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INTER-AGENCY CO-OPERATION

IMPROVING CO-OPERATION
BETWEEN TAX AND ANTI-MONEY
LAUNDERING AUTHORITIES
The views expressed in this presentation are the views of the author and do not necessarily reflect
the views or policies of the Asian Development Bank Institute (ADBI), the Asian Development
Bank (ADB), its Board of Directors, or the governments they represent. ADBI does not guarantee
the accuracy of the data included in this paper and accepts no responsibility for any consequences
of their use. Terminology used may not necessarily be consistent with ADB official terms .

Centre for Tax Policy and Administration

Improving Inter-Agency Co-operation


Option I

Tax Authority

Information

FIU

Currently many Tax Administration have some form of access to


Suspicious Transaction Reports (STRs) held by the FIU

Improving Inter-Agency Co-operation


Option II
October 2010, the OECD Councils Recommendation to Facilitate Cooperation between Tax and Other Law Enforcement Authorities to Combat
Serious Crimes

Tax Authority

Information

FIU

This Recommendation has resulted in an information flow to the FIU, in


appropriate cases, pertaining to money laundering, bribery and corruption,
and terrorist financing.

Improving Inter-Agency Co-operation


Option III

Information

Tax Authority

FIU

Sharing Suspicious Transaction Reports by Financial


Intelligence Units with Tax Administrations

Background

Benefits

Models

Use of STRs

Recommendati
ons

BACKGROUND

Published in September 2015


Based on extensive survey analysis
Sets out the real benefits experienced
Provides a practical guide to the models
for sharing STRs and the
benefits/challenges
Highlights the various uses of STRs
Takes a holistic approach the legal and
operational framework
Makes recommendations to expand cooperation

Whole of Government Approach


The whole of government approach
Financial Intelligence Units (FIUs) and tax
administrations have shared objectives
Tax authorities have a key role in identifying
tax evasion, but also in identifying and
reporting other suspected serious crimes such
as bribery, corruption, money laundering and
terrorism financing.
Responding to the fluid/complex nature of
modern finance and opportunities for
criminals

Whole of Government Approach


October 2010, OECD Councils Recommendation
Establish an effective legal and administrative framework
and provide guidance to facilitate reporting by tax
administrations of suspicions of serious crimes, including
money laundering and terrorism financing, arising out of
the performance of their duties, to the appropriate
domestic law enforcement authorities.
February 2012, Financial Action Task Force (FATF)
Revised the International Standards on Combatting
Money Laundering, the Financing of Terrorism and
Proliferation to include tax crimes to the list of predicate
offences to money laundering .

Whole of Government Approach

June 2012, the OECD Rome Report on


Effective Inter-Agency Co-operation in
Fighting Tax Crimes and Other Financial
Crimes
Recommended countries consider introducing
rules (including legislative rules) for all
authorities holding information relevant to the
administration of taxes to make this information
available to the tax administration.

Task Force on Tax Crimes and Other Crimes


STR Project
2014 Survey data shows tax authorities are often hindered in
their ability to identify and report serious crimes due to a lack
of access, or restricted access, to STRs
Based on data from a diverse set of 28 countries - Australia,
Austria, Belgium, Canada, Chile, Colombia, Denmark,
Finland, France, Germany, Greece Ireland, Italy, Japan, Korea,
Latvia, Malaysia, the Netherlands, New Zealand, Portugal,
Singapore, the Slovak Republic, Slovenia, Spain, Sweden,
Switzerland, the United Kingdom and the United States.
Key area for the OECD Task Force on Tax Crimes and Other
Crimes (TFTC)

Access
% with some level of access
20

Yes
No

80

Access
% with some level of access for civil matters
30
Yes
No

70

Quality of Access
However
in many jurisdictions, while the broad legal framework
provides for the possibility to access STRs, significant
barriers often remain, whether legislative or procedural and
access is therefore limited in practice.
Sometimes legal gateways to access STRs exist, but there is no
obligation for the FIU to actually share STR information.
Sometimes access is only provided on request, meaning the
tax administration must already have a certain level of
suspicion in order to access the STR information. In other cases
STRs are only shared on a spontaneous basis.

Quality of Access
% with direct access
20

Yes
No

80

Quality of Access
% relying on spontaneous exchange - criminal

Yes
No

40

60

% relying on spontaneous exchange - civil

45
55

Yes
No

BENEFITS OF SHARING
SUSPICIOUS TRANSACTIONS
REPORTS

Benefits

for
s
R
T
C
TRs/
S
y
b
s:
a te d
Facilit Korea raise
se
ci vi l u m i n 2013
2014
f
o
f
0
l
$14
irst ha
f
n
i
0m
$33

Aus
tr
$100 alia rai
s
year m and $ es betw
e
4
info from ac 50m pe en
rma
c
tion ess to F r
.
IU

61 criminal ta
x prosecution
s in
Austria in on
e year

MODELS OF SHARING
SUSPICIOUS
TRANSACTION REPORTS

Unfettered Access Model


Strengths
Maximum possible flexibility
Efficient
Increased chance of risks being
identified
Fullest opportunity for the
benefits of sharing STRs to be
maximised
Challenges
Possible conflicts
Need close ongoing co-operation
between the FIU and the tax
administration (possibly through
an administrative agreement).
Technological challenges
Training tax officials

Joint Decision-Making model


Strengths
Still provides for a full use of STRs
Provides reassurance STRs being
accessed consistently
Facilitates for the sharing of
expertise
Challenges
Requires much closer
administrative co-operation on an
ongoing basis (relies on personal
relationships)
Could be reinforced by putting in
place an administrative agreement

FIU Decision-Making Model


Strengths
Clear lines of responsibility
Once the FIU becomes more
familiar with identifying tax risks
less resources are required by the
tax authority
Challenges
FIU may miss tax risks (lack
expertise and other tax
information)
Harder for tax administration to
identify other serious crimes
Helped through training /
secondees / STRs on request

USE OF SUSPICIOUS
TRANSACTION REPORTS

Use of STRs

Barriers to Access and


Effective Use of STRs

RECOMMENDATIONS

Recommendations
Subject to the necessary safeguards, tax
administrations should have the fullest possible
access to the STRs received by the FIU in their
jurisdiction.
Jurisdictions should look to not only provide the
legislative framework to allow tax administration
access to STRs, but also look to ensure the
operational structure and procedures facilitate the
maximum effectiveness in the use of STRs.

Any comments or questions?