Latin America and the Caribbean have made progress in the construction of legal frameworks to combat corruption and money laundering. But the implementation of specific tools – in particular beneficial property registers – is always faced with serious challenges, according to a recent report.
The reportPublished by Global Financial Integrity (GFI) on July 7, analyzes the current state of business transparency in Latin America and the Caribbean. It assesses the ability of governments to identify individuals who have, control or ultimately benefit from legal entities and companies.
The registers containing this information – called beneficial registers on property – is a crucial tool to target the abusive use of companies for criminal purposes and corruption. The system is supported by international organizations such as the Financial Action Task Force (FATF), an intergovernmental body that promotes global standards to protect the integrity of the financial system.
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Criminal groups generally exploit the business sector by methods such as money laundering via complex companies or business structures, or the use of legitimate companies to hide illicit operations, in particular drug trafficking Through export companies.
Criminal networks also use companies to corrupt corrupt officials or access public contracts, which, in some cases, may be worth million dollars.
Despite the importance of knowing who is behind these entities and transactions, not all countries have implemented the necessary controls. In the United States, where about $ 300 billion is laundered each year, the Trump administration earlier this year back Application of a law obliging companies to report beneficial property information.
Insight Crime spoke with Claudia Helms, director of the Latin Program America and Caribbean at Global Financial Integrity, and Luisa Acosta, program assistant to the organization and former researcher on crime, on the way this tool is implemented throughout the region.
Insight Crime (CI): to what extent the use of beneficial property registers in Latin America and the Caribbean?
Claudia Helms (CH): Of the 38 countries and jurisdictions analyzed, more than 72% have a certain type of register. This is important because in countries without centralized register, information can be stored in other places – in a commercial registry database or something similar – which makes it dispersed and difficult to verify.
Luisa Acosta (La): Most countries already have solid legal frameworks that meet FATF standards. But in practice, the application is lacking and depends on the political will of governments. This is one of the main challenges we have identified.
IC: What impact do these registers have to combat illicit financial flows and organized crime in the region?
CH: A beneficial property register makes it possible to combat anonymity which allows complex companies and complex legal structures. To dismantle criminal groups, you have to break the monetary track. The register reveals the person who ultimately benefits from the company and its transactions, which helps them to link to criminal networks.
THERE: Some registers include information for spouses or relatives to the fourth degree, such as Colombia. We know that criminal leaders rarely record assets under their own name. They use the names of their wives, children and other parents. The identification of the real beneficiary helps expose the structure of the criminal group, an important overview of prosecutors and financial intelligence units.
CI: A weakness reported in the report is the exclusion of foreign companies from the registers in several countries. How does this gap benefit from organized crime?
THERE: Leaving foreign companies outside these registers creates a legal escape which allows the anonymity of transnational operations. This is particularly serious in Latin America, where transnational criminal groups such as the Del Golfo clan In Colombia, operate along the cocaine roads that extend in the region to Europe and the United States. First Capital Command of Brazil (Primeiro Comando Da Capital – CCP) and criminal groups in Mexico are also clear examples of how these groups exploit these shortcomings.
CI: The report mentions that some countries impose fines on companies that do not submit the required information, but these fines can simply be paid without additional consequences. What would be a more effective alternative? What mechanisms could the application strengthen?
THERE: In Belize, for example, the authorities suspend the business license of the company so that it can no longer work. Other countries prevent companies that are not in accordance with accessing the financial system, which prevents them from taking out loans or funding their operations. In some cases, not reporting beneficial property may even lead to prison sentences. What is necessary is a more holistic application strategy.
IC: What are the main challenges of the implementation of beneficial property registers in the region?
CH: One of the biggest challenges is to ensure that the information is accurate, up to date and not only entered to check a legal box – it must be useful to the authorities. There is also the question of human and financial resources: who will check the data? What institutions will they coordinate? Who will supervise the process?
Another challenge is to ensure sustainable interoperability of information between government agencies. It is not enough that the agency manages the register to keep the data – there must be a sharing of information in progress and fluid. This helps detect criminal models and identify red flags.
This is why the targeting of criminal structures is so complex: it is not only a question of declaring beneficial owners, but of the way in which this information is used.
THERE: Another critical point is to link the beneficial property register with public procurement systems, because this is often how criminal groups move from illicit funds. In our report, we have found that only Chile – which is currently developing its centralized register – has connected ownership data to its public contract platform. Consequently, the country has been able to identify several cases involving conflicts of interest.
