LONDON: Having failed to regulate front companies that led to criminals moving funds into the country, Britain had emerged as a safe haven for money laundering, a report indicated on Saturday.
The report, from the anti-corruption group Transparency International, said it was "both regrettable and unacceptable" that while British offshore jurisdictions had been forced to introduce regulation, the UK itself had yet to do so.
According to the report, authored by Marcus Killick, chairman of Gibraltar's financial services commission, an estimated 25 billion pounds to 40 billion pounds of dirty money is laundered in the UK each year.
As the City was an international centre of expertise for setting up companies and trusts, it was a magnet for criminals wishing to move funds around the world, the report said.
Killick called for a new regulator of people who set up companies and trusts, but said it did not have to be the Financial Services Authority.
"A new authority could be developed to regulate these bodies which could be merged with the FSA later," said Killick.
The FSA was facing tough challenges as it took over regulation of mortgage providers and insurance brokers, and did not need more responsibilities, he said.
Laurence Cockcroft, chairman of the pressure group, said: "Progress has been made in the UK in fighting money laundering... but money laundering remains a problem of massive proportions and every effective measure must be found to stem its flow."
Although the report recognised that the large majority of trusts and companies were perfectly legitimate, criminals used company and trust shells to make money laundering activities untraceable.
"I cannot see how in a post-Enron, Sarbanes-Oxley environment, company directors are also allowed to be a company themselves. It does not add transparency, in fact it makes it more difficult to see who really owns the company," Killick said.
Transparency International said that it was not calling for a radical legal reform, but for the adoption of principles similar to money laundering rules covering financial institutions.
Killick said: "Rather than monkeying around with trust, let's focus instead on the providers of such services."
For example, powers of inspection, sanctions and tests that providers were "fit and proper", as used by offshore jurisdictions, should be adopted by the UK, he said.
Source: The Times of India
