In the fall of 2020, a television programme was made on a journalistic investigation called “Jersey Offshore leak”. In short 350’000 confidential documents leaked from the archives of a Jersey trust company called “La Hougue Financial Management Services Ltd”.
Amongst the findings is a confidential memo dating 6th July, 2000 on “11 ways” to shift assets offshore to a trust account. (Please see Sources for the details)
In those days, I had already started my young career within the compliance department of a renown Swiss Private bank of Dutch origin and only very few compliance officers would have detected any wrongdoing with those ways.
Fast forwarding to today, 20 years later, I wanted to review if the compliance requirements of the Swiss banking industry would enable a detection of each of these scenarios preventing potential illicit activity. Having practised or at least closely collaborated in AML compliance matters in several jurisdictions, including EU, UK and US, the Swiss AML framework is a pioneer and considers as amongst the tier1 highest standards Worldwide.
In the AML sector, as a fact, the AML framework is the result of corrective measures to (illegit) actions/ practices that already occurred. Meaning that when an action is initiated it may not specifically be considered by laws as illegit nor contributing to money laundering or terrorism financing. But years later, with a better understanding and within a different mindset it was judged as illegit.
For example, in some years from now, it will not be surprising to understand that an “Amazon” has to pay taxes where it generates the revenues and not where it decides to pay them opting for lower tax jurisdictions.
I broke down the 11 ways into 3 categories
– Legit creative compliance
– Aggressive tax avoidance
– Tax evasion (fraud)
Key takeaways : The following 6 check points of AML compliance controls found application and would efficiently prevent money laundering on 10 out of the 11 ways of the memo:
- Assessment of the accuracy / reality of a transaction
- Assessment of the lack of economical sense to enter into an agreement
- Identification of the true beneficial ownership
- Higher Risk clientele categorisation duty (Real estate / promotion)
- IT triggering of frequent below threshold transactions
- AML compliance checks we operate in the credit sector
The 7th way on remuneration / bills paid abroard whether between companies or individuals, can still not be completely outplayed. GAFA’s and transfer pricing are the aggressive example. For the others, it’s down to personal responsibility.
In conclusion, the current AML framework generally does the job considering the different check points we have. But since those years, new numerous and much more complex methods are out there, obliging us to continuously reflect, think forwards and in particular out of the box.
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Berclaz & Associés Legal & Compliance is a Swiss company specialising in the outsourcing of Compliance & Risk functions and Legal & regulatory advice. Our clients are Family Offices, Independent Asset Managers, Company & Trust service providers, Trading companies and Banks. Numerous references on request.