Treasury deputy chief says reviewing costs, benefits of U.S. sanctions

Article by David Lawder

U.S. Treasury Deputy Secretary Wally Adeyemo told securities industry executives on Wednesday that the Treasury will weigh the costs and benefits of financial sanctions to ensure that they remain a strong and viable foreign policy tool.

In a statement following a meeting with the Securities Industry and Financial Markets Association (SIFMA), the Treasury said Adeyemo gave the group an update on his review of Treasury sanctions policy, saying that sanctions “have become the tool of first resort” to address national security and international economic challenges.

“He explained that while this tool has resulted in notable successes, it has also created unanticipated challenges,” Treasury said without naming specific cases.

“The Deputy Secretary stressed that moving forward, and as the United States faces a changing international order, the Treasury Department is assessing the costs and benefits of sanctions use in each case with an eye towards ensuring they remain a strong, viable option for policymakers in the years and decades to come.”

By David Lawder, Reuters, 21 April 2021

Accountants advised on how to write better SARs

Article by Accounting Web

The NCA and OPBAS have published guidance for accountants on preparing “clear and concise” Suspicious Activity Reports (SAR). David Winch summarises what a ‘good quality’ SAR looks like.

Not the most snappy title, but the latest “Guidance for anti-money laundering supervisors on submitting better quality Suspicious Activity Reports” published this month is mercifully brief and readable.

It’s been prepared by the National Crime Agency (NCA) in conjunction with the Office for Professional Body Anti-Money Laundering Supervision (OPBAS) with the intention of helping accountants and lawyers improve the quality of the SARs which they submit.

Clear and concise

It’s not rocket science. The key point is that your SAR is going to be read initially by someone who knows nothing about your firm, nothing about the person about whom you are reporting, nothing about what you are hoping or expecting the authorities might do after receiving your SAR and – let’s be frank – probably understands very little about accounts, tax or company law.

It’s likely for this reason that acronyms and jargon should be avoided as the recipient might not understand and they’re open to misinterpretation.

So you need to give them enough background to understand who you suspect, what you suspect them of having done (or failed to do), what your connection is to the suspected person and suspicious events, and why this is an issue which should interest the authorities.

Aside from the most basic advice – “Punctuation should be used” – and please DON’T HIT CAPS LOCK – the guidance asks that SARs be clear and concise and structured in a logical format.

A brief chronological summary of events will be useful and the SAR glossary codes can save time for the writer as well as the reader. A quick XXF4XX tells the reader immediately that you are reporting a suspicion of personal tax evasion.

Of course you will not be in a position to, for example, quantify the amount involved in a suspected fraud – but you probably can give an order of magnitude which gives the reader a better understanding of the issue.  The more focussed and relevant information you can supply, the better.

Reason for suspicion

The suspicion element needs to be explicit. But with characters limited (8,000 characters on SAR Online and 30,000 using email bulk encryption), it advises you to focus on the five Ws: who, what, where, when and why.

  • Who is involved?
  • How are they involved?
  • What is the criminal property?
  • Where is the criminal property?
  • When did the circumstances arise?
  • Why is there suspicion?

If you’re needing to submit a SAR have a read of this new guidance HERE and use the appropriate glossary codes which you can find HERE.

Then get that SAR submitted and get back to remunerative work!

 

Linear vs. Nonlinear Career Paths

Article by AMY LANDRY

Many believe that professionals know where they want to go and how to get there. But in reality, most of us end up walking a nonlinear career path that brings us places we never could have envisioned.

What do you want to be when you grow up, and how do you plan to get there? I believe the first time I was ever asked this was back in middle school. As I think about it, I’m still being asked this same question today, halfway through my career.

Over the years, I have answered this question three or four different ways depending on what was happening at the time. I want to be a lawyer, so I will go to law school. I want to be a market analyst, so will I will get my degree in international business. I want to be a fashion buyer, so I will intern in a buying office. I want to be a compliance officer and, one day, a chief ethics and compliance officer, so I will get my CCEP certification and pivot from working for vendors to a practitioner role.

I have pivoted or changed direction a few times. For a long stretch, I thought this meant that I was bad at figuring out what I wanted to be, which also meant I was bad at progressing up the ladder. But is that truly the case?

How many of you have gone through something similar? How many of us always feel like our interests change? How many think we want to do something or get to a certain level in our organization only to realize once we get there that it wasn’t for us? I would look at friends and colleagues in amazement as they all seemed like they had figured out something that I was still trying to do. Would I ever figure it out, or would I be destined to a roller-coaster career?

Over this past year, something finally clicked as I kept hearing more and more individuals share the twists and turns they went through in their careers: Most look more like a jungle gym than a step ladder. I started to realize that not everyone will follow the standard, linear career path – and that is totally fine. I came to understand that it’s OK to make a lateral move or a step backward or change careers altogether if it fits into where you are now in your career. Ultimately, it is OK to follow a nonlinear career path.

Some might not even be sure how linear or twisted their own career path is.

Career coach Stacey Lane has a good definition of a non-linear career path: It “starts out in one direction, but zigs and zags through insights, discoveries and happy accidents. A nonlinear path requires a bit of planning, chance, serendipity, risk and faith.”

With this in mind, it is OK for us all to follow our own path that builds on our own unique strengths. Without you knowing, it can align with where you want to be. It can bring you where you need to go to learn and grow into your best professional self. It can have you waking up every morning excited to go to work every day. My hope is that more and more of us nonlinear career professionals come forward to challenge the status quo of needing to have a linear career path.

What Is a Company Formation Agent?

Article published by OCCRP

Put simply, a formation agent is a company that creates other companies on behalf of clients around the world.

The process is quick, easy, and remarkably cheap. Although many turn to formation agents for legitimate business reasons, illicit actors might seek out their services to dodge taxes, hide their ownership of high-value assets, or squirrel away dirty money.

It’s no coincidence that these firms are exceptionally popular in tax havens and financial secrecy jurisdictions. Even a cursory internet search turns up an abundance of eager firms in Belize, Panama, Luxembourg, Liechtenstein, Cyprus, Seychelles, Malta, the Cayman Islands, and the British Virgin Islands, to name but a few.

The U.K. government even lists dozens of formation agents on its official website. These include one company, Formations House, exposed in OCCRP’s #29Leaks investigation as providing services to a corrupt African dictator, as well as a sanctioned Iranian oil firm, Italian mafia associates, a Swedish Hell’s Angels boss, and assorted international fraudsters.

How do company formation agents work?

Details vary by country, but the basic service is usually the same.

If you’re looking to set up a company in the U.K., for example, you’re required to register through Companies House, a government agency. Prospective owners have to provide a name and official address for their firm, a list of directors and shareholders, and documents outlining the nature of their business.

Submit this information, pay the £12 (US$16.50) online filing fee, and your company is then included on the list of entities permitted to operate in the country.

But what if you live outside the U.K., and just want the benefits and prestige of being registered in London? That’s where formation agents come in.

For a nominal fee, a formation agent will file all the paperwork for you. Fork out a little extra, and they’ll allow you to use their address for your business. They’ll also keep the necessary documents up to date, open an account with a local bank, and even provide a secretary to answer your calls and sort your mail.

Comprehensive service packages offered by formation agents can be in the ballpark of £100 ($138), but the charge for a simple company registration starts from as little as £9.99 ($13.75).

Alternatively, you might want to opt for what’s called a ‘shelf company.’

These are basically ready-made businesses: companies that have already been incorporated, but which are listed as dormant until someone pays to have them activated under their name.

Figuratively taking companies off the shelf, in the words of one formation agent, is “extremely popular for clients who wish to obtain older companies,” thereby creating the impression they’ve been doing business in the country for a long time.

Are company formation agents really all that bad?

Some customers turn to a company formation agent for legitimate business purposes. But others use the services provided by these firms to set up front companies and dummy corporations to shield their financial dealings from prying eyes.

Shell companies are active, but don’t actually do any business. Part of what makes them so attractive to unscrupulous actors is the anonymized and often dizzyingly complex ownership structures they can be used to create.

Those looking to obscure their business interests often use a formation agent to set up a shell company under the name of a proxy, someone who won’t set off alarms or be linked back to the true owner. The proxy could be the formation agent itself, and the shell company may also own other companies in various jurisdictions in order to further disguise connections to the real owner and their assets.

Illicit actors can easily hide their assets so deep in these warren-like structures that they become exceptionally difficult to track down ─ if anyone even knows to come looking. Complex ownership structures tend to be set up in financial secrecy jurisdictions where laws and regulations are specifically designed to protect them from scrutiny.

These entities offer a means for the rich and powerful to avoid paying their fair share in taxes. One such method consists of simply channelling earnings or assets from higher-tax jurisdictions to shell companies registered in low-tax jurisdictions. This decreases declared income in the countries where they actually do business, and the amount they would be required to hand over to public coffers.

Shell companies are also the lifeblood of many money laundering enterprises. In using obscure ownership structures to disguise their ties to an entity, criminals and corrupt actors can distance themselves from financial flows and assets of dubious origin, while at the same time maintaining access to the proceeds of their operations.

How are company formation agents regulated?

Most countries have legislation requiring company formation agents to conduct due diligence on their customers, performing background checks before entering into business relationships. They are also supposed to keep an eye on how clients use their services and report any suspicious activity to the authorities.

Part of the problem lies with the sheer scale of the industry. In the U.K. alone, around half a million companies are registered every year, which means it’s almost impossible for regulators to ensure these measures are always followed.

What’s more, formation agents sell themselves as services that make it fast and easy to start a company, so conducting their own oversight over clients is arguably against these firms’ interests.

What can be done to improve the regulation of company formation?

Following the #29Leaks investigation, Transparency International called on the U.K. government to reform the country’s company formation industry.

They recommended:

  • Granting Companies House further powers to ensure the accuracy and reliability of information included on the U.K. corporate register.
  • Streamlining oversight of the sector by reducing the number of supervisory bodies involved, boosting available resources, and mitigating against conflicts of interest.
  • Enforcing stricter penalties for formation agents who break the rules, with criminal convictions sought for the most egregious behavior.

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An increasing number of countries are also requiring companies –– and by extension the firms that specialize in forming them –– to identify their true beneficiaries rather than merely an ostensible owner, in what’s known as a UBO register. Theoretically, this makes it harder to use offshore entities for nefarious purposes.

What is Formations House?

OCCRP’s #29Leaks project sought to expose the kind of business that just one company formation agent was conducting. The investigation was based on leaked documents from Formations House, a London-based company services firm.

With minimal oversight from U.K. authorities, Formations House set up a network of shell companies masquerading as Gambian banks. Formations House also established an entirely mythological free-trade zone in the West African country.

Among other deals, the firm processed transactions in a shady helicopter deal involving the Bulgarian government, and registered a U.K. company for the daughter of one of the Sicilian mafia’s most dreaded capos.

In Slovenia, one of the firm’s clients ran a tax-dodging car-trafficking outfit that cost citizens several million dollars. Another client skipped out on a major construction projectin Serbia, after already having been sanctioned in India for market manipulation and fined in Dubai for lying to regulators. Proper due diligence would have identified these clients as a threat to the integrity of the U.K.’s financial system.

There’s currently an active proposal to have Formations House struck off the U.K. register. But for the time being, the company remains listed on the government’s official website, along with dozens of other formation agents, all eager to help businesses set up shop in one of the largest and most attractive financial centers in the world.

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April 22, 2021, Published by OCCRP

Heimelijke transacties met cryptocurrencies

Article by Andrew Silonero

Heimelijke transacties met cryptocurrencies: een grijs gebied tussen witwaspraktijken en verstandige praktijken

Eigenaren van cryptocurrencies die hun identiteit en transacties verhullen kunnen te makkelijk worden bestempeld als potentiële criminelen. Dat is niet terecht; er zijn voor deze handelswijze voldoende gerechtvaardigde beweegredenen te bedenken.

 

Bio

Andrew Silonero was born and raised on Curacao. After having moved to the Netherlands for his studies, he graduated from Leiden University with two bachelor’s degrees as well as master’s degrees in both Tax Law and Criminal Law. His professional interests include learning about white-collar crime, tax fraud and cybercrime. Andrew works for a subsection of the Tax and Customs Administration.

Click link below to see complete article.

Changing the Culture, One Process at a Time

Article by Yan Tougas

 When I tell people that changing the culture is an outcome of processes, I often get a faint nod of understanding, mixed with an inquisitive look. They intuitively get it but they are not sure what it looks like in real life.

What Changing the Culture Looks Like On the Ground

Let me share an example with a process that takes place in the very early stages of employee onboarding. Each month, I ask HR to give me a list of new hires. I then email each new hire and invite them to meet with me over Zoom for 15 minutes (I’ll go back to in-person meetings after the pandemic). During the meeting, I ask them to tell me a little bit about themselves, about the ethics program at their previous employer, and then I tell them about our ethics and compliance program and open it up for questions. Why do I do it this way? Well, let’s look at the alternatives and try to guess which one can lead to a better cultural outcome.

  • Email. I could send a welcome email describing the program. This email would join dozens or hundreds of other emails, each looking more urgent and more important to this new employee who is trying to make a good first impression. My email would not tell me anything about this employee, where she comes from, what she does, or what questions she might have on her mind.
  • Phone call. That’s better than email. What’s missing is the handshake of an in-person meeting (whenever we can shake hands again), the vibes you get when you are within feet of another human being, and the employee experience of visiting your office. They don’t get the sense of knowing where you are physically located, which is often a location they will seldom have to visit.
  • Group training. This is very common in large organizations like mine. HR rounds up all the new employees once every quarter in a large room for 3 hours and shoots them with several 30-minute presentations about safety, quality, ethics, benefits, policies, etc. Here again, there would be no time for me to learn about each new employee or to answer all their questions.

There are other avenues, but let’s stop here and consider: Which of these experiences is most likely to result in an employee reaching out to you a year later when they are facing an ethical dilemma?

Process Influences Outcomes

I sincerely believe that the employee who took the time to schedule a meeting with me, to walk to my building, to find my office on the 2nd floor, to shake my hand, to sit across my desk, to tell me about herself, and who was given the opportunity to hear about our commitment to an ethical culture – she is the employee who is most likely to reach out when debating what the right thing to do is. And since my job is to create a culture where employees speak up when in doubt, then I find that I have no choice but to adopt the process that will most likely create that outcome.

I have looked at only one process with you – the welcome of new employees by a chief ethics officer. There are tens of thousands of processes in your company right now. How you hire, how you compensate, how you promote, how you reward, how you treat each other – each can be an influence and a force for changing the culture. You might be responsible for a few dozen. What is the cultural outcome of each? How can you improve the outcome? Don’t know where to start? Look at a cultural outcome you dislike, link it to a process, then set about to change that process. And a cultural change will follow.