Anti-money laundering is one of your most subscribed services, how has this fight evolved over the years? We have been providing Know Your Customer (KYC) information to clients since 1993. The change in Anti Money Laundering (AML) laws and best practices has changed dramatically during that time. Obviously, the terrorist acts of 9/11 caused the majority of the changes. Two examples stand out - first, the increased information and expectation of banks and business in general to truly know who they are doing business with. The duty of care/best practice related to due diligence has increased dramatically. This requirement has caused a substantial increase in the number of database providers and investigative companies similar to IPSA to jump into the market. Second - transaction monitoring has also dramatically increased and improved. The algorithms and thresholds utilized to identify suspicious activity are far better today than they were even five years ago, let alone 15. However, this improvement has brought with it, increased workload to the financial services industry. Major western governments tend to look at the large
The Panama Papers...provided a real world lesson learned for many people who did not perhaps understand or value the need for due diligence
banks as the first line of defense on the private side - if not even the public side - for finding signs of illicit activity. While all of these changes have increased the cost of compliance and thereby increased the cost of doing business in general - especially cross-border business - the industry has certainly made it more difficult to utilize proceeds of crime within the legitimate business world. There is still more work to be done, however. The widely debated issue related to true beneficial ownership is a substantial one, which comes to mind first. Examples such as the Panama Papers disclosures, in theory, fuel both sides of the beneficial ownership debate. On one side, the reality that without having true beneficial ownership information within a transaction decision, illicit finance has far more latitude to
operate - especially utilizing shell companies. The Panama Papers documents have and will undoubtedly continue to show more examples of bad actors utilizing shell companies to further criminal activity. On the other side, the right to privacy would suggest that because leaks such as this can take place, people who have legitimate reasons and desires to remain anonymous in fact need vehicles such as shell companies and foreign bank accounts to remain truly protected from prying eyes. Is there ever a legitimate reason to have a secret foreign bank account and/or a shell company built to shield assets? There are multiple reasons, but the most common and legitimate one in my opinion relates to instability in your home country. If a person has concern that their home government is corrupt for example, there may be reason to ensure wealth is protected, and to some degree, hidden. Citizenship by investment is an emerging trend for many countries. How do you assist governments in establishing these programmes for foreign investors? Generally, IPSA provides due diligence services to countries offering citizenship by investment programs. Our advice tends to focus on two main themes - increase transparency and decrease conflicts of interest. The government should demand transparency when it comes to applicant information and the government should provide it to their people related to how the programs funds are being utilized. Transparency breeds trust and good will, both of which are critical if these programs hope to continue growing in popularity. Conflict of interest is another issue that in many cases is normal within a growing and immature industry. However, the immigrant investor program industry is now to the point where I believe the players, i.e. agents, service providers, governments, due diligence firms, advisors, etc, should take great care to ensure they don’t have conflicts of interest. Or at least where there is a conflict – i.e. represent a developer project where an applicant invests – be transparent about the conflict. For example – If an advisor represents an applicant and also represents a developer and receives a commission from the developer for introducing the applicant, there is a conflict of interest. That conflict can be reduced through transparency but it rests with the advisor to ensure the applicant is made aware of the relationship with the developer and in general terms about the commission.
2016 JULY / AUGUST