By Emily Hong
The STEP Public Policy Committee has recently published a critical new report, Tackling Economic Crime, which delves into global efforts to combat financial crime and offers pragmatic recommendations to address the gaps in existing Anti Money Laundering (AML) and Counter-Terrorist Financing (CTF) frameworks. As an organization representing professionals in trust and estate planning across 95 countries, STEP leverages its members’ extensive expertise to offer technical and policy advice.1 This input aims to foster more effective AML and CTF strategies, particularly in succession planning, where trusts often play a central role.
Financial crimes, such as money laundering, tax evasion, and terrorist financing, persist as major threats to global financial systems. Despite the establishment of measures like AML frameworks and trust regulations, these crimes continue to thrive due to inefficiencies in reporting and administrative processes.2 Trusts, though legitimate tools for wealth management and succession planning, are sometimes exploited for illicit purposes, making them a focal point in global discussions on economic crime prevention.
Tackling Economic Crime examines the current measures in place to combat these crimes and offers recommendations to strengthen these systems rather than suggesting an increase in regulations. STEP advocates for improving the quality of existing data and enhancing the implementation of established frameworks – emphasizing that while global efforts like those from the Financial Action Task Force (FATF) and the European Union have been effective in collecting significant amounts of information, the focus now should be on improving how this information is processed, administered, and used.3
One of the report’s main proposals is improving the quality and processing of Suspicious Activity Reports (SARs), which play a critical role in identifying economic crime. A lack of detailed guidance for filing these reports has led to an overwhelming number of incorrect or unnecessary submissions, which strain government resources and dilute the effectiveness of the system. By investing in more detailed guidance and enhancing the processing mechanisms for SARs, authorities can focus on legitimate threats and improve the overall efficiency of their AML efforts.
The report also addresses the growing burden of compliance checks across jurisdictions, which has resulted in rising costs for customers and a significant duplication of efforts. STEP recommends introducing a ‘compliance passport’ that would streamline the verification process across borders.4 Such a passport would allow entities to demonstrate AML compliance in multiple jurisdictions, reducing the distortions in transparency regimes and simplifying the compliance landscape. This would be particularly beneficial for multinational entities operating in multiple regulatory environments, as it would enhance the certainty of their AML compliance while reducing regulatory friction.
Additionally, the report emphasizes the need to verify beneficial ownership information in company and trust registers. In many countries, beneficial ownership data is not verified, which severely limits the practical utility of this information in combatting money laundering and other illegal activities.5 STEP advocates for requiring obliged entities to verify this data, which would make it more difficult for criminals to conceal their identities behind complex corporate structures. In cases where entities do not have a registrable beneficial owner, STEP proposes that these entities be required to provide a fuller explanation for their status – this would give authorities greater certainty and allow them to focus their resources on cases where criminal intent may be suspected.
Strengthening whistleblowing frameworks globally is another recommendation put forward in the report: Whistleblowing is a crucial tool in uncovering corruption, fraud, and other forms of economic crime, but in many jurisdictions, whistleblowers face risks such as compromised safety and legal repercussions. STEP calls for jurisdictions with weak whistleblowing protections to review and strengthen their frameworks, ensuring that whistleblowers can report wrongdoing without fear of retaliation.
Finally, STEP recommends the adoption of a unified global standard for AML and CTF compliance. While many jurisdictions have adopted FATF’s recommendations, inconsistencies remain, with some countries implementing divergent standards. This lack of uniformity exposes systems to criminal risks and undermines global efforts to combat financial crime. STEP advocates for all jurisdictions to agree on one global standard, ensuring that international financial regulations are consistent and non-discriminatory.
Citations:
Emily Hong is a fall editorial intern for the IELR. She is a sophomore at Johns Hopkins studying International Studies and Economics.
[1] STEP (2024). Tackling Economic Crime: Expert analysis of existing measures to combat financial crime and practical recommendations on how to address the gaps, STEP, https://www.step.org/knowledge-hub/tackling-economic-crime
[2] IMF (2024). Anti-Money Laundering and Combating the Financing of Terrorism (AML/CFT), IMF, https://www.imf.org/en/Topics/Financial-Integrity/amlcft
[3] STEP, supra note 1.
[4] Id.
[5] FATF (2014). GUIDANCE ON TRANSPARENCY AND BENEFICIAL OWNERSHIP, FATF, https://www.fatf-gafi.org/content/dam/fatf-gafi/guidance/Guidance-transparency-beneficial-ownership.pdf.coredownload.pdf
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