International seminar Anti-money laundering legislation

29th November 2013

Case 1

Designated categories of offenses for money landering

What is considered to be a “serious tax crime” under your domestic law for the purpose of the

anti-money laundering prevention?

• Until July 2013 Belgian AML (Act of 93) : “serious and organized tax fraud with substantial complex mechanisms or processes of international scale” Indicators provided by Royal Decree.

• Since July 2013 a new crime was initiated in our tax codes: serious tax fraud (higher imprisonment possible). Adapted in Belgian AML.

• “serious and organized tax fraud with substantial complex mechanisms or processes of international scale”. No legal definition. – Problem of interpretation in practice – The presence of one of the indicators provided by the authorities by Royal

Decree do not automatically lead to serious and organized tax fraud

• “serious tax fraud” – The seriousness will be judged upon ‘the creation or use of false documents’,

‘the substantial amount of the transaction and the unusual character of this amount considering the activities or equity’, and also the presence of indicators stipulated in the Royal Decree of 3 June 2007.

– Organization of the tax fraud might contribute to the seriousness of the crime, but is no condition present of serious tax fraud.

– What does this mean for financial institutions in terms of amounts ?

Principle of legality (forseeable criminal offenses?) Principle of equality ?

What is the relevance under your domestic law of the fact that the due taxes might be

prescribed and/or the criminal prosecution for tax crimes is prescribed as well?

• The prescription of Money laundering is in theory 5 years, 10 years if legally interrupted, but is considered to be an “ongoing crime”, because f.ex. the illegal proceeds are continuously concealed by the offender or new transactions are being made with the “poisoned money”;

• The fact that the tax fraud (predicated offence) is prescribed, does not prevent the filing of a STR, nor will it prevent prosecution for money laundering. – What with regard to tax crimes that were committed

before the installment of AML ?

Do you encounter problems with AML application from financial institutions after a

self-declaration?

• F. ex. Certificate on self-declaration is basic, only mentioning the total amount of regularized income abroad and gives no direct indication on the held assets;

• Financial Institution have to perform a CDD on the origin of the funds. Problem of partly self-declarations;

Do you experience a general increase of awareness of AML & KYC with financial

institutions and non-financial persons for tax fraud?

• YES

• General increase of awareness of Financial institutions, but also of other non-financial reporters

• In 1970 a 25 year X marries with an older and wealthy architect Y. In 1975 the architect deceases and X inherits a fortune of 4 million euro, placed on a Swiss bank account. X is the only inheritor. X has no knowledge of the origin of the capital placed on the Swiss bank account. X did not declare this fortune for inheritance tax purposes, nor has disclosed this account in her tax declaration for income tax purposes.

• In 2013 she decides to buy a new house for an amount of 850.000 euro and transfers the money from her Swiss bank account to an escrow account of the Notary.

• What if X tells you that the money is held by a discretionary Trust in Jersey ? Case related questions: • Is it likely that the financial institution or the Notary will file a STR (Suspicious Transaction Report)

to the FIU (Financial Intelligence Unit)?

• Assume the Notary and financial institution would enquire X about the origin of the funds. Her explanation is that this originates from her late husband who has died 38 years ago. Does this influence 1) ?

• Supposing that the due taxes are prescribed and/or the criminal prosecution for tax crimes is prescribed? Is it likely that X would be prosecuted for money laundering?

Case 2

Threshold for cash payments

What is the threshold for cash payments under your domestic law?

• Selling of good(s) by a trader or services provided in one or more transaction between which there seems to be a connection cannot exceeds 5.000 EUR (3.000 EUR as from 1 January 2014)

• Sanction is a fine of from 250 to 225.000 EUR, but not more then 10% of the amount that was illegally paid for in cash

• List of traders or service providers that have to inform the FIU (no list available yet) self-incrimination

• Real estate

– Price of the real estate cannot be paid for in cash as from 1 January 2014.

– The threshold is 5.000 EUR until then.

A Nigerian person X wants to buy a second hand car for 20.000 EUR in cash from a professional second hand car dealer in your domestic country.

• What is the threshold for this cash transaction? 5.000 EUR; 3000 EUR as from 01/14

• What can be the sanction(s)/consequences if the car dealer ignores the threshold on cash

payments and accepts the cash, consequently puts it on the company bank account? Fine imposed by the FOD Economy according to AML. Criminal prosecution?

• Does the threshold applies on a deposit in cash by X with the financial institution of Y account instead of paying directly to X in cash? Although this is not officially accepted by AML, the FIU tends to accept this, since compliance is shifted and executed by the financial institution

• The auditor of the company picks up several cash transactions, in total 30 for 2012 that exceed the threshold for tax transaction. All these cash transaction are properly booked in the company. Is there an obligation for the auditor to file a STR with the FIU? No not automatically. Only if the auditor assumes money laundering, he has to file a STR. The auditor will however inform his client on the threshold for cash payments.

• What is the sanction for violating the threshold? Sanction is a fine of from 250 to 225.000 EUR, but not more then 10% of the amount that was illegally paid for in cash. This sanction does not prevent criminal prosecution for money laundering if the public prosecutor feels that the car dealer is involved in money laundering activities.

Case 3

Identification and verification of Ultimate Beneficiary (UBO) + STR

You are contacted by an accountant in your home country.

The accountant explains you that he has recently received an e-mail by a potential new client, Mr. Hakan from Turkish nationality. Mr. Hakan informed him that he’s a resident in your home country, and a car dealer for 8 years now, performing his activities through a limited liability company Turkcar. Mr. Hakan isn’t satisfied with his current accountant (in his opinion he charges too much) and is looking for an accountant to do the bookkeeping of Turkcar. The accountant is eager to accept the new client, who is willing to pay a retainer fee of 7.500 EUR to handle the bookkeeping of Turkcar upon first request.

Mr. Hakan also mentions that he wants to set up a new company to buy two apartments (value for the two is 375.000 EUR). The new company, TurkInvest will rent the apartments for living and might buy more real estate in the future. Mr. Hakan requests the accountant to set up the new company and to prepare the purchase of the real estate in cooperation with a Notary of his choice.

In answer to the accountant question, how Newco will acquire sufficient funds for the purchase of the real estate, Mr. Hakan presents a loan agreement for 350.000 EUR with his sister, a Turkish resident. Mr. Hakan informs the accountant that the remaining 25.000 will be paid by him in cash upon the Notary deed.

When the accountant asks Mr. Hakan to inform him on his sister, he informs him that his sisters owns a restaurant in the heart of Istanbul.

The accountant request you to assist him with the identification and verification progress of the new customer and his business.

The accountant tells you that although Mr. Hakan seems a nice guy and Turkcar a legitimate company, he’s not sure whether he should file a suspicious transaction report with the FIU.

• Ask for more substantial information on the origin of the funds; – Verify if the accountant has preformed a full CDD and

verification, including PEP screening of his client (and sister) and the origin of the funds;

– Legal and financial information (history) on Mr. Hakan his sister in order to understand the legal origin of the funds. ;

– Declaration of the Turkish Financial Institution on credit of the sister

– Document and analyze the loan agreement between TurkInvest and the sister;

– Establish the payment capacity of TurkInvest from potential rent

– Explain threshold in cash with regard to real estate transactions

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