Global task force launched to fight commercial corruption

New IBA and OECD watchdog puts pressure on treasurers to be more rigorous on compliance matters

The need for corporates to be stringent in their efforts to identify and stamp out corruption has intensified with the launch of a new, global action group within the legal industry.

Unveiled in December, the Task Force on The Role of Lawyers and International Commercial Structures emerged from talks between professional membership body the International Bar Association (IBA) and high-profile NGO the Organisation for Economic Cooperation and Development (OECD).

The partners created the task force primarily to investigate, and refine, the relationship between lawyers and their corporate clients.

In particular, the IBA and OECD were concerned by reports of last year’s Panama Papers leak, which showed that, in the course of assisting complex, offshore transactions, lawyers can either knowingly or unwittingly enable asset concealment or money laundering.

Previous efforts to set global anti-corruption standards – such as the 2012 recommendations of the Financial Action Task Force (FATF) – have provided lawyers with a general framework for conducting due diligence on their clients and for identifying beneficial ownership.

However, the IBA and OECD argue that implementation of the FATF measures from one country to the next has been patchy.

While their new Task Force will work mainly with lawyers to provide guidance on the formation of international commercial structures, its activities will also clearly touch upon those of corporate finance professionals.

With that in mind, treasurers and their colleagues will need to pay increasing attention to a range of key, potential business impacts, such as:

  • an increased burden on firms to comply with KYC regulations;
  • a greater need for corporate head offices to vet associations and partnerships formed by offshore subsidiaries; and
  • a requirement to develop more detailed policies on the actions and announcements of individual employees, to ensure they are in line with the standards set by the new Task Force.

As The Treasurer reported in April 2016, UK corporates are already likely to face a far more rigorous regulatory climate in the anti-money laundering field, following the publication of a major Home Office Action Plan.

Later that year, we also reported that the Securities and Futures Commission of Hong Kong plans to toughen its stance against fraud, with a “quality over quantity” approach to enforcement cases that will focus more heavily on holding individual wrongdoers to account.

As steps such as those take shape in specific territories, and the new Task Force makes its presence felt, it will be more crucial than ever for treasurers to ensure that their departments comply with all the relevant requirements as they are developed.

IBA President David W Rivkin said: “It is undeniable that lawyers must play a central role in complex offshore financial transactions.

“To ensure that they do not unwittingly facilitate economic crime, it is imperative that lawyers ask the right questions of their clients, vet them sufficiently, understand who are to be the ultimate beneficiaries of their client’s actions, and have an understanding of sovereign laws.”

For advice on KYC regulations, check out this special ACT webinar.

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