective sanctions implementation. This will often
just Russian or Belarusian kleptocrats. The NCA
require investigations and the exchange of
states that the unit has a dedicated budget, but the
information between the relevant authorities. With
exact budget has not been made public.31 It also
only the US giving this mandate to its domestic task
remains unclear how the responsibilities of the new
force, large amounts of assets belonging to
unit are coordinated with existing anti-corruption
sanctioned individuals will remain untouched.
coordination and investigation bodies such as the
International Corruption Unit or the National It is also unclear to what extent the recently created
Economic Crime Centre. task forces and their members have been properly
resourced. Only the US has published information
Other task forces are primarily tasked with
on the budget available to KleptoCapture and
coordinating implementation and ensuring
publicised plans to turn it into a permanent task
compliance enforcement in the private sector and it
force.35 The US has stated that it will establish a
is not clear to what extent they will or even can
dedicated “kleptocracy team” focused solely on
engage in proactive asset tracing. In fact, there are
Russia with an annual budget of US$3.5 million. The
discussions on whether proactive asset tracing in
UK’s Combating Kleptocracy Cell is also intended to
the form of requesting information from obliged
be a permanent unit, but the government has not
entities or other competent authorities, consulting
detailed long-term funding plans.
existing government databases, requesting or
sharing information with foreign counterparts and
performing other types of investigative work can be
initiated by law enforcement and FIUs in the context The success of the REPO Task Force and the
of sanctions (that is, whether the fact that someone national task forces, where they exist,
has been designated is sufficient to trigger proactive depends to a great extent on the
asset tracing).
authorities’ ability to successfully link
In Germany, for example, law enforcement can only assets to Russians of interest and take
initiate investigations into the ownership of assets additional steps to seize, confiscate and
owned by foreign legal entities if there is an initial return those assets to the victims of
suspicion that an asset is the proceeds of a crime.32
corruption.
As the sanctioning of individuals does not constitute
such a suspicion, no investigations into complex
ownership structures can be undertaken. Similarly,
14UP TO THE TASK?
I. NOWHERE TO HIDE
Dragged-out reforms and insufficient implementation of key
transparency measures – the very same deficiencies that
kleptocrats have abused for decades – risk undermining
accountability efforts.
For years, kleptocrats and the corrupt have been
using anonymous companies and trusts to hide Anonymous companies and trusts have
their identity and the source of their money when made it easier for kleptocrats to purchase
investing and laundering the proceeds of grand real estate or other luxury goods
corruption. What’s more, they have been able to throughout the countries covered by the
leverage such assets to influence elections, sway research. Now, the lack of transparency is
decision-making and launder their reputation. This making it much more difficult for the
is particularly true of Russian kleptocrats.36 authorities to trace assets connected to
Transparency International’s analysis of the Russian them, enabling the elites to remain
Asset Tracker37 – an effort by investigative unpunished.
journalists coordinated by the Organized Crime and
Corruption Reporting Project (OCCRP) – illustrates
the pattern well. When launched, the tracker
contained information on 11 sanctioned individuals
This section assesses the likelihood that the
and 149 assets connected to them, ranging from
assessed countries will have at their disposal
real estate and yachts to company shares. Only in
sufficient and actionable information on the
two cases were the assets registered in the name of ownership of companies, trusts and assets to
the individual. In all other cases, the assets were support sanctions implementation as well as civil
held through legal entities or trusts and often and criminal investigations. It also sheds light on
through complex ownership structures. The how prepared countries are to prevent their
structures frequently made use of companies or
companies, trusts and real estate sectors from being
trusts set up in secrecy jurisdictions like Cyprus,
abused by kleptocrats in the future.
Bermuda, the British Virgin Islands and the Isle of
Man.
15TRANSPARENCY INTERNATIONAL
approach is not satisfactory and that it hinders
BENEFICIAL OWNERSHIP TRANSPARENCY timely access to information by the competent
OF COMPANIES authorities.44 In this context, the absence of a
centralised register of beneficial ownership
The use of anonymous companies is one of the information presents a major gap to address.
main methods used by kleptocrats to hide their
In Canada, the government has accelerated the
wealth. The challenges faced by REPO Task Force
timetable to implement a centralised, public register
countries to freeze assets held by sanctioned by 2023.45 However, draft amendments to the
individuals are largely a result of the complex Canada Business Corporations Act have not yet
ownership structures of companies set up in secrecy been published.
jurisdictions with the help of a long list of
professional enablers.38 Corrupt individuals can Italy lags significantly behind in the implementation
register such companies in countries with limited of the EU’s 5th Anti-Money Laundering Directive
ownership disclosure requirements and use (AMLD), which required all EU Member States to
nominee directors and shareholders to manage establish public beneficial ownership registers by
their companies for them.39 Frequently, family January 2020.
members or close associates are also named as In the US, Corporate Transparency Act of 2020
beneficiaries in order to obscure the true ownership authorises the creation of a centralised register
of the company buying an asset. containing beneficial ownership information of
Our research shows that despite the commitments companies. The register, however, will not be open
and pledges to improve company ownership to the public.46 The Financial Crimes Enforcement
transparency made by REPO Task Force countries in Network (FinCEN) has recently consulted
different international fora – such as the G7, G20 stakeholders on the implementation of the register
and the Financial Action Task Force (FATF) – the in the US47 and, at this stage, the exact features of
current rules and practices are still far from the register are still unclear.
satisfactory. Australia lags even further behind. No concrete
Australia,40 Canada,41 Italy,42 and the US43 still rely steps have been taken to implement commitments
on information collected by financial institutions to under the G20 High Level Principles adopted at the
be able to identify the beneficial owner of 2014 Brisbane Summit and the country’s own 2016-
companies. The FATF has now agreed that this 2018 Open Government Partnership Action Plan.48,49
Table 2. Progress with the establishment and accessibility of beneficial ownership registers for companies
Registration
Country Central register in place Public access Free access
requirement
Australia
Canada
France
Germany
Italy
Netherlands
United Kingdom
United States
– yes; – no; – forthcoming; – will be; – will not be
16UP TO THE TASK?
Only France,50 Germany,51 the Netherlands52 and the benefit of the “beneficiaries”. One of the
the UK53 have central beneficial ownership registers challenges in tackling the misuse of trusts is that
that are up and running. In all four countries, access control and ownership are explicitly separate and
to the register is open to the public. In France and multiple individuals with different roles (settlor,
the UK, access is free of charge. In the UK, beneficiary, trustee) could qualify as beneficial
moreover, information is also available in open data owners. Such trust structures are often combined
format and the government has recently announced with complex ownership constructs using multiple
its commitment to implement the Beneficial anonymous companies to further obscure the
Ownership Open Data Standards.54 ultimate beneficial owner.59
In Germany and the Netherlands, certain Our research shows that, as with the register of
restrictions such as registration requirements, fees beneficial owners of companies, countries are
and limited search functions limit the usability and lagging behind in their commitments to improve the
effectiveness of the register.55 transparency of legal arrangements.60 Only three of
the covered countries have a register with beneficial
In the Netherlands, delays in the implementation of
ownership information for trusts. As with the
the register have meant that companies are taking
companies, the lack of a trusts register presents a
longer to populate it. Companies had until 27 March
substantial gap in Australia,61 Canada,62 Italy,63 the
2022 to submit information on their beneficial
Netherlands64 and the US.65
owners to the register. The government estimates
that only around 52 per cent of Dutch companies In the US, even under the approved Corporate
complied with this deadline, with information on Transparency Act, newly imposed beneficial
700,000 to 800,000 companies still outstanding.56 ownership reporting requirements will not apply to
These low levels of compliance further restrict the most types of trusts.
ability of the register to be used as an effective
Italy and the Netherlands lag significantly behind
transparency tool.
their EU counterparts in implementing the register
Another challenge relates to the accuracy of the of trusts by June 2017 as stipulated by the EU’s 4th
information in existing registers. At present, none of AMLD.66 The EU 5th AMLD later requires member
the countries has put in place effective verification states to ensure individuals with legitimate interest
mechanisms, whose absence limits the reliability gain access to the register, which Italy and the
and therefore the usefulness of the registers. Netherlands have also not met.67 The delay poses a
Register authorities do not have the mandate and substantial weakness in both countries’ defences
consequently the resources to undertake any against dirty money. The Netherlands is of particular
independent checks on the information provided by concern owing to the importance of Dutch
companies or beneficial owners. companies in providing trust services worldwide.68
In France, greffiers (court clerks) are responsible for The Netherlands is expected to implement the
verifying beneficial ownership data submitted to the register in 2022, although the date will be confirmed
register.57 However, there is no information either via a separate Royal Decree that remains pending at
on the types of verification mechanisms used or on the time of writing. Italy has approved the necessary
the number of audits conducted. The stable legislation for the register of trusts but the relevant
employment figures at the National Council of implementing decree is also pending. France69 and
Clerks of Commercial Courts since the introduction the UK70 have put in place beneficial ownership
of the new obligation in 2016 also raise questions registers of trusts that are free to use. However,
about whether they are adequately staffed and they require the demonstration of a “legitimate
resourced to effectively undertake the task.58 interest” to access the information. In practice, this
requirement may restrict access to the information
as requestors would need to provide evidence of
BENEFICIAL OWNERSHIP TRANSPARENCY how the information would help them further
investigations into financial crime.
OF TRUSTS
Germany71 is the only analysed country with a
Trusts are another preferred vehicle of kleptocrats register of trusts that is accessible without having to
as they enable property or assets to be managed by demonstrate a legitimate interest. However, as it is
one person on behalf of another. In a trust, the included in the joint transparency register
original owner (“settlor”) transfers assets into a (“Transparenzregister”), obtaining information
trust, to be held and managed by the “trustee” for requires the payment of a fee and prior registration.
17TRANSPARENCY INTERNATIONAL
Table 3: Progress with the establishment and accessibility of beneficial ownership registers of trusts
Country Register in place Public access Free access
Australia
Canada
France
Germany
Italy
Netherlands
United Kingdom
United States
– yes; – no; – forthcoming; – partial: access by legitimate interest; – will be; – will not be; – will be partial
TRANSPARENCY OF REAL ESTATE Real estate registers
OWNERSHIP
To start with, access to relevant real estate data,
including ownership, is limited across countries
The real estate sector has been an easy and
included in the research.
convenient place for kleptocrats to secretly launder
or invest stolen money and other illicitly gained Australia,73 Canada,74 Germany75 and the US76 do
funds. As scandals have shown, property is often not have centralised registers of land or real estate
purchased through anonymous shell companies or ownership. The information is maintained by
trusts without proper due diligence by the subnational registers, with varying rules regarding
professionals involved in the deal. In 2017, the types of information that is collected, disclosed
Transparency International’s research showed that and how it can be accessed.77 Public access to
the ease with which such anonymous companies or information is often restricted or made more
trusts can acquire property and launder money in difficult, for example by charging a fee,iii requiring
the attractive real estate markets of Australia, the demonstration of a legitimate interest,iv or poor
Canada, the UK and the US is directly related to levels of digitalisation.v
insufficient AML rules and enforcement practices.72
With a few exceptions, none of the countries
This analysis finds that the lack of transparency in currently collects information on the beneficial
the real estate sector remains a major issue. It also owner of properties owned through legal entities
finds that additional gaps in existing frameworks and trusts. In countries that have beneficial
challenge the efficacy of recently approved ownership registers, such as France, Germany, the
transparency measures. Netherlands and the UK, it is possible to cross-check
the data with the relevant beneficial ownership of
companies register, provided that the company is
registered in the country.
Australia, British Columbia in Canada, France, Germany,
iii v
Germany, France, Italy, Scotland and Northern Ireland in
Italy, the Netherlands and partially the UK the UK, and the US
iv
Germany
18UP TO THE TASK?
In Canada, British Columbia introduced a register information about beneficial owners. The register is
that contains the names of beneficial owners of any a particularly welcome transparency measure in
company, trust or partnership owning real estate. Canada, despite drawbacks like search fees and a
The authority administering the register can issue lack of data verification, for being the first-of-its-kind
fines for failing to declare or for providing false in the country.
Table 4. Overview and accessibility of real estate ownership registers
Availability of beneficial
Availability of data on
Type of ownership data on
Country Availability of data the beneficial owners
register foreign owners of
of properties
properties
Depending on the register, access is free or
Australia Subnational requires a fee. Digitalisation of documents is
uneven.
British Columbia has a public land ownership
transparency registry that is accessible online for
Canada Subnational British Columbia: British Columbia:
a fee. Other provinces have registers containing
legal ownership data available for a fee.
Information on private real estate ownership
only available on request or from authorities.
Centralised Information about real estate owned by legal
France & entities available online in open data format.
subnational Property extracts with historical data and
detailed information available from sub-national
registers for a fee.
Access to regional registers is restricted to
people with a “legitimate interest”. Information
Germany Subnational
can be requested online but many documents
are not digitised.
Access to the online portal requires the payment
Italy Centralised
of a fee.
Publicly accessible for a fee and the large
Netherlands Centralised
majority of documents are digitalised.
Real estate data available in national registers
(England and Wales, Northern Ireland, General
United
Subnational Register of Sasines and a new land registry in
Kingdom
Scotland). Access is available online for a fee with
some information available for free.
Real estate data available at county-level. This
data is not recorded in a standardised way and
United States Subnational
information is hard to search, including for law
enforcement.78
* – foreign companies can buy real estate without registering or otherwise declaring their beneficial owners
– yes; – no; – partial: possible to cross-reference with the beneficial ownership register for properties owned by
domestically incorporated companies; – forthcoming
19TRANSPARENCY INTERNATIONAL
Real estate ownership through revealed there are still almost 90,000 properties in
England and Wales that are owned by opaque
foreign companies offshore companies.88 The government made
commitments back in 2016 to address the issue.89
Six of the eight countries covered by the research
Only now, with the invasion of Ukraine, has the
have a substantial loophole in their legal framework
government found parliamentary time to deliver on
that makes their real estate sectors vulnerable to
the commitment to introduce transparency over
dirty money, despite the recent adoption of
who really owns offshore companies holding UK
transparency measures.79 In Australia,80 Canada,81
property through the Economic Crime
France,82 Italy,83 the Netherlands84 and the US,85
(Transparency and Enforcement) Act 2022.90
foreign companies are currently not required to
disclose their beneficial owners to purchase a In Australia and Canada, there is no systematic
property. Furthermore, as they are allowed to capturing of beneficial ownership data on property
purchase real estate property without having to owners at all, except for the Canadian province of
register a branch or subsidiary in the country where British Columbia.
the property is located, the disclosure rules followed
Only in Germany are foreign companies currently
by domestic companies, including those on
required to register with the country’s beneficial
beneficial ownership, also do not apply.
ownership register in order to invest in real estate.91
In France and the Netherlands,86 the beneficial Notaries are required to verify the registration with
owner of properties owned through French or Dutch the transparency register before notarising the
companies can be identified by cross-checking the purchase.
data with the information in the beneficial
The EU Anti-Money Laundering Package proposed
ownership register of companies. Information on
by the European Commission in July 2021 also aims
the beneficial owner of properties owned through
to close the loophole.92 Specifically, it would require
foreign companies, however, is not available at all.
foreign companies purchasing real estate or
In such cases, finding the real owner of a property
engaging with obliged entities across Member
will depend on whether the company’s country of
States to declare their beneficial owners to the
incorporation has a beneficial ownership register.
company beneficial ownership registers. At the time
Upcoming research by the Anti-Corruption Data
of writing, the package is still being debated in the
Collective, Transparency International and
European Parliament.
Transparency International France estimates that
about 25,000 properties owned by legal entities in
France are owned through foreign companies
directly, without their registration in French
TRANSPARENCY OF LUXURY GOODS
company register. No information on the real OWNERSHIP
beneficial owners of these companies is available.
The same loophole will also affect Italy and the US None of the countries covered in the analysis
after their planned beneficial ownership registers collects and publishes the beneficial ownership of
are put in place. So far, the Corporate Transparency registered yachts or private planes systematically.
Act does not include provisions to create a More often than not, yachts and planes are owned
requirement for foreign companies buying real by legal entities, often incorporated in secrecy
estate to submit information to the beneficial jurisdictions. As with real estate purchases by
ownership register. In Italy, foreign companies can foreign companies, this allows kleptocrats to
buy real estate without having to register locally.87 circumvent transparency rules in countries that do
Unless the new regulation on the establishment of a not require foreign companies to register their
beneficial ownership register of companies includes beneficial owners. They can avoid scrutiny
disclosure requirements for foreign companies, altogether in countries that do not have beneficial
there will be a gap. ownership registers at all. No country collects
beneficial ownership information in their registers
In the UK, the loophole has been systematically of vessels or aircraft.
highlighted by civil society organisations in recent
years. Research by Transparency International UK
20UP TO THE TASK?
Table 5. Availability of beneficial ownership information for luxury goods
Country Yachts Private planes
Australia
Canada
France
Germany
Italy
Netherlands
United Kingdom
United States
– no
Photo: Juan Poyates Oliver/Handout via REUTERS
21TRANSPARENCY INTERNATIONAL
II. NO ONE TO HELP
National frameworks have significant gaps when it comes to
regulating gatekeepers of the financial system. But even in
countries where anti-money laundering obligations extend to key
professions, compliance remains patchy.
As various cases have shown, any business financial gatekeepers. In the three countries, some
transaction done by Russian kleptocrats in Western of these professionals are under no regulatory
economies will have been undertaken with the help obligation to undertake customer due diligence,
of a wide array of lawyers, accountants, bankers, identify the beneficial owner of legal entity clients or
investment advisers or real estate agents. These identify their source of wealth. They also do not
gatekeepers are as crucial for the functioning of the need to report suspicious transactions to
legitimate financial system as they are for the authorities.
integration of dirty money. As such, they are
Even more significantly, in Australia,93 Canada94 and
uniquely placed to identify and report on criminals
the US,95 neither trust and corporate service
or sanctioned individuals seeking to evade scrutiny.
providers nor the legal profession have any
This section assesses the comprehensiveness of regulatory AML obligations.vi Among the array of
national frameworks to regulate the priority services that lawyers can provide to corrupt
gatekeeper sectors of real estate agents, lawyers, individuals is the important service of setting up and
trust and corporate service providers, and administering companies and trusts. In addition,
investment fund managers. It also investigates lawyers often act as nominees or trustees, acting in
whether there is evidence of at least minimal accordance with the fiduciary requirements set up
compliance by the private sector and identifies by the settlor.
where there are clear and obvious gaps that need to
Real estate professionals do not fall under AML
be addressed.
regulation in Australia or the US. This is a serious
vulnerability, especially given the lack of
ANTI-MONEY LAUNDERING REQUIREMENTS transparency in property ownership.
In line with the EU rules, France,96 Germany,97 Italy98
FOR GATEKEEPERS and the Netherlands99 impose AML requirements on
gatekeeper professions. So does the UK.100
In contravention of global AML standards, Australia,
Canada and the US have not regulated all key non-
vi
In Australia, current loopholes in the system allow non- ultimate beneficiaries are kept hidden, allowing opaque
licensed third-party providers to sell nominee director or business structures to flourish.
shareholder services, ensuring that the real identities and
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