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, according to a study released by the Stolen Asset Recovery (StAR) Initiative of the World Bank and the United Nations Office on Drugs and Crime.
The report notes that corruption is estimated to be at least a US$40 billion-a-year business.
“We need to put corporate transparency back on the national and international agenda,” says Emile van der Does de Willebois, World Bank Senior Financial Sector Specialist who led the StAR research team. “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.”
The report, The Puppet Masters: How the Corrupt Use Legal Structures to Hide Stolen Assets and What to Do About It, examines how bribes, embezzled state assets and other criminal proceeds are being hidden via legal structures – shell companies, foundations, trusts and others.
According to the study, corrupt public officials and their associates conceal their connection to ill-gotten funds by exploiting legal and institutional loopholes that allow opacity in companies, foundations and trust-like structures.
Two of 10 corruption case studies highlighted in the report involve Hong Kong. One concerns Bruce Rappaport, a former ambassador to Israel and Russia of the Caribbean nation of Antigua and Barbuda. The other involves former Hong Kong Crown prosecutor Warwick Reid.
Among the other case studies are those of former Philippine president Joseph Estrada, former Zambian president Frederick Chiluba and former Ukrainian prime minister Pavel Lazarenko.
The study recommends that more detailed information be collected in corporate registries, and that providers of legal, financial and administrative (incorporation and management) services to legal entities more effectively conduct due diligence on those controlling corporate entities.
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