As drug trafficking and organized crime gain territory around the world, money laundering is becoming a major concern for multinational companies operating in regions plagued by corruption.
Money laundering is the crime that seeks to hide or disguise the illicit origin of money or assets, a practice that has spread among corporate employees who see the opportunity to obtain benefits in exchange for favors. Dirty money is also what multinationals pay to government officials to facilitate new business opportunities and increase revenue.
Under the administration of President Joe Biden, the United States is strengthening its anti-corruption strategy by focusing on two main areas to specifically address this crime:
- Tightening the regulation of real estate transactions, especially those carried out in cash.
- Reinforcing the regulation on the creation and use of shell companies.
The effort is intended to regulate the real estate market, which is often targeted to launder money from bribes drug trafficking, and organized crime. By taking part in real estate transactions involving dirty money, a large number of companies and professionals could get entangled in a crime without even knowing it.
Experts from Global Financial Integrity (GFI) estimate that in the last five years, at least US $2.3 billion of dirty money has been laundered through real estate transactions in the United States.
Therefore, the US’ new strategy seeks to identify real estate buyers behind shell companies and their agents as well as increase the government scrutiny of real estate transactions, especially when it comes to cash deals, regardless of their amount or location.
Regarding stricter regulation of shell corporations, the goal is to know their actual owners, especially companies that have complex networks to hide the ultimate destination of dirty money. The Biden administration seeks to combat corruption by detecting companies used as façades and thus discourage this practice, which is widespread in the real estate’s markets such as Miami and New York.
On the other hand, the Corporate Transparency Act (CTA) will come into force shortly in the United States. The CTA, part of the Anti-Money Laundering Act of 2020, established beneficial ownership information reporting requirements for certain types of corporations, limited liability companies, and other similar entities created in or registered to do business in the United States, according to the Financial Crimes Enforcement Network (FinCEN) The proposed rule implements these reporting requirements and reflects efforts to bolster the United States’ corporate transparency framework. Ultimately, the goal is to discourage money laundering activities.
As a result of this policy, companies created in the United States will have to report who their owners are, and a database will be established and maintained by FinCEN, an office of the US Department of the Treasury, which will also ensure compliance. If companies that are required to report fail to do so, they could face significant civil and criminal penalties.
Drug trafficking, money laundering, organized crime, and illicit enrichment are far from being Hollywood fiction. While all the regulations and actions aimed at avoiding these crimes or increasing the sanctions are important, businesses must do their part in terms of prevention too. Companies with operations in countries where corruption has become institutionalized must take all the necessary measures to monitor closely their operations to avoid getting employees involved – directly or indirectly- in money laundering activities. It should be a priority to carry out the due diligence to know who your employees are doing business with, who is benefiting, or who is being hired. In times of crisis, it is easier to fall into drug trafficking networks in regions like Latin America, given the decrease in controls and protocols, and the need for easy money.
The chances of being involved in a crime without property monitoring are higher than we imagine at this time.