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Company ownership secrecy prevails in Southeast Asia, UN report says

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Southeast Asian countries are lagging behind in the adoption of registries with information on companies’ true owners, a tool deemed crucial to fight corruption, money laundering and terrorism financing, according to a report by the United Nations Office on Drugs and Crime.

“While transparency in the banking sector is somewhat regulated,” the report said, “countries in Southeast Asia are considered to be very secretive when it comes to the transparency of ownership of legal entities and other forms of wealth.”

The U.N. estimates that the region generates about $100 billion a year from sources such as the illegal trafficking of timber, drugs, and migrants. Countries such as Malaysia, Indonesia and Thailand are among the top 10 generators of illicit flows, according to Global Financial Integrity, a research organization.

Making the disclosure of company beneficial ownership mandatory would help eradicate financial crimes because it would allow authorities as well as the public to see who’s behind a transaction or a deal.

FinCEN Files, an investigation by the International Consortium of Investigative Journalists, recently found that lack of publicly available information on company ownership hampers client due diligence and anti-money laundering checks by banks.

Bank employees in charge of monitoring illicit money transactions are often unable to identify the beneficiaries of companies based in secrecy jurisdictions and stop dirty cash flows in time, FinCEN Files revealed.

Beneficial owners are “natural persons” who ultimately own or control an entity, according to the definition by the Financial Action Task Force, an inter-governmental body that develops anti-money laundering policies.

In Southeast Asia, the level of transparency varies between countries in the region with Thailand and Cambodia ranking among the most secretive. Those countries don’t publish complete information on company and wealth ownership, according to the UNODC analysis – which doesn’t include countries such as Singapore or Brunei.

The agency also mentioned real estate as a particularly secretive sector where lack of owner information may be a hindrance to law enforcement, as previous research has shown.

When information on property owners is not recorded and reported, properties can be purchased using illicit funds to launder money, embezzle funds or bribe politicians without any oversight, according to a study by Transparency International.

Here’s an overview of ownership secrecy in Southeast Asia:

Indonesia

Indonesia is the only country in the region with a full-fledged beneficial ownership registry. New corporate transparency rules were introduced in March 2018 in an effort to prevent and combat illicit activities, protect corporations and shareholders, and to recover assets in an effective manner. Information on company ownership must be updated regularly and is available for a fee.

Malaysia

Malaysia is moving to make beneficial ownership disclosure mandatory for most companies. According to the new guidelines, companies are required to keep the information at their offices, ensure its accuracy and provide it to law enforcement if necessary. Beginning in 2021, they will have to notify the registry.

“Not having strong beneficial ownership legislation is not an option,” the Malaysian Anti-Corruption Commission’s chief commissioner Latheefa Koya told reporters last year, according to Mongabay.

The country was recently engulfed in one of the world’s biggest financial scandals involving Malaysian sovereign wealth fund 1Malaysia Development Berhad, or 1MDB. It resulted in a 12-year prison sentence for Malaysia’s former prime minister Najib Razak, who was found guilty of corruption and other crimes in July. He has appealed the verdict.

Myanmar

Companies in the extractive sector that want to apply for a license have to provide information about their real owners. The registry for these companies is publicly available.

The Philippines

Beneficial ownership information is required for companies in the extractive sector but such information has not been reported yet “due to data privacy concerns,” according to the UNODC report.

The Philippine Security and Exchange Commission also requires all SEC registered stock and non-stock domestic corporations to disclose ownership. However, the information is not publicly available.

Cambodia

The country doesn’t have a mechanism to record or report beneficial ownership information, and the definition of “beneficial owner” remains unclear. Only a business registry with basic company information is available.

In 2018, Irrawaddy reporters used Paradise Papers documents to reveal how the wife of a powerful Cambodian army chief had used shell companies to obtain coal mining licenses in the North. Global Witness experts consulted by Irrawaddy said the structure may have been set up “with the explicit purpose of obscuring the real owners of the Cambodian company.”

Thailand

Like Cambodia, Thailand doesn’t have a mechanism to record or report beneficial ownership information. Only basic company information is available to the public.

The next step: verifying the information

Despite recognizing some developments in the region, the UNODC report concluded that all countries in Southeast Asia must ensure that information on owners is recorded and verified.

Without that, “law enforcement agencies will encounter significant challenges in detecting and investigating suspicious cases, and financial institutions will not be able to carry out reliable due diligence on their customers,” it said.

Experts agree that many governments should do more to regularly check whether the information provided to them is accurate in order to prevent stolen identity cases where innocent people may beare used in lieu of real owners.

“Verification is a big challenge that many [Southeast Asian] countries face,” UNODC’s Cornelia Koertl said during a September 29 webinar.

Koertl said that she observed some recurring “tendencies” across the region. In some cases, owner verification is not mentioned in a country’s regulation and, in others, information is verified only “when necessary,” without specifying further criteria, she said.

Experts on the panel agreed that verification is also a widespread problem in countries such as the U.K. that have a more developed company registry.

During the FinCEN Files investigation, reporters tracked down a Belgium-based dentist named Ali Moulaye who had his signature on financial statements for 385 U.K. shell companies flagged in banks’ suspicious activity reports.

Shown some of the documents bearing his signature and asked for an explanation, Moulaye said he knew nothing about it. “My signature can be falsified by anybody,” he said. “ I know nothing about it. I am a dentist. I don’t need to do such things.”

Moulaye was never charged with wrongdoing.

After FinCEN Files reporters inquired about the U.K. business registry’s flaws, the government announced reforms to Companies House in order to “clamp down on fraud.” Moving forward, the registry will verify company directors’ identity, and investigate and remove false information.

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Election Integrity

Analyzing the Case for Election Fraud

Despite the overwhelming pressure, if you can’t help but feel that tingling sense of knowing that is telling you there’s more to the story, you are not alone. In fact, according to a new Rassmussen poll, nearly 50% of voters believe the election had issues. A quick look at the data blatantly shows that indeed, shenanigans abound (how can a state have 1+ million more mail-in ballots tallied than they sent out?). But was it fraud or masterful gamesmanship?

Adryenn Ashley

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The world, or at least the global media, has spoken: Biden won the 2020 Election.

UPDATED FREQUENTLY WITH NEW INFORMATION – Last update 12/21/2020

A quick Google search reveals pages upon pages of reports of why the Trump team’s assertions of vote fraud and election fraud and vote flipping are flat out fallacies. YouTube has announced a ban on any videos questioning the election results. And now on Monday all 538 electors have voted, formalizing Biden’s 306-232 win. And while there is still Congress to get through, and the inauguration, based on social media and television news and practically every other point of information bombarding society today, Biden is now the President-elect.

But why now, after Government officials confirmed during Senate testimony that a foreign adversary, Russia, attempted to interfere in the 2016 United States Presidential Election via “a multi-faceted approach intended to undermine confidence in our democratic process.” According to U.S. intelligence official reports, Russia targeted voter registration databases in at least 21 states and sought to infiltrate the networks of voting equipment vendors, political parties, and at least one local election board. And if their purpose was not so much to “hack” the election but create chaos and sow seeds of uncertainty around our election process, I would say they have won. But what if this cycle, it was Russia who somehow manipulated extra ballots and placed the blame on the Democrats? What if…?

Russian Experience With Voter Fraud

The 2004 presidential election in Ukraine saw suspiciously high turnout rates that “even Stalinist North Korea would envy,” the State Department declared!

Back then, the U.S. government decried as corrupt an earlier election where special voting boxes were created to help citizens vote from home, election observers were expelled from vote counts, pre-election polls were wildly off, and voter turnout in certain communities exceeded 90%.

But the story of that Ukrainian election as recounted by then-Ambassador John Tefft to a Senate committee in December 2004 raises a tantalizing question for voters distrustful of the Nov. 3 elections results in our own 2020 Presidential Election: If tactics and outcomes in the Ukrainian election back then were enough to cry foul, why can’t Americans debate similar concerns here?

Tefft’s testimony raises an important question: Should America, the greatest democracy in the world, share any of the fraudulent attributes of a Ukrainian election? The answer for most Americans is hopefully resounding “No.”

And despite continued and repeated headlines that there was no fraud, according to the Harvard Kenney School report on Election Integrity this cycle, expert assessments indicate that compared with 2016, the performance of this contest displays several warning flags, namely worsening confidence in the integrity of American elections and falling public trust, challenges to legitimacy arising from threats of campaign violence,legal disputes about the process and results, and public protests about the outcome, as well as growing attempts at voter suppression. 

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Investigations

Advocates celebrate major US anti-money laundering victory

Landmark laws to thwart the use of U.S. shell companies by terrorists, human traffickers, arms dealers and kleptocrats are set to be enacted after more than a decade of lobbying and politicking with rare bipartisan support.

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Advocates celebrate major US anti-money laundering victory

The sweeping anti-money laundering reforms hitched a lift in the annual defense spending bill that passed the Senate 84-13 today, and was approved by the House 355-78 earlier this week.

The Corporate Transparency Act requires U.S. companies to report their true owners to the Treasury Department’s Financial Crimes Enforcement Network, known as FinCEN — largely ending anonymous shell companies in the country.

The International Consortium of Investigative Journalists has repeatedly documented how the rich, the powerful and the criminal have used anonymous entities to hide their wealth, including in the 2016 Panama Papers and the 2020 FinCEN Files investigations.

Welcoming the clampdown, Transparency International’s U.S. director Gary Kalman said, “It is rare for such a simple measure to promise such an enormous impact.” Kalman added that the long sought anti-corruption reforms would “move us into a new era of enforcement.”

The new legislation will allow law enforcement agencies and financial institutions to request company ownership information from FinCEN. The data will not be publicly available.

FinCEN Files was based on a trove of suspicious activity reports filed by banks and other financial institutions to FinCEN. BuzzFeed News obtained the secret documents and shared them with ICIJ and more than 100 other media organizations.

The global investigation exposed how a broken U.S.-led enforcement system allows banks to continue to profit from moving dirty money tied to drug cartels, trafficking rings fueling the opioid crisis, fraud, organized crime, sanctions evasion, ruinous real estate schemes, and terrorism.

“Too many times, people … think money laundering is a federal, victimless crime. It is certainly not that,” Sen. Sherrod Brown of Ohio, the top Democrat on the Senate banking committee, told reporters on a call organized by the advocacy group the FACT Coalition. “Sinaloa cartel actors, fentanyl traffickers have been destroying thousands of families in my state and across the country.”

Earlier this year, Brown credited FinCEN Files for revealing the lack of forceful enforcement against banks that repeatedly violate the law. Advocates said a number of proposed bipartisan bills, including one co-sponsored by Brown, were instrumental in generating the support needed to attach the reforms to the spending bill.

“This is a really big deal to get this passed,” Brown said Thursday. “No more hiding these abuses in anonymous shell companies. It also cracks down on bank officials who look the other way or actively aid money laundering.”

A long time coming

ICIJ has shown how offshore shell companies have been used for dubious financial dealings and tax avoidance through a series of global exposés, including the Secrecy for Sale investigation, Panama Papers and Paradise Papers. U.S. lawmakers have repeatedly cited the investigations in proposing reforms over the years.

Countries like the United Kingdom, Indonesia and members of the European Union also took steps toward ending anonymous shell companies in response to ICIJ reporting.

“When the Panama Papers leaked, there was a huge flurry of interest because there’s all of a sudden this recognition that it was kleptocrats, money launderers, corrupt officials the world over, as well as criminals, were all using a very common structure to help evade law enforcement, which was setting up an anonymous company,” Lakshmi Kumar, policy director of Global Financial Integrity, said.

The phenomenon is not limited to the exotic offshore tax havens of popular imagination. U.S. jurisdictions like Delaware, Wyoming and Nevada are among the world’s top locations to set up anonymous companies. Legislation to require corporations to disclose their true owners was first proposed in the U.S. over a decade ago, co-sponsored by then-senator Barack Obama, and similar bills have been introduced over the years.

Advocates credit years of lobbying a broad coalition of stakeholders, including the U.S. Chamber of Commerce which had previously been a leading opponent, in getting the reforms across the finish line this year.

“What’s changed now is a growing understanding among various constituencies about the harms that anonymous companies pose, and the threats that they pose for our financial system, to our businesses,” Clark Gascoigne, senior policy advisor at FACT Coalition, said.

But it’s not a done deal quite yet.

Although the anti-money laundering proposals have had the support of the administration, President Donald Trump has repeatedly threatened to veto the National Defense Authorization Act over provisions unrelated to financial secrecy.

Both the House and the Senate votes surpassed the two-thirds margin that would be needed to override a veto, although some Republicans have indicated that they would not support what would be the first veto override of the Trump presidency.

But the NDAA has been reliably passed by Congress every year for six decades and advocates are confident that the time has come for the landmark financial transparency measure that’s included in the omnibus bill.

“It’s one of the few areas where the outgoing Trump administration agrees with the incoming Biden administration,” Gascoigne said. “It may be the first bill in the history of Congress that has the support of both Dow Chemical and Friends of the Earth. Heck, the state of Delaware even supports reform.”

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Investigations

Muslim Brotherhood suspect and Saudi billionaire linked to same offshore companies, Austrian report says

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One of 30 people in Austria suspected to be members of the Islamic fundamentalist group Muslim Brotherhood was the director of offshore companies linked to a Saudi billionaire, according to an investigation by Austrian media outlets profil and Ö1.

The man, described as a 37-year-old Viennese entrepreneur with Iraqi roots, is suspected of “participating in a terrorist, subversive and criminal organization” and was a target of the police investigation into the group and the Palestinian extremist organization Hamas, the report said

The inquiry, which led 930 officers to raid 60 apartments, shops and clubs in four federal states last month, had no connection to the Vienna terror attack that killed four and injured 23 on November 2, according to officials cited by Deutsche Welle.

The Austrian report ー based on police records ー does not name the suspect, nor the Saudi businessman, for fear of hampering the ongoing probe into possible terror financing.

The pair’s link to shell companies in the British Virgin Islands and other offshore financial centers was revealed for the first time after the reporters’ examination of Paradise Papers, a trove of leaked documents obtained by Süddeutsche Zeitung and shared with the International Consortium of Investigative Journalists in 2017.

The 13.4 million files include incorporation documents, emails, contracts and other records from two offshore service providers and the company registries of some of the world’s most secretive countries.

The Austrian man was listed as the director of several companies in the BVI, Malta and the Bahamas, the media report said. His address on the documents referred to an apartment in Vienna that belongs to the wife of one of the main suspects in the police investigation, according to a review of Austria’s land registry records.

By cross-checking the confidential files with property records, the reporters also found that the shell companies owned properties in the U.K., including two office buildings, a commercial property and a retail park, worth about $73 million in total.

The documents show that a Liechtenstein trust owned by the Saudi businessman was behind those companies. The man is also known as a philanthropist who has financed Islamic studies at various European universities in recent years, including in Austria, the report added.

The complex offshore structure identified by the journalists is legal, the report said, but “can be used to disguise the flow of money and the identity of the true economic beneficiaries.”

Profil and Ö1, two ICIJ media partners in Austria, asked the Viennese suspect about the purpose of the offshore company network and his link with the Saudi billionaire. A lawyer representing him declined to comment.

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