News stories in the past few years have reported on dramatic changes in the political systems of many countries in the world (e.g., the “Arab Spring”) and we thought our clients would be interested in the latest developments on how some governments are dealing with the illegally-obtained assets of Political Exposed Persons or PEPs.
Currently, Swiss lawmakers are debating a draft piece of legislation, which if accepted could bring end to the era of “absolute power, absolute corruption” type crime. It seems that soon corrupt politicians and their family members and cronies will find it harder to find a safe place to stash their illegally obtained funds. This new law, which could be considered as the first of its kind, will introduce new powers for authorities in Switzerland to freeze, confiscate, and repatriate funds that originated from questionable sources. Many believe that, if approved, most probably this law will serve as a model for other countries to follow.
The problem of illegally obtained funds by PEPs that are deposited in Switzerland’s banks has been attracting increasing attention over the last quarter century. Even despite the current legal constraints, it is estimated that during the last 25 years, some $1.8 billion USD have been confiscated by Swiss authorities and repatriated. With the new legislation that Switzerland is considering, this will become even easier to accomplish. Some of the high profile cases over the past quarter century were Ferdinand Marcos of the Philippines, Sani Abacha of Nigeria, and Vladimiro Montesinos of Peru. In addition, the recent Arab Spring revolutions that broke out in early 2011 led to the freezing and confiscation of assets of such high-profile PEPs as Presidents Zine el-Abidine Ben Ali of Tunisia and Hosni Mubarak of Egypt.
Currently there are a large number of legal constraints to identify, confiscate, and repatriate PEPs’ stolen assets. Although these new proposed laws’ principal target is secret bank accounts owned by PEPs, it most probably will also serve to more intently scrutinize banks accounts suspected of being funded from other types of illegal sources. This new law will equip the Swiss Foreign Ministry with the necessary legal tools to provide banking information to other states who file a request for legal assistance, thereby facilitating the process.
The Swiss authorities are not the only ones engaged in actions to close the gaps and loopholes. It is anticipated that during the upcoming G-8 summit scheduled to start next Monday, June 17, 2013 in Northern Ireland, Mr. David Cameron, Prime Minister of the UK, will continue in his efforts to convince other world leaders to endorse a plan for the creation of an international central database of financial information that would be accessible to all government tax and law enforcement agencies.
Meanwhile Singapore, the world’s fastest growing global financial center, is anticipated to surpass Switzerland by 2020 to become the global banking center. Due to its rising status as a financial center, Singapore has also embarked upon a serious process of ”loop-hole closing.” On July 1, 2013, a new law will come into effect in Singapore that is meant to force all banks to invest in adequate tools to detect money laundering and other illegal financial transactions; non-compliance with this law would lead to punishments such as fines, criminal prosecution, and loss of banking license.
The huge ill-gotten gains of high-profile PEPs are big news items but because of such events, your legal, large-scale international financial transactions are increasingly under scrutiny; as we have cautioned you before, global legislative developments are steadily moving towards greater transparency and less privacy and confidentiality. However, privacy and confidentiality are not only valuable for business reasons but are also very important for the protection of individuals transacting legitimate business. Investors increasingly need experienced advisors to help them maintain the balancing act of being transparent in their financial dealings while at the same time protecting their privacy and confidentiality. This “tightrope act” is one of the paradoxes of modern business life and one of the reasons our clients appreciate what we can do for them!
