DIFFERENT ANGLE by Kenneth Rijock
This controversial topic was discussed at length last week in a seminar at the Cambridge International Symposium on Economic Crime, and hedge fund administrators were not happy to hear other participants, including yours truly, describe the methods through which money launderers can gain access to hedge funds on behalf of their criminal clients. Whilst operators and administrators of Hedge Funds located in the United Kingdom do have regulatory supervision, many others are located in offshore financial centres where no mandatory oversight exists. Is it easy to move the proceeds of crime into those offshore funds? What do you think?
- The jurisdictional choice of offshore Caribbean financial centres, where there is no immediate access to financial records and evidence desired by onshore law enforcement, and where there is perception of secrecy, whether based upon the current legal situation or not, increases risk for onshore financial institutions.
- The use, by legitimate high net-worth hedge fund investors, of non-transparent tax haven corporate entities for privacy and security reasons, gives money launderers and other financial criminals a seemingly valid reason to also employ these vehicles to place investments, whilst obscuring their true beneficial ownership.
- Money laundering organisations can actually form their own, captive, hedge funds, invest their own criminal capital, and that of legitimate investors, reaping 20% & 2% fees, and thereby laundering some of their proceeds of crime.
- The inability of hedge funds to detect covert transfers of investment vehicles post-placement of funds, thus allowing criminal elements to utilise front men/straw men, and later take control, without the knowledge and consent of the hedge fund administrators.
Candidly, if you are banking hedge funds with an offshore domicile, your level of risk must be accurately calculated in light of the above issues. Hedge fund clients, if they are to remain clients, must demonstrate that they have an effective level of compliance policies and procedures, including but not limited to, customer identification procedures, enhanced due diligence, and source of funds verification.
The facts and opinions stated in this article are those of the author and not those of World-Check. World-Check does not warrant the accuracy of any facts and opinions stated in this article, does not endorse them, and accepts no responsibility for them.
Print Article
Email Article
SEND ARTICLE TO A FRIEND
More Articles
Subscribe to Newsletter
Please take note of the following content change to be applied to the Data-File on 19 December, 2008. In order to avoid any potential problems please ensure that your datab...more
Make this my homepage
Bookmark
