Anti-money laundering efforts could be made more effective if national tax authorities highlighted good practice rather than just punished bad ones, the European Parliament’s Panama Papers committee heard today.
“We know that people reach much more to positive rather than negative news,” Brigitte Unger told the EP’s PANA Committee. “White lists promoting good practice could encourage voluntary and true compliance.”
Studies have long shown that positive reinforcement can be a powerful driver of behavioural change, and the idea has gradually permeated into public policy. Locally, the Malta Tourism Authority’s quality assured seal for restaurants and tourist attractions is an example of positive reinforcement-made-policy.
Prof. Unger, a University of Utrecht academic who specialises in money laundering issues, argued that tax authorities in EU member states would be better served if they wielded carrots alongside sticks.
She urged member states to promote banks, notaries and estate agents who did things by the book. “We need true and voluntary compliance,” Prof. Unger told the committee. “Having a white list to show what countries did good, what successful things have been done to combat money-laundering, would be much more motivating than permanently hearing that someone did it wrong.”
The PANA Committee was established by the European Parliament last year following the Panama Papers leak and has been tasked with looking into EU-related money laundering and tax evasion.
Committee members are due to visit Malta next month on a fact-finding mission. Minister without Portfolio Konrad Mizzi and Prime Ministerial chief of staff Keith Schembri, whose offshore dealings were exposed by the Panama Papers leak, have so far avoided saying whether they will agree to meet with PANA committee members.
Prof. Unger said that research data showed that while most of the world’s offshore companies were based in the USA and Caribbean, the largest volume of offshore money circulated within Europe.
She highlighted Cyprus, the Netherlands and Luxembourg as the worst offenders, saying they were “overflowing with money-laundering money from abroad”.
PANA Committee vice-chair and S&D MEP Ana Gomes noted that lists of politically exposed persons were often compiled by private financial information firms such as Dow Jones.
“We’ve suggested having a list of PEPs drafted by the European Commission, and they have said that it would be feasible. Perhaps that could help improve compliance,” she said.
Prof. Unger agreed. “That could help, if we could all agree. But the first step would have to be drawing up a list of member states who are in favour of that.”