Professional services carried out by lawyers, accountants, and bankers are essential to ensure that the world has access to finance, pays taxes, and can buy property. Company and trust services, as well as tax and investment services, help form companies and manage investments. They can act as “gatekeepers,” ensuring these services operate legally and ethically. Alternatively, they can act as enablers of corruption, helping the powerful steal, bribe, extort, and hide their ill-gotten gains.
To tackle this issue, OGP members need to address concerns around high-risk professional services. This is a necessary complement to the tremendous strides taken by members around issues of fiscal openness, beneficial ownership, and open contracting.
Overview
How Professional Services Can Enable Corruption
The consequences are significant. The International Monetary Fund (IMF) estimates that corruption may cost a typical country as much as five percent of its gross domestic product. This diverts money away from public services, cuts into the tax base, and erodes public confidence in institutions. It also strengthens those who are already powerful and worsens inequality.
Some professionals help launder and smuggle money across borders, helping criminals to buy luxury goods and services outside of the origin country. This laundering is enormous in scale. According to a study in Nature, millions of transactions annually move dirty money into the international financial system. This amounts to hundreds of billions of dollars annually.
Professionals play a crucial role in moving dirty money and property around by exploiting gaps in regulations and leveraging their expertise to obscure financial transactions. The Panama Papers, and many other leaks, exposed how law firms and financial institutions helped the wealthy and powerful hide their assets and evade taxes. In other cases, communications professionals actively spread disinformation and fan the flames of social division.
To date, very few OGP members have committed to put forward actions around high-risk professional activities in their OGP action plans or Open Gov Challenge commitments. Notably, however, some members made progress to advance reform. Armenia has taken steps to involve the business sector in ending corruption, which led to the creation of its public beneficial ownership register during its 2018–2020 OGP action plan. Nigeria’s compliance industry played an essential role in supporting beneficial ownership transparency in the OGP action plan and beyond, resulting in the creation of a public beneficial ownership register. In the United States, real estate professionals supported the Corporate Transparency Act, developed through OGP action plans, which has now been signed into law.
The remainder of this page outlines some ways in which OGP members can address these important issues.
Key Definitions
Read about key definitions related to this topic, focusing on the professional services themselves as well as commonly used terms related to anti-corruption strategies, anti-money laundering, and more.
- Financial services: This includes accounting, banking, and fund management. Professionals in these areas are vital for ensuring that financial transactions are transparent and compliant with regulations.
- Legal services: Legal professionals provide advice and representation, which is crucial for maintaining the rule of law and ensuring that businesses and individuals operate within the legal framework.
- Communications and reputation management services: These professionals help manage public perception and communications, playing a key role in upholding the reputation of institutions.
- Real estate: Professionals in this sector are essential for ensuring that property transactions are conducted legally and transparently, reducing the risk of corruption in real estate dealings.
- Company and trust services: This includes a range of activities that fall across financial, legal, and accountancy work. It generally involves the management, administration, or incorporation of legal entities, especially corporations and trusts.
- Gatekeepers of financial system integrity: Gatekeepers are professionals who are pivotal to ensuring the financial system’s integrity by adhering to legal and ethical standards.
- Enablers of corruption: Enablers of corruption refers to professionals who take actions that facilitate corruption. The term will be used sparingly to avoid negative connotations for the profession as a whole.
- Designated Non-Financial Businesses and Professions (DNFPBs): These are professional services outside of the banking and finance system, which may include casinos, real estate agents, dealers in precious metals and stones, lawyers, notaries, other independent legal professionals, and accountants, as well as trust and company service providers.
- Professional services approach: This is a regulatory strategy that focuses on enhancing transparency, accountability, and integrity within professional services, ensuring that these sectors contribute positively to financial integrity. This approach is different from a profession-based approach, although the two are not mutually exclusive.
- Profession-based approach: This regulatory approach works closely with professional associations such as legal bars or accountants associations. This has the advantage of aligning reporting and due diligence requirements with other professional requirements and opens space for co-regulatory approaches.
An Open Government Approach
A government approach to regulate high-risk professional services is necessary but cannot work on its own. Rather, professionals must be empowered to follow the law and their professional codes of conduct in a way that is collaborative and cooperative.
OGP provides a space for collaborative, cross-sectoral approaches to enhance financial integrity. When Nigeria adopted regulations for a public beneficial ownership register, academics and think tanks convened compliance officers from companies to engage them in discussions on how to move forward with this reform. These multi-stakeholder approaches are at the heart of OGP’s process and central to an emerging approach of “co-regulation.” This approach brings together government, non-profits, and different private sector actors to undertake a unique and shared decision-making process.
Beyond collaborative approaches, professional services have roles to play in using public information and building information systems that prevent criminal activity. Major anti-corruption laws such as the United States’ Bank Secrecy Act or Foreign Corrupt Practices Act require financial actors to carry out customer due diligence. The European Union’s Anti-Money Laundering Directives go beyond financial requirements and mandate customer due diligence activity for a wide variety of professions beyond banking. These efforts often require building information systems and maintaining books in such a way that allows for red-flagging.
The Financial Action Task Force (FATF) released a report in July 2024 to assess the state of play of how its members are applying the FATF Recommendations to professional services. The following figures illustrate the current rates of compliance with specific requirements related to the prevention of misconduct by professional services and supervisory controls of such services.
Selected Open Government Approaches
Currently, there are few OGP commitments dealing with high-risk professional services. The following are a set of potential actions that members can explore and adapt to their context.
Given that OGP is largely focused on government policy, actions here are focused on steps that governments might take to improve transparency through open government approaches to promote transparency, participation, and public accountability.
- Beneficial owners: Implement mandatory disclosure of beneficial ownership to increase transparency in financial transactions.
- Customer due diligence: Strengthen and publish rules on customer due diligence (CDD). This may include a co-regulatory approach with professional associations and interested civil society groups. Reforms should include the following requirements.
- Identify the customer and verify said customer’s identity through reliable, independent source documents, data, or information.
- Identify the beneficial owner.
- Understand the purpose and intended nature of the business relationship.
- Conduct due diligence on the business relationship and scrutinize the transactions undertaken during that relationship.
- Maintain records on transactions and information obtained through the CDD measures.
- Implement additional measures for politically-exposed persons (PEPs), including appropriate risk-management systems and enhanced ongoing monitoring of the business relationship.
- Identify, assess, and mitigate money laundering and terrorism financing risks in relation to new technologies, products, and business practices.
- Digitization for interoperable data and open data for red-flagging: Major anti-corruption and anti-money laundering laws require companies and professionals to report and avoid suspicious activity. Governments have two concrete roles in helping professionals comply with these laws.
- Digital first reporting: The first is that they can adopt policies and filing systems to promote digital reporting.
- Open data for machine learning: Second, they should publish appropriate open data (such as beneficial ownership data) to help enhance real-time monitoring of financial transactions to detect and prevent illicit activities. This will become increasingly important as more firms adopt machine-learning approaches to detect suspicious activities.
- Limiting complexity: Consider requiring explanations of complex corporate structures and publishing those.
- High-risk activities: Establish and publish a list of high-risk activities, especially in transactions with a nexus in a high-risk jurisdiction.
- Transparency of funding: As appropriate, require disclosure of funders in high-risk legal cases.
- Supervision and co-regulation: Establish independent oversight bodies or supervisors to review the actions of legal professionals and ensure accountability. These may be combined with professional associations and civil society for a co-regulatory approach.
- Whistleblower and safeguards: Ensure that legal service providers have adequate channels to report suspected ongoing crimes, consistent with their professional standards and practices.
- Codes of conduct: Encourage the adoption of codes of conduct that promote ethical communication practices.
- Self-regulation: Encourage industry to investigate and take action on ethical breaches. Such an approach should preserve civil liberties and should not preclude the enforcement of relevant laws, such as those governing political finance.
- Transaction register: Mandate the registration of all real estate transactions in a publicly accessible database to enhance transparency.
- Public digital cadastres: Introduce regulations that require the disclosure of the ultimate beneficiaries of real estate transactions.
- Enforcement and compliance reporting: Report on major violations of real estate customer due diligence rules. Consider a public database similar to that for bribery or environmental crime in the United States.
- Digitization for interoperable data and open data for red-flagging: Real estate transactions can and should move toward a digital-only basis as appropriate. As with the guidance for financial services above, there are two core components: digital first reporting and open data for machine learning.
Open Government Resources
To support the implementation of these recommendations, a number of resources are available from the OGP Support Unit and its partners.
National Actions to Help Professional Services Ensure Financial System Integrity
This publication is an overview of the current landscape regarding the role of professional services in preventing or enabling corruption.
Countering Kleptocracy through Open Government and Democratic Oversight
The OGP Support Unit co-authored a set of papers with the National Democratic Institute (NDI) on kleptocratic regimes, with a focus on how such actors extend their influence abroad at the national and local levels.
The Open Gov Guide is the how-to resource for concrete recommendations, examples of reforms, and international standards and guidance. The guide covers several policy areas relevant to this topic, as listed below.
- Anti-Corruption
- Civic Space
- Free Expression and Media Freedom: This chapter includes information on strategic lawsuits against public participation (SLAPPs), which are often used by corrupt actors to retaliate against whistleblowers, journalists, civil society groups, or political opposition.
- Digital Governance
- Fiscal Openness
This blog provides an overview of the findings from a research project conducted by the OGP Support Unit and the Brookings Institution on the beneficial ownership data ecosystems in five countries: Colombia, Indonesia, Kenya, Ukraine, and the United States.
This document summarizes inputs on this topic from members of the Financial Transparency and Integrity (FTI) Democracy Cohort, a multi-stakeholder platform run by the United States government, the Brookings Institution, and OGP. The cohort began as part of the first Summit for Democracy in 2021.
This page is based on the invaluable guidance and materials developed by the following organizations.
- The Financial Action Task Force (FATF) has published guidance on legal services, trust and company service providers, the accounting profession, and real estate. FATF also has a Horizontal Review of Gatekeepers from July 2024, which assesses progress made by its members to prevent professional services from facilitating corruption.
- Transparency International published guidance and research on professional services as well as an article on how money is moved from Africa to Europe and beyond. Its U4 Anti-Corruption Centre also published Professional enablers of illicit financial flows and high-risk services and jurisdictions, which outlines high-risk activities by professional services and high-risk jurisdictions.
- The Organized Crime and Corruption Reporting Project (OCCRP) published investigations into enablers and sanctions evasion.