MANILA, Philippines - An international study has shown how large-scale corruption through bribes, embezzled state assets and other “official” criminal proceeds is being kept under wraps via legal entities such as foundations, trust funds and others.
The study, released yesterday by the Stolen Asset Recovery (StAR) Initiative of the World Bank and the United Nations Office on Drugs and Crime (UNODC), makes recommendations to state policymakers on how to improve transparency and place safeguards in place.
“Most large-scale corruption cases involve using legal entities to conceal ownership and control of corrupt proceeds, and policymakers should take steps to improve transparency to reduce opportunities for wrongdoing,” it stated.
World Bank senior financial sector specialist Emile van der Does de Willebois said that corporate transparency must be revitalized on the national and international agenda.
“It is important for governments to increase the transparency of their legal entities and arrangements and at the same time improve the capacity of law enforcement,” De Willebois, who led the study team, said.
The report, dubbed as “The Puppet Masters: How the Corrupt Use Legal Structures to Hide Stolen Assets and What to Do About It,” also provides policymakers with practical recommendations on how to step up ongoing international efforts to uncover flows of criminal funds and prevent criminals from misusing shell companies and other legal entities.
At least 150 cases reviewed showed that a corporate vehicle was misused to hide the money trail; the corporate vehicle in question was a company or corporation; the proceeds and instruments of corruption consisted of funds in a bank account; and, in cases where the ownership information was available, the corporate vehicle in question was established or managed by a professional intermediary.
The report casts light on how corporate vehicles are misused to conceal the proceeds of corruption.
It also describes how providers of legal, financial and administrative (management) services – including banks, financial institutions, lawyers, accountants, and other professionals that are known as trust and company service providers (TCSPs) – can be employed to facilitate corruption.