Jacqueline Johnson

Is the global financial system AML/CFT prepared?

Purpose – To gauge the extent to which the global financial system is anti‐money laundering (AML)/countering the financing of terrorism (CFT) prepared by analysing and comparing the AML/CFT systems of Financial Action Task Force (FATF) members with countries belonging to regional AML organisations.Design/methodology/approach – Mutual evaluation data of 16 FATF members and 21 non‐FATF countries is analysed and compared using Kruskal‐Wallis and paired‐t tests to determine similarities and differences across the two groups of countries.Findings – AML/CFT systems of FATF members and non‐FATF countries are poor. The lack of compliance with global AML/CFT standards leaves so many holes in these countries regulatory, financial, and legal systems that money laundering with or without any relationship to the financing of terrorism, would be relatively easy to achieve.Research limitations/implications – In using an analytical approach it has been necessary to put numerical values on compliance levels used by the F...

The Necessary Illegitimacy of the Whistleblower

This article examines the plight of the whistleblower using elements of organizational legitimacy theory. In recognizing the negative correlation between the actions of the organization and the whistleblower, it becomes clear that the continuing legitimacy of the organization necessitates the illegitimacy of the whistleblower. This helps explain the blacklisting of the whistleblower and their vilification which results in the destruction of both their career and their reputation. Only specific protective legislation can provide insurance for their career.

Third round FATF mutual evaluations indicate declining compliance

Purpose – To review the reported compliance levels of third round mutual evaluations with a view to determining any change or differences in compliance levels for Financial Action Task Force (FATF) member countries following the updating of FATFs Forty Recommendations in 2003 and the introduction of the Nine Special Recommendations relating to the financing of terrorism.Design/methodology/approach – A comparison of pre‐ and post‐2003 compliance with the FATFs Forty Recommendations and Nine Special Recommendations is made using both self‐assessment and mutual assessment data.Findings – There are significant differences in compliance levels pre and post 2003. Since, the FATF updated their Forty Recommendations in 2003 compliance with those Recommendations has declined. With regard to the Nine Special Recommendations which have not changed since their introduction there is a significant difference between self‐assessment compliance levels in 2003 and compliance determined using independent mutual evaluatio...

11th September, 2001: will it make a difference to the global anti‐money laundering movement?

Begins with the response of the Bush administration to the terrorist attacks of September 11, including the establishment of the Foreign Terrorist Asset Tracking Centre and the passing of the PATRIOT Act, and moves on to the reaction of the global community: condemnation by the United Nations, response by the Financial Action Task Force, support from the International Monetary Fund, extension of the role of the Wolfsberg Groups of financial institutions, and responses from countries around the world. Gives a diagram illustrating anti‐money laundering initiatives since September 11. Concludes that the ferocity and size of the terrorist attacks has overcome any reluctance by governments to commit to legislation against money laundering.

Corporate Flight: 'Moving' Offshore to Avoid US Taxes

Shows how many US companies, which are increasingly multinational, are using offshore subsidiaries to reduce their tax liability; some are even moving their head offices abroad or “offshore”. Discusses what offshore financial centres are; key characteristics are low taxation, little supervision of depositors, and secrecy of accounts. Points out that the term offshore is confusing, since large countries can be attractive to non‐resident businesses, and so they are not a homogeneous group; within the USA itself, Delaware is a state with low taxes and so has long been used by companies which are actually based in another state. Describes how reincorporating offshore works and the problem it poses for US tax revenues; the issue is contentious, especially after September 11, but the Bush administration’s attitude remains relaxed.

Little enthusiasm for enhanced CDD of the politically connected

Purpose – The purpose of this paper is to determine whether countries are implementing enhanced customer due diligence (CDD) for financial transactions with the politically connected.Design/methodology/approach – Public information in relation to ratification of the UN anti‐corruption resolution, mutual evaluations of anti‐money laundering systems and Transparency Internationals (TIs) corruption reports are used to determine governments attitudes to corruption and enhanced CDD recommended as best practice by the financial action task force (FATF).Findings – It was found that low levels of compliance with recommended best practice when handling transactions with politically exposed persons, amongst the countries examined, are leaving the global financial network open to abuse by those in public office.Research limitations/implications – The release of mutual evaluation reports by the FATF and regional anti‐money laundering bodies has been of immense importance in determining the level of compliance with...

An analysis of the obligations of gambling entities under the FATF's 2003 anti-money laundering recommendations

Purpose – To highlight the compliance issues which face gambling entities with the implementation of the Financial Action Task Forces (FATFs) 2003 Forty RecommendationsDesign/methodology/approach – To determine the gambling sectors attitudes towards the FATFs new anti‐money recommendations their responses to an earlier FATF consultation paper are analysed. Interested parties were asked to provide feedback on a number of options proposed by the FATF. Twenty six of the 145 respondents provided feedback on issues relating to the gambling sector. It is these responses that form the bases of the analysis in this paper.Findings – The preferences of the gambling sector were not taken on board by the FATF. The increased customer due diligence (CDD), suspicious transaction reporting and the identification of politically exposed persons will be a burden on casino operators, the only gambling sector to be specifically identified in the new recommendations. Non‐compliance could be a serious issue.Research limitat...

Stanley Works: to Bermuda or not to Bermuda, that was the question

Deals with the subject of US companies which relocate offshore to take advantage of the tax differentials between countries following globalisation. Focuses on Stanley Works, an established Connecticut manufacturer which in February 2002 announced that it would relocate its legal domicile to Bermuda in order to increase cash flow and decrease tax payments. Describes the strong negative reactions in the USA to this intended reincorporation abroad ‐ from unions, shareholders, the press, the US Treasury, politicians and commentators. Relates this storm of protest to the atmosphere in the US after the financial scandals and terrorist attacks of the early 21st century; although other companies had reincorporated outside the USA before Stanley Works, which eventually withdrew its reincorporation plan, none has since.