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Financial Crimes Enforcement Network (FinCEN) leak: UHNWI’s – the wrong target?

28 September, 2020

The FinCEN leak will surprise no experienced lawyers advising UHNWIs (Ultra-High Net Worth Individuals) and their professional advisers.  The irony of the disclosure by International Consortium of Investigative Journalists (ICIJ) and the recent BBC Panorama programme is that in most instances the processes used by wealthy people to engage in commercial activity or anonymise their ownership of property and charitable giving are perfectly legal.

It is doubtful whether the TV producers had bothered to read the judgment of Mrs Justice Lang in National Crime Agency v Baker & Ors [2020] EWHC 822 (Admin) (08 April 2020) and specifically para 97:

‘…The use of complex offshore corporate structures or trusts is not, without more, a ground for believing that they have been set up, or are being used, for wrongful purposes, such as money laundering. There are lawful reasons – privacy, security, tax mitigation – why very wealthy people invest their capital in complex offshore corporate structures or trusts. Of course, such structures may also be used to disguise money laundering, but there must be some additional evidential basis for such a belief, going beyond the complex structures used.

If they had considered the judgment it would have been much better focussed and effective.  In Baker, the NCA fell into the same trap of equating opaqueness with deliberate subterfuge to hide criminality.

Rather than have a number of distinguished US and UK AML experts and former prosecutors comment on how suspicious the activity looks, the TV producers would have been much better directing their questions to the UK government.  The laxity of regulation surrounding company incorporation, registered offices and directorships along with the poverty of scrutiny of company accounts is something that has existed for more than twenty-five years.  These weaknesses were exploited by VAT carousel fraudsters on a vast scale (costing UK taxpayers £bns) from the mid-nineties until reverse charging was brought in.  It could be very easily addressed with legislation.  Similarly, the UK government could legislate to make banks’ AML and KYC obligations more stringent – rather than lobbying on their behalf, as George Osborne did, when successfully persuading the US not to remove HSBC’s banking licence, following the exposure of the latter’s involvement in laundering money for drug cartels.  

Richardson Lissack has considerable experience advising UHNWIs and their professional advisers based in the UK and abroad.