The biggest problems were corporations, trusts and other business entities. This where compliance usually fails. I insisted upon complete disclosure of officers, directors and beneficial owners, the last group being the most difficult to verify; Here's why.

The usual copies of stock certificates, the stock transfer ledger, or even a list of shareholders is insufficient when one is dealing with money launderers who will transfer the stock the next day, use front men, encumber or lien the stock in favour of the true owner, who then forecloses his interest, and a number of other cute tricks that fool compliance officers every day of the week. My solution may be tough for the clients to swallow, but it is quite effective. It is composed of two parts:

• When a client offers up a corporation as the vehicle owning an account or investment, one first should require a senior partner of the client's onshore law firm to issue an opinion of counsel. The opinion should recite that the lawyer has examined the books and records of the company, and the officers, directors and shareholders, type of business and company address, are listed therein. Most lawyers regard their licenses to practise law as essential to their working lives, and will not issue such a professional opinion, risking exposure, until they have actually completed the due diligence. They also will only do this for trusted clients, not recently-arrived financial criminals whom they do not know well, nor trust. make sure the law firm is prominent; no sole practisioners, no offshore law firms, no obscure attorneys accepted.
  

• Part two is intended to lock in the client. You create a form affidavit; the information contained in it duplicates the information in the lawyer's opinion letter, and addes that the business of the company is lawful, and affirmatively states that the affiant has an absolute duty to disclose, in writing via registered mail, any change in corporate ownership, or encumbrance of said ownership. Of course, it is executed before a notary public, who affirms that it is being signed under oath, in the presence of two witnesses. What money launderer or criminal investor/client will sign a document, commiting perjury under oath? Few indeed, though legal clients will probably be advised by their attorney to adhere to these requirements.

When the prospective client and/or his attorney-financial advisor stomps out the door, refusing to abide by your reasonable compliance requests, you have probably identified either a money launderer, a front man, or the career criminal himself or herself.

With trusts, it really became a duel, frequently between myself and the client's lawyers or financial advisors:

• They all tried to tell me that "redacted" (read censored) partial trust instruments, with the identity of the beneficiary of the trust, and ther trustee's powers, were legally sufficient. After all, they reasoned, since the laws of their particular state did not require that the trust instrument be recorded, they had no legal duty to turn the complete document over to me. I respectfully disagreed.
  

• The lawyers for the trusts also played the privacy card, which didn't get far with me. Some attempted to send in unpaginated trust instruments which conveniently omitted crucial segments and sections. One must always ensure that the pages are consecutive, and the document complete, by the way.
  

• Some actually withdrew, rather than disclose the documents. One wonders who really was the  beneficiary of those instruments?

Remember to also complete due diligence upon the trustee or trustees, to avoid surprises later.

The foundation, of which the Panamanian version is currently the most popular, is another form of business association that you may encounter. Here's the problem: since it has no owner, how can you possibly fix blame for criminal activity? How can you hold anyone accountable for corporate misconduct?
It represents, in the wrong hands, an optimum money laundering tool, whereby those in control can use it to pay their bills, and support their lifestyle, all under the guise of a charitable purpose.

Next week: more business entities.