‘Moving Money’ – the cost of more onerous AML procedures

George Hodgson

George Hodgson

I attended a lively presentation today on the paper Moving Money: International Flows, Taxes, and Money Laundering by Professors Richard Gordon and Andrew P. Morris. They basically argue that the move to more onerous anti-money laundering (AML) procedures and the move to automatic information exchange are both going to significantly increase transaction costs for everyone, legitimate and illegitimate users of the financial system alike. This increase could have significant implications for economic growth, but with little evidence of any real benefit from the new measures in terms of improved tax revenues or reduced illegitimate funds flows. In spite of that, there was a general air of optimism about the outlook for international finance centres (IFC). The professors noted that the best IFCs already have very effective systems and skill sets in these areas. They may well be able to adapt to the new regimes more rapidly and with fewer costs than their on-shore counterparts — who also face huge compliance costs — hence preserving their competitive advantage. Indeed the rising cost of on-shore, rather than off-shore, compliance may well start to become a political issue in the major economies now pushing through such dramatic, and expensive, changes in tax reporting and the AML regulatory environment

We understand that the UK has decided not to adopt the proposed delay to the on-boarding of new entity accounts announced by the US in notice IRS notice 2014-33. Instead UK Financtaxh_2023675cial Institutions will be required to obtain self-certifications from new customers (both entities and individuals) from 1 July 2014. This will maintain consistency between Entity and Individual on-boarding processes, as well as between the due diligence obligations for US and CD/OT reporting purposes.

George Hodgson is STEP’s Deputy Chief Executive.  

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