Illicit Financial Flows: a Private Sector IFC Legal Department - - PowerPoint PPT Presentation

IFC Legal Department

Strategy FY17-FY20 Lucas Diez Suarez Compliance Counsel

Illicit Financial Flows: a Private Sector Perspective

1

l Lima, March 14, 2019

IFC Non-financial Risk Management Structure

VP, Compliance Risk and ESG and General Counsel CEO Legal Business Risk

and Compliance

Environment,

Social and Governance

Corporate Risk Committee Corporate Committees

CBR BR

is a one-stop shop for providing advice on management and mitigation of non-financial risk (except ESG and

• perational risk)

CBR

3

CBR Subject M t Mat atter A Area eas

AML/CFT Integrity Due Diligence (IDD)/ Screening IFC Liaison to INT WBG Sanctions

Offshore Financial Centers (OFCs) Tax Behaviors & Practices Market Conduct (Mobilization) Operational Conflicts

• f Interest

Material Non-Public Information (MNPI) IFC Policies & Procedures IFC Board & Stakeholder Engagement Data Access & Controls Compliance Aspects of Nominee Directorship

Integrity Function

4

Thre hree S Subj bject Ma Matters re s related t to

• IF

IFF

• 1. Int

Integr egrit ity D Due ue Dil ilig igenc ence (ID e (IDD) AML AML/CF /CFT Tax c condu duct ct Thes ese t e three ee sub ubje jects ar are e closel ely int interrel elat ated

2. . 3. .

IDD P D Proc

• cess

Wide Scope Deep Analysis

6

IDD P D Proc

• cess I

II

7

 Sanctions  Criminal activities  Civil proceedings  Source of funds  Political influence  Use of third parties  Other significant issues

One or more issues below?

Assess Risk

Review by CBR

Management decision

IDD Research

Integri rity

• Signif

ific ican ant c corrupt ptio ion sc scan andals an and d enac actment o

• f new l

w laws ws have put c corrupt ptio ion o

• n

top o p of the ag agenda a

• Ch

Chan ange in in pe perceptions

• Developme

pment o

• f

complian iance p programs ams

• Sig

Significant g gap ap between c compli liance o

• n

pape paper an and d compliance in in pr prac actice

• Check

ck-th the-bo box a x approach

• Old

ld w ways o s of d doing b busi siness ss

• Deve

velo loping c compliance cul ulture ta takes ti time and nd compromise

Prog

• gre

ress Chall llenges

AML/CFT FT: D : Due ue Dil iligenc igence o e over er Financ Financial ial Ins Instit itutio ions ns (FIs (FIs)

• IF

IFC fre frequently u y uses F FIs Is t to

• re

reach a a la larg rger n number of

• f

benefic iciar iarie ies s

• IF

IFC re relies on

• n the

he A AML/ ML/CFT c con

• ntrols of
• f the

he F FI I to

• con
• nduct

DD over b benefic iciar iarie ies

• Assess

ssme ment o

• f AML/CF

/CFT c controls i s include des e s ensurin ing that at:

• The

The F FI I ha has AML/ ML/CFT p proc

• cedures/controls t

tha hat a are re al alig igned in d in in international st stan andards, in indu dustry b best st pr prac actices an and d appl applicable l laws ws

• Controls
• ls a

are a adequately i ly imple lemented

AML/CFT FT: D : Due ue Dil iligenc igence o e over er Financ Financial ial Ins Instit itutio ions ns II II

Required for all projects with financial institutions Annual Reporting by Client AML Questionnaire for Clients

AML/C /CFT FT

• Importan

ant progre ress duri ring t the he la last f few y years

• The

he w wor

• rk of F
• f FATF a

and FRS RSBs ha has prod

• duced

signif nificant ant i improvement nts a at th the j jur urisdictional a and nd FI FI lev evel

• Increased a

awareness of added d value o

• f AML/CF

CFT compli liance

• Impr

mprovemen ements ts i in compli liance p programs

• Imple

lementation

• n o
• f a true

risk sk-base ased a d approac ach

• Clie

ient r ris isk p profile an and enhanced d due d diligence mea measures

• Tran

ansa sactio ion m monit itorin ing syste tems

• Technology i

is key

• Capa

Capacity g gaps aps an and d govern rnance i issues

• Tr

Trade-based mo d money launderi ring

Prog

• gre

ress Chall llenges

Tax C Condu duct ct: O OFC P Policy cy a and d Tax Due D Dilige gence ce

• OFC po

C policy

• Asse

ssessment o

• f busin

siness r rat ationale f for the u use se o

• f

interm rmediate e entities

• Rest

stric icts t s the u use o

• f intermediat

diate e entit ities i s in ju jurisdictions r rat ated as as NC C or PC b PC by the G Global F Forum

• Tax

ax D Due Dil iligence Pil Pilot

• Syst

stemat atic ic r revie iew o w of tax s x structures a s and practic ices

• Risk

sk-base ased a d approach f focusin sing o

• n tax c

x collectio ion a at the pr project h host c country

Tax C Condu duct ct: O OFC P Policy cy a and d Tax Due D Dilige gence ce

TDD Pilot Focus: Four Key International Tax Issues

Tax related scandals/ negative news

Cross-border related party transactions Host country re- investment through intermediate jurisdiction

Tax Treaties: SPVs with minimal legal presence

Tax C Condu duct ct

• Improveme

ments i s in tax x govern rnance a at the corpo porate l level as as a a resu sult o

• f internat

atio ional al stan andar dards ds

• EOIR

IR

• AE

AEOI

• BEPs
• Diffic

icultie ies t s to keep u p up wit with n new c w creat ative struct ctures es

• One lo

loophole c clo lose ses s and ano nother o

• ne

ne opens ns

• Challe

llenges b by some de developing c countries in in imp mpleme menting internat atio ional al s standar ards ds

• Resources a

and nd capacity

Prog

• gre

ress Chall llenges

Key Ta Takeaways

15

• 1. We

e do not o

• nly ma

manage r risk, w when enever po possible, w we e pu push clien ents to raise t e thei eir stand ndar ards Commitmen ent f from m clients is es essential, t they n need eed t to see t ee the e added ed v value This a appr pproach t to i integ egrity i is an es essential pa part o

• f I

IFC’s DN DNA; t this i is w what ena nables us us t to m make o

• ur

ur operations sustai ainab nable, e even i n in challeng ngin ing marke kets We don’t ’t alw lways g s get i it ri right

2. . 3. . 4. .