The topic addresses the company’s involvement in money laundering or tax evasion, which are unlawful and fraudulent behaviours. In the financial sector, the topic can also deal with how financial institutions help their clients evade taxes. (Note that evading taxes is not linked only to companies in the financial sector - any company can evade taxes, which should be captured but careful not to mix it up with tax avoidance).
In your analysis about money laundering, consider the following analysis flow that is in alignment with the IMP framework.
Introduction
To write a strong introduction, you should explain why good corporate governance is crucial and disclose the impact and consequences that money laundering and tax evasion has on society. This would help the readers make an educated assumption about the company's impact, even if it is not directly linked to the company.
Ideally, the geopolitical context of the country the company is having an impact in should be reported.
You should build a strong case by evaluating the general impacts of money laundering or tax evasion by tailoring it to the industry and place to which the company belongs to. It might be hard to pinpoint the concrete impact of these illegal activities, so adding specific information about the context in which the event(s) took place and the more general impacts it is associated with becomes crucial.
Core Analysis
The body of the analysis should answer the following questions:
How much money was laundered? How much tax money was evaded?
For how long was money laundered or tax evaded?
What processes did the company undertake to allow money laundering or tax evasion?
For instance, was the company involved in loan shark operations generating illegal interests? Did it use unlicensed check-cashing businesses? Did it fail to file the Currency Transaction Reports? Did it use insurance wrappers to evade taxes? Or used other tactics to deceive authorities?
Was a fine given, and if so, what is its amount? What about a final sentence or prosecution? Please add clear rulings from lawsuits or fines. Note that because lawsuits often take years to complete, the 'scandal' can have occurred over 3 years ago. Go beyond media reports.
You would be able to find concrete data, evidence, and impacts on the lawsuit document, so make sure to add it as a source in your analysis.
If discussing a commercial bank or other institution in the financial sector, how many clients did the company help in evading taxes? If available, what is the total amount of taxes evaded?
Include reports indicating that the unlawful practices are continuing. A lack of compliance with regulatory requirements or violations of preventive measures could be a good indication that the company is still exposed to money laundering risks.
Note that companies are usually fined for even failing to comply with regulations even if there was no money that was actually laundered.
If the case is about money laundering, the proceeds of the illegal funds might be available. If this is the case, please make sure to add data in regards to the person/group/organisation that is laundering the money and how they have affected society.
Important points to consider:
In the core analysis, assess whether the issue is likely to repeat itself. If the company was fined last year for money laundering and/or tax evasion that occurred 5-10 years ago, but in the meantime, it has changed its management and internal processes, such as by training employees adequately and implementing policies and procedures to ensure employees are not the perpetrators/beneficiaries of such practices, then the topic is deemed irrelevant. In other words, there is no impact today.
Note: We ask for clear rulings from lawsuits or fines when discussing money laundering or tax evasion cases. Because the lawsuits often take years to complete, the 'scandal' is deemed outdated (before 2019). However, if reports claim that these bad practices are continuing, showing a poor track record of unlawful behavior, then there is still an impact today, then the analysis can be published.
If the amount of money laundered is available, it is vital to put it into perspective. This can be done by comparing it to the total profits or revenue made by the company in a year.
Note that there is no threshold for the size of the fine, as some courts might be more strict and some more lenient. Therefore, the amount fined does not reflect the size of the crime; it is just an indicator. Though we can assume that the money laundered and fine will be of a large amount (such as USD or EUR 100 Million) when there is a public prosecution.
There are cases where a company can get fined for overlooking anti-money laundering compliance laws, which ultimately permit and facilitates money laundering. Therefore, as the company does not obey the set-out legislations, the impact of money laundering being at a large scale should be captured.
Caution: Money laundering accusations are very serious. Please make sure the sources you use are trustworthy and have a strong reputation. Government documents, as well as sources like Bloomberg, The Guardian, and the Financial Times, are all reliable. Be aware of articles with grammar or spelling mistakes or that are biased.
Read more about avoiding allegations or accusations in our article on the 6th Golden Rule.
Not to include:
Also, ask yourselves the following questions:
1/ The breadth of the impact
Is the impact local, national, or global?
How many people are concerned?
2/ The depth of the impact
Are the people concerned deeply affected, or does the issue just marginally impact them?
Are the changes brought by the issue profoundly changing society or the planet?
3/ The persistence of the impact
Find more about evaluating the scale of the impact in Step 5: Assess scale and value.
