No safe havens for dirty money

08 Oct 2018 / 06:58 H.

    THE signal is out. Wherever you try to clean your dirty money, you could be hunted down. Countries all over the world are pursuing money launderers under their elaborate money laundering national laws. Also targeted are banks, which allow for the channelling of such illicit money.
    By now, Malaysians are all too familiar with this crime of money laundering ever since they witnessed the former premier and his wife appearing in court to face an extraordinarily large number of charges for such an offence.
    And in Datin Seri Rosmah Mansor's case, money laundering can be linked not just to corruption but for all sorts of other illegal acts including tax evasion. She has been charged with money laundering by failing to declare tax exceeding RM7 million from 2014 to 2018.
    A survey of laws worldwide shows that the noose is tightening for money launderers.
    In the UK, described as the money laundering capital of the world where properties are bought to hide corrupt money, under new legislation, offshore owners of properties must reveal their true identities or face jail sentences and unlimited fines.
    A recent judgment of the UK High Court issued the first "unexplained wealth order" against the wife of a foreign banker to explain the purchase of property in 2009 for £11.5 million (RM62.1 million) via a company in the tax haven – British Virgin Islands.
    The wife claimed she owned the company, which bought the property. But the funds were traced to her husband, once chairman of a state-owned bank in a foreign country. He was convicted for "misappropriation, abuse of office, large-scale fraud and embezzlement".
    Her appeal against the order was dismissed by Justice Supperstone.
    Like other wives elsewhere, her reported luxury lifestyle included a 10-year spending spree of £16 million at the prestigious London's Harrods store.
    She must now explain how she had obtained the funds to procure the property, failing which her property would be forfeited.
    Much of the same has happened in the US when the Department of Justice seized properties and goods bought with funds, (allegedly) stolen from 1MDB.
    Huge sums of money were diverted from 1MDB and landed in the account of a US law firm – Shearman and Sterling – where it was disbursed to purchase assets and invest in business interests for the personal benefit of identified persons.
    This includes luxury real estate, a Beverly Hills hotel, a private jet, and a major Hollywood motion picture and to fund luxurious lifestyles.
    Payments were made to Las Vegas casinos, luxury yacht rental companies, business jet rental vendors, a London interior decorator, associates and family members, and jewellers.
    Banks are not spared in this quest to staunch money laundering. They have been hauled up for allowing fraudulent transactions to go through. Even giant banks like HSBC and Standard Chartered have been hauled up.
    The former involving US$8 billion (RM33.1 billion) laundered; the latter paid US$700 million in fines. One of the largest fines at the time for anti-money laundering non-compliance was brought against Wachovia, since merged with Wells Fargo. It is estimated that close to US$390 billion dollars were laundered from Mexican drug cartels.
    The small, unassuming island off the coast of Australia, Nauru, turned into a shell corporation haven after its natural resources were depleted, is reportedly a favourite of the Russian mafia. An estimated US$70 billion passed through it which remains unaccounted for.
    The Commonwealth Bank of Australia ended up paying more than US$700 million for serious and systemic failures to report suspicious deposits, transfers and accounts. It also admitted to the late filing of 53,506 reports of transactions of US$10,000 or more through its "intelligent deposit machines". Incidentally, Malaysia has a similar reporting requirement.
    The European Union (EU) is tightening regulations following a series of revelations on wealthy individuals' use of shell companies as a means of avoiding tax, many of which were revealed by the "Panama Papers" leaks. EU member states will be required to establish centralised registers of information about bank and payment-account holders, which national authorities could access in case of suspicious activities.
    Tax authorities would gain access to national anti-money laundering information, including the true owners of companies and trusts to prevent tax evasion by hiding funds offshore.
    Nearer home, Singapore has shut down the BSI Swiss merchant bank, and fined it S$13.3 million (RM39.9 million) for 41 breaches related to 1MDB. This includes its failure to conduct due diligence on high-risk accounts and to monitor for suspicious customer transactions.
    Last year Singapore fined Credit Suisse and UOB banks for breaching anti-money laundering requirements relating to the 1MDB fund.
    The litany of cases is multiplying exponentially, denying corrupt individuals less and less places to stash their dirty money.
    Gurdial Singh Nijar, a former University of Malaya law professor, currently practises law. Comments:

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