Jersey lawyer criticises inconsistency of EU money laundering 'white list'

A Jersey lawyer specialising in the field of money laundering and financial services regulation has questioned the validity of the European Union's 'white list' of countries whose money-laundering controls are considered to be equal to those of EU member states, and which notably excludes leading offshore fund jurisdictions in Europe and the Caribbean.

Stephen Platt, an English barrister and chairman of BakerPlatt Group, queries the inclusion on the list of countries such as Russia, Argentina and Mexico, as well Australia and Canada, which have been adjudged to be less than 25 per cent compliant with the international standards established by the Financial Action Task Force.

Platt describes as "bewildering" the suggestion that the white list countries have higher standards of anti-money laundering controls than leading offshore financial services jurisdictions including the UK's Crown Dependencies.

"Having researched the background to some of the countries included, we question why countries that fall behind recognised international standards are on the list, while finance centres such as Jersey, the Bahamas and the Cayman Islands are not," says Platt, who advises governments and regulators on the implementation of regulatory and anti-money laundering rules.

An analysis by BakerPlatt and its alliance partner in London, Seven Bedford Row, notes that the first mutual evaluation report on Russia in 2001 by the European Committee on Crime Problems noted as a "critical deficiency" the country's lack of comprehensive laws and regulations implementing international standards on money laundering.

Although a second evaluation in 2004 noted significant improvements, it also found that numbers of investigations, prosecutions and convictions for money laundering were falling and know your customer procedures remained deficient.

A report on Argentina by Gafisud, a regional FATF offshoot for South America, noted inherent weaknesses in legislation that had the effect of impeding successful prosecution of money laundering, while no offence of terrorist financing existed. The country was criticised for its failure to provide statistics in anti-money laundering areas, preventing an assessment of the implementation of core requirements from being carried out.

The FATF's September 2004 report described the application of anti money laundering measures in Mexico as somewhat haphazard, and said the lack of mutual legal assistance legislation not only inhibited the country's ability to co-operate internationally, it also undermined national prosecutions. Bank and trust secrecy was also criticised as impeding investigations.

In addition, the lawyers say, while the FATF praised South Africa for developing a legislative structure to combat money laundering, the absence of a framework to combat the financing of terrorism was noted, whilst the framework in place was so new it needed time to be assessed for its effectiveness.

BakerPlatt notes that Jersey, which was not included on the white list, was assessed as 76 per cent compliant at the time of the island's last assessment by the International Monetary Fund in 2003. The most recent FATF assessments, issued in November last year, rated the Bahamas as 45 per cent compliant and Cayman as 78 per cent compliant.

However, five of the 13 countries on the list were far below this level, according to their most recent IMF assessments: Australia (24 per cent), Canada (14 per cent), Singapore (23 per cent), Switzerland (22 per cent) and the US (31 per cent).

"Australia's and Canada's staggering level of non-compliance with FATF recommendations makes it difficult for the EU to justify their inclusion on the white list on the grounds of 'equivalence'," Platt says.

"Given that the EU recently announced that it is to pursue infringement measures against 15 of its member states for failing to implement the Third Money Laundering Directive into national law, it would perhaps be better placed to give a jurisdiction such as Jersey the recognition it deserves, and the role model some of its member states appear to need, as the leader in the field of anti-money laundering."

Source: HedgeWeek

Taiwan seeks help of foreign banks in money-laundering probe

Taiwan has sought the help of international banks as part of its probe into an alleged money-laundering case implicating former president Chen Shui-bian and his family, a prosecutor said Tuesday.

Merrill Lynch & Co., Credit Suisse Group and ABN Amro Holding NV are among the banks that have pledged to assist the investigation, said a prosecutor who declined to be named.

"We are seeking assistance from the banks as witnesses," the prosecutor said, without elaborating.

When contacted by phone, Merrill Lynch spokeswoman Vicki Kwong said: "As in normal practice, Merrill Lynch is cooperating with authorities."

Taiwan launched a probe this month into alleged money laundering implicating the former first family, following similar moves by Swiss authorities.

Copies of Swiss documents obtained by a Taiwanese lawmaker showed Chen's son Chen Chih-chung and daughter-in-law Huang Jui-ching transferred 31 million US dollars to her Swiss bank accounts in 2007.

They were also suspected of laundering money by setting up companies in the Cayman Islands.

Prosecutors have named the couple and Chen Shui-bian, his wife and brother-in-law, as defendants in the case.

The ex-president has admitted that his wife wired 20 million US dollars abroad from his past campaign funds, but said she did so without his knowledge. He has denied any illegal activity.

His son and daughter-in-law have said they merely did their mother's bidding and were unclear about "the source or the background" of any transferred funds.

Chen, who left office in May, is already being investigated for allegedly embezzling 14.8 million Taiwan dollars (480,500 US) in special expenses while president, and his wife is on trial for corruption and document forgery in the same case.

Source: AFP

Son of Taiwan ex-leader returns to face money laundering charges

The son and daughter-in-law of Taiwan's ex-president Chen Shui-bian Monday returned to the island to face a probe into alleged money laundering implicating the former leader. The couple, listed as defendants along with the ex-leader and his wife Wu Shu-chen over their alleged roles in the scandal, insisted they knew nothing about a 20 million US dollar fund kept at their bank accounts set up by a Swiss bank in Cayman Islands.

"I have no idea about the funds because my mother has long been the one handling the family's money," said the son Chen Chih-chung at the airport.

He stressed he did not know about the source and how the fund was wired abroad.

His wife, Huang Jui-ching, also said her mother-in-law, Wu Shu-chen, asked her to sign some documents, which she did as she was told without asking why.

They insisted that their return to Taiwan is a solid proof that they want to cooperate with the judicial authorities in clearing themselves and their family. Taiwan prosecutors have issued summons for the couple, who left Taiwan on August 9, just days before the scandal came to light earlier in August.

Taiwan's prosecution authorities have listed the former president Chen and four of his family members as defendants over their alleged roles in a high-profile money laundering scandal.

The scandal came to light on August 11 after Swiss judicial authorities notified Taiwan after finding unusual fund transfers through the son and daughter-in-law accounts set up by a Swiss bank.

The Supreme Prosecutor's Office launched the probe after Chen admitted at a news conference on August 14 that his wife had remitted 20 million US dollars worth of previous campaign donations abroad without telling him. He said his wife told him this was done in preparation for their retirement after he stepped down as president in May.

On August 16, prosecutors barred the ex-leader and his wife from going abroad, after searching Chen's home and office and Wu's home earlier in the day.

Investigators claimed to have found details of four secret bank accounts opened in 2000, the year Chen won the presidential election.

Chen said the money was from campaign funds that he had failed to declare. But prosecutors are trying to determine if the couple was attempting to launder illegally-obtained money through their son and daughter-in-law as well as other relatives.

The money laundering scandal has dealt a crushing blow to Chen's Democratic Progressive Party (DPP), which lost its eight-year grip on power to the pro-China Kuomintang (KMT) party in the March 22 election.

Chen, who served two four-year terms as president between 2000 and 2008, resigned from the DPP on August 15 as the party was preparing to expel him.

Source: The Earth Times

EU’s money laundering white list questioned

A lawyer spcialising in money laundering has put the validity of EU’s ‘white list’ in doubt

A lawyer specialising in money laundering and financial service regulation this week questioned the validity of the EU’s ‘white list’ of countries where money laundering controls are considered the same as EU member states.

Stephen Platt, BakerPlatt Group barrister and chairman, questioned why countries such as Russia, Argentina and Mexico could justifiably make the list and noted Australia and Canada, also on the list, were less than 25% compliant by the standards set by the Financial Action TaskForce (FATF) into money laundering controls, according to Tax-News.com.

Platt described as ‘bewildering’ that white list countries were regared as having a higher level of control of money laundering compared with leading offshore finance centres, including the British Crown Dependencies.

‘Having researched the background to some of the countries included, we question why countries that fall behind recognised international standards are on the list, whilst finance centres such as Jersey, the Bahamas and the Cayman are not,’ said Platt, who advises gand regulators on the implementation of effective regulatory and anti-money laundering rules.

Source: AccountancyAge

Taiwan detains former security chief in money-laundering scandal

A Taiwan court on Monday ordered the detention of former internal security chief Yeh Sheng-mao for alleged corruption and reportedly leaking top secrets to former president Chen Shui-bian over a money-laundering scandal. "He allegedly violated the anti-corruption law by covering up the case in a bid to profit a third party," a court spokesman said of Yeh. "He also allegedly violated the national classification information law by leaking top secrets to a third party."

The court detained Yeh to prevent him from hampering evidence, said the court spokesman.

Yeh was charged in late August with concealing documents that hindered investigations into the alleged money laundering implicating Chen. Prosecutors are seeking a jail sentence of two and a half years against him.

The documents concerning alleged money laundering by Chen's wife, Wu Shu-chen, were submitted by the head of the anti-money laundering centre to then-director of the Investigation Bureau, Yeh, in February, according to the indictment.

Yeh later told the head of the centre that he had personally handed the documents to prosecutor-general Chen Tsung-ming for further investigation and necessary legal action, the indictment said.

Yeh never passed on the documents, claiming later he forgot as he was busy during the transition between governments. He said he had verbally told the prosecutor-general about the issue, but Chen Tsung-ming denied the claim.

On August 21, prosecutors searched Yeh's home and found copies of the documents, indicating that it is unlikely that Yeh forgot about them, the indictment said.

Yeh was the first person to have been indicted in the snowballing money laundering scandal involving the former president and his family.

The allegations surfaced in June when Swiss judicial authorities alerted Taiwan after detecting unusual transfers of 21 million US dollars in bank accounts set up by Swiss banks in the Cayman Islands for Chen's son and daughter-in-law.

The scandal was first revealed by a Taiwan magazine on August 10. On August 14, Chen admitted that his wife had remitted 21 million US dollars into several foreign bank accounts.

Chen had not declared the monies, which were leftover campaign funds from the 2000 and 2004 presidential election.

Two former chief aides of Chen and an associate of Wu were also arrested for their alleged roles in helping with the fund management and transfers.

Prosecutors have questioned Chen, his wife, brother-in-law, son and daughter-in-law over their alleged roles in the scandal and barred them from leaving Taiwan.

Chen stepped down as president in May after serving two terms from 2000. He was succeeded by Ma Ying-jeou of the Nationalist Party.

Source: The Earth Times

Cayman Islands Bank Cited In Former Taiwan President`s `Laundering` Case

The family of former Taiwan President, Chen Shui-bian, is accused of laundering money in several overseas accounts, including in the Cayman Islands.

Chen`s family is suspected of depositing at least T$1 billion in banks in Japan, the United States, the Cayman Islands, Singapore and Switzerland, among other places, Taiwan media reports indicate.

But Chen has denied any wrongdoing.

`There is absolutely no graft, absolutely no stolen money,` he told a news conference this week.

Chen has admitted `expatriating` $20 million, but claims the money came from unused campaign contributions - permissible under Taiwan's law at the time - and was intended to underwrite the island's `diplomatic work.`

Source: Carib World News

Cayman welcomes the CFATF review

The Cayman Islands Financial Services Association (CIFSA) is hailing the results of a recent review of the Cayman Islands anti-money laundering framework by the Caribbean Financial Action Task Force (CFATF), the regional arm of the FATF.

The report concluded that the Cayman Islands was either compliant or largely compliant with 38 of the FATF 40+ 9 Recommendations relating to money laundering and combating the financing of terrorism.

CIFSA was quick to congratulate the Cayman Islands government, the Cayman Islands Monetary Authority (CIMA) and private sector representatives that participated in the onsite review which was conducted in June 2007.

“All of the various entities and individuals, and particularly the Cayman Islands Monetary Authority should be congratulated for this result,” said Eduardo d’Angelo Silva, Chairman of CIFSA.

“The CFATF report is a huge endorsement of our anti money laundering framework. Many of the enhancements to our regulatory framework were made over six years ago, so it is nice to finally receive some acknowledgement of our efforts,” Mr Silva said.

The assessment of the Cayman Islands was based on the FATF 40 recommendations on money laundering and the nine special recommendations on terrorist financing (known as the FATF 40+9).

CIFSA was also especially pleased with the significant recognition that CFATF gave to the Cayman Islands private sector. In its report the CFATF said that: “The financial service providers displayed a healthy compliance culture, based on an appreciation of the reputation risk of AML/CFT for the jurisdiction. The strong compliance culture was also demonstrated by the financial service providers’ proactive cooperation with the authorities in implementing AML/CFT measures.”

Eric Crutchley, Director of CIFSA, said the Islands must be proud of this latest achievement.

“As a leading financial services centre, the Cayman Islands should be proud of the CFATF’s recognition of our strong compliance culture. Our compliance culture was around long before formal legislation was introduced and it is good to see it being acknowledged so significantly by an independent review body such as the CFATF,” he said.

http://www.caymannetnews.com/news-4437--1-1--.html

Liechtenstein Now Less Of A Tax Haven

The Alpine principality will start helping other nations claw back missing tax revenues.

Timing is everything these days, especially for a tax haven like Liechtenstein. A day before finance ministers of the Group of 20 were due to meet to discuss new guidelines to stop tax evasion, one of the world’s favored destinations for such shenanigans said it would start helping other nations claw back their missing tax revenues.

The tiny Alpine principality said Thursday that it was dropping its distinction between tax evasion and tax fraud, an issue that has frustrated tax authorities in the United States and Germany because Liechtenstein previously insisted on only handing over data in cases of outright tax fraud.

It now says it has already begun “concrete talks” with other nations and was offering bilateral tax agreements in cases of tax fraud and tax evasion. "We are aware of our responsibility as part of a globally integrated economic area,” Prime Minister Otmar Hasler said. “With today's declaration, we are making our contribution to a joint solution that will make an effective enforcement of foreign tax claims possible.”

International organizations such as the Organization for Economic Cooperation and Development have been lobbying for more transparency from tax havens like Liechtenstein, Switzerland and Luxembourg for many years now. But the crackdown has now reached a critical stage as governments around the world seek to tighten financial regulations to prevent another repeat of the credit crunch while desperately trying find new tax revenues.

France and Germany have already asked the OECD to prepare information on tax havens for the G-20 meeting in London on April 2. On Tuesday, France’s La Tribune reported that the OECD was adding Switzerland, Luxembourg, Austria, Singapore and Hong Kong to its list of noncooperative tax centers, which already included Liechtenstein.

Stephen Platt, chairman of the BakerPlatt Group and specialist in anti-money-laundering, said that Liechtenstein’s move was “essential” to its ongoing survival. "It is simply untenable within this climate and this environment for centers to continue not to criminalize the laundering of the proceeds of foreign tax evasion," he said, adding that in the long term such rules were “unsustainable and not good for your reputation.”

But the international backlash against tax havens by governments and the G-20 may also be too indiscriminate, he said, because of the “very real and distinguishing” differences between them. While Liechtenstein is only now amending its laws on tax evasion, other offshore financial centers like Jersey and Guernsey already did so a decade ago; Switzerland, the Cayman Islands and Singapore have not.

Meanwhile there is the other elephant in the room: banking secrecy. Liechtenstein seems keen to keep its rules in that area unchanged. "Our bank secrecy has always served to ensure the legitimate protection of the privacy of the citizen, which we will continue to retain,” Hasler said Thursday.

Platt believes that the G-20 nations are looking at tax evasion and banking secrecy as two related but distinctly important issues. “The criminalization of laundering of tax evasion is equally as important, [but] tax havens that do not address bank secrecy need to see it addressed,” he said.

Source: Forbes

Blacklisting threats persist as tax havens still blamed

Cayman and other offshore financial centres are not out of the onshore countries 'bad books' just yet. The latest meeting of the G20 has revealed more pressure to come on tax havens and yet more potential black lists. According to the communiqué from the Pittsburg round, the G20 countries will be continuing to fight non-cooperative jurisdictions (NCJs). Although it is widely acknowledged that offshore financial centres had little to do with the recent global economic melt down, the G20 members have agreed to use countermeasures against tax havens from March 2010.

However, the OECD has warned the G20 nations that it maybe their own tax regimes that need addressing first.

The G20 members have said they are committed to maintaining the momentum in dealing with tax havens and to deliver an effective programme of peer review. “The main focus of the Forum’s work will be to improve tax transparency and exchange of information so that countries can fully enforce their tax laws to protect their tax base. We stand ready to use countermeasures against tax havens from March 2010,” the communiqué stated.

It also indicated that it would require the Financial Action Task Force (FATF) to issue a public list of high risk jurisdictions by February 2010. “We call on the FSB to report progress to address NCJs with regards to international cooperation and information exchange in November 2009 and to initiate a peer review process by February 2010.

However, the Organisation for Economic Cooperation and Development (OECD) has warned the G20 nations that dealing with the symptoms of the problem and not the real causes can cause more harm than good. Speaking to AFP, the OECD said reforming national tax regimes in leading countries should be where the focus is because onshore tax incentives encourage the legal use of offshore entities and complex instruments to take best advantage of onshore tax allowances.

The OECD said that the causes of the global economic crisis lay with policymakers in many fields and in many countries.

Speaking to Reuters in the wake of the summit, Leader of Government Business Mckeeva Bush said the campaign against offshore centres was misdirected. "It's not fair," said Bush. He said that the anti-tax haven "finger pointing" by the world's richest and most powerful governments is hypocritical and seeks to shift blame away from their own failed policies and lax regulation. "It's the fault of the onshore centres who taxed their own people ... money is running away from them now," Bush said.

An OECD report "Reform and exit strategies" implies that the main causes of the global crisis were borrowing by governments and unduly low interest rates by central banks. Official distortion of exchange rates then prevented markets from absorbing the global trade and savings imbalances which resulted. In the West, a social bias towards "easy money policies" led to "excess liquidity, asset bubbles and leverage."

Another cause was the so-called "American dream" vote by Congress to push out zero asset-backed home loans to low income households. "Banks respond to the signals they are given," the report suggests. It also points to the risk that mortgage tax relief, of the type associated with subprime loans, could result in households falling into excessive debt.

Author of the report, Adrian Blundell-Wignall, says a cause of the crisis, given little or no public attention, was national tax systems in leading economies. These unduly favour corporate risk and debt leverage and were the main force behind much-criticised structured financial instruments. But the issue of domestic tax reform "needs to be on the long-run agenda," Blundell-Wignall said.

He also cites a degree of incompetence in bank boardrooms, the pooling of businesses within financial groups which ensured contagion if part of the group collapsed, and unduly complex or overlapping rules and supervision.

Source: Cayman News Service

Businessman is held in $13.4M fraud case

December 15, 2006

A federal judge set bail at $5 million yesterday for a West Windsor businessman who, authorities allege, defrauded the government by diverting $13.4 million of payroll taxes and worker compensation premiums into his own bank account.

Allen Hilly, 44, a native of Iraq who is living legally in the U.S., operated a number of companies hired by small- to mid-sized businesses looking to outsource human resource and administrative functions, federal authorities said.

Between February and November of this year, Hilly allegedly collected employment taxes weekly from more than 100 clients, but ordered the money transferred to his own account rather than to the Internal Revenue Service, according to a criminal complaint filed by the FBI in U.S. District Court in Newark. He is charged with money laundering and wire fraud.

The complaint identifies Hilly as managing partner of Professional Employer's Holding LLC, which operates a number of subsidiaries in various states. According to the complaint, Hily told employees he intended to "blow up" the subsidiaries and restructure or close them by the end of the year.

The complaint also states Hilly is the sole signatory on the Bank of America account found to contain the $13.4 million. It was held in the name of Leading Edge Holdings Corp., a company described as a "shell company that is the alter ego for Allen Hilly."

Hilly was arrested at his Mercer County home late Wednesday. The FBI learned he was preparing to leave the country after being advised by his bank that authorities had seized his money, a law enforcement source said.

Yesterday, Hilly made a first appearance before U.S. Magistrate Judge Claire Cecchi in Newark. A meek-looking figure in business attire, he sat quietly at a table as his attorney and the government's attorney sparred over everything from his citizenship status to his character.

Assistant U.S. Attorney Marion Percell termed Hilly a serious flight risk because he is facing a maximum prison term of 20 years on each of the 158 counts with which he is charged.

She told the judge Hilly had been evasive and untruthful in interviews, claiming vaguely to have been born in the "Mideast," to be earning an annual salary of $60,000 and to be possessing only $15,000 in assets.

Hilly drives a 2006 Porsche Cayenne which, "I'm told costs more than his alleged salary," Percell said. He is also a permanent resident of the U.S., not a citizen, she said.

The government has "very powerful" evidence that Hilly had committed "an extremely large fraud," Percell said. The evidence includes copies of e-mails Hilly sent employees in which he "repeatedly ordered" them not to channel money to the government, she said.

"By Jan. 31, every employee of these companies will receive a W2 saying 'zero dollars' were withheld," she said. "So it's not surprising ... that, yesterday morning, he told his employees this was it, fire all the employees, we're shutting down."

Percell also told the judge Hilly had "talked about" investing the seized money in businesses in England, New Zealand and the Cayman Islands.

Kevin Marino, the attorney representing Hilly, attacked Percell for painting his client as a "notorious, horrible flight risk."

Hilly is a law-abiding, naturalized U.S. citizen who has lived with his wife in the same house for 13 years and has an 8-year-old son who attends the Far Hills Country Day School.

"Allen Hilly is an entrepreneur," Marino said. "Does he represent a flight risk? He does not."

Marino told the court he has known Hilly personally for 18 months, as he represented him in "commercial litigation." Later, outside court, he declined to characterize the nature of the litigation.

"It may seem strange he doesn't know exactly where he was born. He told them 'Mideast,'" Marino said. But in reality, many children of emigrant parents are not sure of their birthplace, he said.

"This is an offensive proceeding, because it's cavalier," Marino said. "He's never been in trouble before. He should be set free."

But the judge approved the request, calling Hilly a serious flight risk. She also ordered Hilly and his wife, Rosa, to surrender their passports.

A preliminary hearing in the case has not yet been scheduled.

http://www.nj.com/news/ledger/jersey/index.ssf?/base/news-5/1166161964211060.xml&coll=1&thispage=2

RI, Caymen Island, S Africa combats money laundering

Jakarta (ANTARA News) - Indonesia through the Financial Transaction Analysis and Report Center (PPATK) forged cooperation with the financial intellegence agencies of Cayman Island and South Africa in preventing and combating money laundering.

A spokesman for PPATK, Natsir Kongah, said here on Monday that the cooperation agreements were strategic, considering that Caymand Island was one of the biggest financial centers in the world, while South Africa was also the biggest financial center on the African continent.

The signing of documents of agreement between PPATK and Financial Reporting Authority (CAYFIN) of Caymand Island and the Financial Intelligence Center of South Africa was believed to be decisive to strengthen international cooperation often conducted by the respective countries in promoting the exchange of information especially on money laundering and other crimes.

Caymand Island, an island resort discovered by Christopher Columbus on May 10, 1503, was well-known as one of the world`s five biggest financial centers. At least 350 banks and trust companies are operating there with around one trillion US dollars circulating in the region.

This small country is also a place of 8,000 mutual funds and 65,000 corporations. Around 1,000 companies have listed their shares at the Caymand Island`s Stock Exchange.

According to Natsir, the procedure of PPATK cooperation with CAYFIN and FIC was based on article 25, point 3, 2002 of the revised law No 25, 2003 on money laundering which allowed PPATK to prevent and combat money laundering under cooperation with other relevant national and international parties.

The cooperation was an effort to strengthen the close relations with the internatioal world especially Caymand Island and South Africa as members of the Egmont Group.

The substance of the agreement has to do with cooperation in the exchange of financial intelligence information relating to the prevention and eradication of money laundering and the funding of terrorist groups.

Information is credential in nature and it is also an obligation of each institution to maintain the credentiality of the information, which should not be made as evidence at a court of law, and could be passed on to other parties without written approval from the owners of the information or institutions.(*)

Copyright © 2006 ANTARA , December 12, 2006

http://www.antara.co.id/en/seenws/?id=24616

Indonesia, South Africa, Cayman expand cooperation on money laundering

JAKARTA (AFP) - Indonesia's anti-money laundering watchdog has signed agreements with the Cayman Islands and South Africa to exchange financial intelligence and help combat the financing of terrorism.

http://cayman-island-travel.com/2006/12/11/indonesia-south-africa-cayman-expand-cooperation-on-money-laundering-afp-via-yahoo7-news/