Money laundering

I performed this translation of a book about anti-money laundering measures, on assignment from an agency client for a bank in Liechtenstein, from German into English in spring 2006.

“Suspicion of Money Laundering” (Extracts – not continuous text)

“Money laundering” – this catchword usually generates heightened interest among the general public. Criminals laundering their illicit gains through shady banks and living like kings – or at least this is the cliché that exists in the imagination of simple citizens or the massively influential daily gutter press. HIB now shows which counter-measures have been and are being taken at an international level, illustrates the close interplay between legislation and the banks bound by it, and documents international efforts using the example of a case with public appeal. Only a very few people know that due diligence also affects innocent persons – particularly so-called politically exposed persons (PEP’s), i.e. individuals in the limelight – to a strong extent, which is why PEP’s are paid particular attention in the present publication.

Our renowned experts clearly explain the current legislative status against the background of the international smokescreen of supranational legislative standards and agreements as well as from the point of view of Liechtenstein  and the immediate neighbour states of Austria, Germany and Switzerland.

The reader is guided into the topic via a comprehendible glossary of terms and an introductory explanation of how money laundering works. There then follows a description of legislation, while separate thoughts about the human rights conformity of money laundering regulations form the conclusion of the broadly informative first part.

Amnesty comes from the Greek word “amnestia” and means “forgetting, forgiving”. Amnesty is used in the pardoning of criminals. In the financial field it is found in the form of tax amnesties, which on the one hand aim at being able to re-integrate a part of the evaded taxes in the state budget, and on the other hand aim at escorting tax offenders into legality without the negative consequences of criminal prosecution. As an accompaniment to an amnesty other conditions such as minimum supplementary taxes or investment conditions are imposed on “remorseful returnees”.

Advantages for the state granting amnesty are clearly obvious. Revenues can be increased in the short term, declared capital can be taxed as normal again in the future and, in terms of administration, amnesty is considerably more simple than a determined search and prosecution of tax offenders.  …..

The other side of the coin is revealed in the disadvantages of a tax amnesty. Honest taxpayers pay dearly for their legal compliance – they have no enjoyment of privilege – and tax morale is undermined. The question arises for every taxpayer whether evasion and waiting for the next “amnesty period” would not be more favourable, weighing up the possible risks of such an action, than complying with tax contribution ordinance. The law as an absolute is consequently now only perceived to be relative.

“The hardest thing in the world to understand is income tax”

Albert Einstein (1879-1955)

Until the reform in 2001 Russia’s tax system was barely transparent, even for specialists. In addition to incomprehensibility, other insufficiencies which delimited the Russian from modern Western systems took their toll:

•       Extremely high overall burden at 55-60 % of GDP (for com-parison:  EU at approx. 41 %);

•       Progressive demonetisation in the 1990s;

•       Tax burden as “matter of negotiation”;

•       Additional burdens due to donations to civil servants etc.

Restructuring of the tax landscape was tackled when Putin took over the presidency in 2000. Owing to the broad backing of the president by the media and the Duma, as well as the lack of op-position parties, the government’s reform plan was able to be implemented practically without structural influences from outside. The most important goals of the reform were the improvement of investment conditions in Russia, the repatriation of companies from the shadow economy to the legal arena, the simplification and standardisation of tax laws, the further monetisation of tax payment and the centralisation of revenues.

“Suspicion of Money Laundering” has presented the reader with an abundance of information. In the foreground, in addition to the accurate portrayal of legal standards – both in the international and national context – with regard to money laundering prevention, as already touched on in the introduction, stood the “somewhat different glimpse into the Liechtensteinian banking business”.

“Pros” from banking circles take an interest in the theoretical side of the due diligence check or, respectively, according to which standards this must be carried out in compliance with the law from the bank point of view.    “Laymen”, on other hand, are appealed to more by the simplified practice-oriented approach to this topic. HIB (Liechtenstein) extended due respect to both of these diametrically opposed interests and linked precise theory with simple practice.

The constructed case study led the reader into everyday questions of practice in the banking business and briefly and concisely answered how the present facts would be legally judged. Additionally, the statistics from the money laundering reporting offices demonstrated the cost-benefit ratio of the complex process of “due diligence”, which on paper, unfortunately, turned out to be thoroughly disappointing.