Pakistan identifies 26 tax crimes as ML predicate offences

The government of Pakistan is preparing a list of serious tax crimes to be declared as predicate offences under the Anti-Money Laundering Act 2010. A total of 26 offences have been outlined so far, connected to sales tax, income tax and federal excise duty. Making tax crimes predicate offences to money laundering is one of the Financial Action Task Force‘s 40 Recommendations as of 2012.

As of July 1 2013, tax crimes are predicate offences to money laundering in Singapore. The Monetary Authority of Singapore guided financial institutions to  ‘develop, implement and enforce internal policies, controls and procedures that effectively detect, and deter the laundering of proceeds from wilful or fraudulent tax evasion through the financial system.’

The new guidance placed enhanced due diligence requirements on all ‘clients assessed to present high risk of wilful or fraudulent tax evasion.’

In March 2013, the Private Banking Industry Group’s issued the Industry Sound Practices (see Addendum 1, p 29), to ‘safeguard the industry from being used as a platform to harbour proceeds from serious tax crimes, or as a conduit to disguise the flow of such funds.’

Among the firm’s responsibilities is to communicate that clients are responsible for their own tax obligations and assess the bona fides of clients, carefully evaluating the tax-related risks both when taking on a client and via continuous monitoring

Red flags for when to apply EDD to a client and account include:

• Client requests for holdmail services without satisfactory reasons. Clients can ask a bank to receive correspondence relating to their account. The mail is held for them until they return to the jurisdiction. The service allows a level of privacy or secrecy which the Singapore governmnet n
• Use of complex structures
• Non-face-to-face business relationships
• Negative tax-related reports from media or other credible information sources on the client or on client’s jurisdiction of domicile or tax residence
• Any additional parameters that a Covered Entity considers pertinent for conducting its risk assessments and due diligence checks.

Courtesy of http://www.tennesseefederalcriminallawyerblog.com

The Industry Sound Practices also includes a ‘non-exhaustive’ five step process for EDD, including screening adverse or negative news, questioning the source of funds, using information from other financial institutions where legally possible, identifying the beneficial owners.

This guidance was targeted to the private banking sector, some of whose clients have been used to evading taxes and may be less inclined to reveal more details about the source of their wealth as private banking is notoriously discreet and protective of its wealthy benefactors. There was some concern that clients who had traditionally banking in Singapore may begin to move funds to jurisdictions with less rigorous counter-tax crime regimes.

If any readers have seen changes within Singapore, or heard of a client exodus, do please drop me a line.

 

 

Related articles

• This is the end: Swiss-US data sharing agreement smashes bank secrecy
• Singapore takes steps against tax crimes and moves towards better international cooperation on tax matters
• Banks all geared up and ready against tax dodging
• Why is Prosecuting Money Laundering so Hard?

China: Zhou’s House of PEPs Infographic

Think that Frank Underwood from Netflix‘ House of Cards series and his network are ruthless in their relentless pursuit of power? Wait until you read about one of China’s politico-business families. Sanctions officers might consider placing this infographic on their desktops as a reminder of who is who and who they have done business with.

Meet the Zhous, China’s very own House of PEPs, which is odd given they have thrived in a Communist country which expounds the virtues of equality for all and no citizen being better than the next. The infographic shows the prominent politically exposed persons in the clan, how they are related, and shows the business investments they have made and lists the companies connected to them via investment or other business dealings.

The thirteen members of the Zhou family depicted in this New York Times Infographic appear to have stakes in more pies than they have fingers. Seven of the clan have been detained by Chinese authorities,  the whereabouts of six of them is reported ominously as ‘unknown’. One of the clan lives in California and is presumably, for now at least, safe from prosecution by China. Two more are on the lam; they are not under arrest, as far as we know, but no one knows where they are.

The Zhous at a glance 

Zhou Yongkan, the patriarch of the family sits at the top of the tree. He has held various positions in government and state entreprises. His is under arrest and Chinese authorities have already seized USD14.5bn in assets belonging to Zhou and his associates.

Wang Shuhua, his first wife, is deceased, but their son Zhou Bin took an 80 percent stake in the energy investment company, Zhongxu, in 2009. He is also underarrest.

Jia Xiaoye, his second wife, us under arrest – location unknown.

Zhou Bin’s wife Huang Wan and her father Huang Yusheng are both being detained for questioning in undisclosed locations, while her mother Zhian Minli is in California.

Zhou Yuangqing, Yongkang‘s brother, his sister-in-law Zhou Lingying and nephew are also mentioned on this ominous family tree; while mum and dad are under arrest, the whereabouts of Zhou Feng, the nephew, is unknown.

Source: The New York Times

Indian Bitcoin exchange produces KYC/AML guidance

A bitcoin exchange in India has published a compliance policy for dealing with clients in terms of bitcoin transfers. BTCXIndia has reproduced the standard Know Your Customer and Anti-Money Laundering (KYC/AML) policy used by financial institutions and tailored the requirements to fit a typical bitcoin customer and transaction.

The KYC/AML guidelines focus on a customer acceptance policy, identification procedures, transaction monitoring and risk management. In brief, anyone who wants to open an exchange account with BTCXIndia will undergo the same due diligence as a client opening a regular bank account. Identification processes will include scrutiny of beneficial owners, monitoring will look for  complex, unusually large transactions and BTCXIndia has hinted that it will set thresholds for transaction limits if required. Remittances worth more than INR50,000 (USD798, XBT0.836) will be effected by debit to the customer’s account or against cheques and there will be no cash transactions through the firm at all, which would reduce some of its risks.

The exchange has committed itself to creating risk profiles for all customers, based on low, medium and high categories and using information derived from their identity, social/ financial status, nature of business activity, information about his clients’ business and their location. Salaried employees, government owned companies, regulators will fall into the low risk group, along with any client whose financial/business information is easy to acquire, barring high net worth individuals who will not automatically receive low risk status.

High risk examples

Customers who will require a higher level of due diligence checks, according to the policy, include:

(a) non-resident customers;

(b) high net worth individuals;

(c) trusts, charities, NGOs and organizations receiving donations;

(d) companies having close family shareholding or beneficial ownership;

(e) firms with ‘sleeping partners’;

(f) politically exposed persons (PEPs) of foreign origin;

(g) non-face-to-face customers and

(h) those with dubious reputation as per public information available.

The policy sets out clearly what the company expects from its customers and staff in terms of AML compliance and it is worth reading the policy to see just how BTCXIndia is managing this.

Legal position

The Reserve Bank of India, the regulatory body for banks and Bitcoin exchanges has vaguely mentioned that it is “watching” the crypto-currency but has not yet clarified what that means. BTCXIndia has published a useful guide on the latest legal commentary from different jurisdictions on status of bitcoin use.