Archive : Category

Whistleblower Ruedi Elmer vs. the Swiss ‘Justice’ System

June 2, 2017   Blog, Tax Havens, Tax Havens

We’ve regularly covered the battles of whistleblower Rudolf Elmer against the Swiss “justice” system. As we’ve said before, and as has so often been the case with those brave enough to risk all to challenge injustice and corruption, the bank was the criminal, not Rudolf Elmer. He wrote a guest blog for us here on how Switzerland corrupted its courts to nail him. We’d like to bring you up to date on his heroic struggles.

Rudolf-Elmer_m

Tax Justice Network warns at the UN against subversion of Sustainable Development Goals

Last week the Tax Justice Network director Alex Cobham was invited to the United Nations in New York to address the ECOSOC Financing for Development Forum. Here are his remarks, which highlight a major threat to the Sustainable Development Goals target to reduce illicit financial flows. And what’s that threat? A concerted effort to remove multinational tax avoidance from the scope. In fact, there’s been some very active lobbying in order to exempt corporate tax dodging from the ‘illicit financial flows’ definition.

This is life and death stuff.

subversion 310517

Technology and online beneficial ownership registries: 21st century transparency

At the Global Tax Transparency Summit meeting held in London in December 2016, a senior official from the tax haven of Jersey claimed that one of the reasons for not making their registry of company ownership available to public scrutiny was the lack of a global standard for public company registries.  TJN’s John Christensen, himself a former senior official of Jersey’s government, offered to fill that gap, arguing that civil society could provide a standard that serves as a benchmark of good practice.  In this cooperative spirit, TJN’s Andres Knobel, based in Buenos Aires, has drafted a new brief on how technology can be harnessed to provide a secure, transparent platform for an online public company registry. Transparency, 21st century-style.

As he so rightly says,

“the technology already exists but commercial registers are hardly taking advantage of it. Where does that leave the fight against corruption? …credit cards use big data to detect fraud, Netflix can suggest targeted movies, Amazon does the same with books, Facebook is developing tools to prevent “false news” and “false amplification” (fake users and coordinated massive ‘comments’, ‘likes’ and ‘shares’) and Israel checks social media in order to identify potential terrorists. All this, and yet meanwhile the creation of ‘legal fictions’ (companies) that are involved in all of these technologies, is still mainly done on paper.

His report is titled: Technology and online beneficial ownership registries: easier to create companies and better at preventing financial crimes. You can download the full report here.

Do Anti-Money Laundering requirements solve ‘fake residency’ concerns?

May 30, 2017   Blog

Do Anti-Money Laundering (AML) requirements solve the Common Reporting Standard’s “fake residency” concerns for automatic exchange of banking information?

Short answer: we wish…

Here’s a longer answer:

In response to our recent blog about the use of fake residencies to avoid the OECD’s Common Reporting Standard on automatic exchange of banking information – where we proposed extra questions by the bank, whenever someone declares to be resident in a tax haven offering residency or citizenship in exchange for money – we were questioned a about whether the bank’s own AML requirements would make these extra questions become unnecessary.

It is true that the CRS constantly states that banks should use information obtained pursuant to AML to check for consistency with the information declared by account holders. However, if the CRS were that confident about the AML processes in banks, why even bother to ask for an extra self-certification (where the account holder declares their residence) whenever a new account is opened or when some old accounts have conflicting information? Why not simply say: for all accounts, old or new, just trust whatever information was obtained pursuant to AML? Otherwise why would the OECD say it is putting “citizenship-for-sale schemes” in its sights when referring to schemes that avoid the CRS?

While we cannot know what’s in the OECD’s mind (after all, we weren’t invited to design the CRS, however much we tried to make it accessible for developing countries and loophole-free), we have our guesses. AML provisions try to ensure, among other, that the origin of the funds is legal – the residency of the account holder is part, but certainly not the main focus of AML.

As for how trustworthy banks’ AML processes are, here are a few examples about “effective” measures by major banks, relating to the core issue of preventing money laundering:

[In 2013] HSBC was accused of failing to monitor more than $670 billion in wire transfers and more than $9.4 billion in purchases of U.S. currency from HSBC Mexico, allowing for money laundering, prosecutors said. The bank also violated U.S. economic sanctions against Iran, Libya, Sudan, Burma and Cuba, according to a criminal information filed in the case.

You’d think that HSBC might have learned their lesson and now they’re “super” compliant:

[In 2017] The Financial Conduct Authority (FCA) commissioned a skilled person review – a so-called “166 report” […] The investigation was launched after the monitor installed by US authorities to oversee improvements in HSBC’s financial crime measures flagged worries about its progress.

Or:

Banamex USA, a subsidiary of the US banking conglomerate Citigroup, accepted responsibility for “criminal violations by willfully failing to maintain an effective anti-money laundering (AML) compliance program … and willfully failing to file Suspicious Activity Reports,” according to a May 22 press release from the US Department of Justice.

And:

Between 2010 and 2014, at least $20.8 billion was laundered out of Russia, funneled into banks in Moldova and Latvia, and spread from there into 96 countries across the world… a lot—an awful lot—of international banks ended up as hosts for the money, despite their anti-money-laundering controls… This cash then ended up in accounts at 732 banks, including giants like HSBC, Bank of China, Credit Suisse, Deutsche Bank, Citibank, and Royal Bank of Scotland.

This doesn’t just involve major banks – just look at Andorra’s Banca Privada d’Andorra:

In 2015, the Treasury Department’s Financial Crimes Enforcement Network (FinCEN) said BPA had helped organized crime groups from Venezuela to China launder billions of dollars.

And sadly, this isn’t just a problem of banks either. The CRS requires many other financial institutions to identify account holders and their residencies, including investment entities, insurance companies and some trusts – all of these likely have even less stringent AML requirements overall, than banks. So, do we feel any more confident because financial institutions collect residencies pursuant to AML requirement? Not really.

Now let’s look at how countries are doing in terms of their compliance with FATF Recommendations on AML, especially regarding old Recommendation 5/new Recommendation 10 about customer due diligence (basically, the information financial institutions must obtain from their clients, which is supposedly relevant to identify fake residencies, even though this is not their main focus):

Table

Back to Top