Bank of Bermuda Presidentcalls for tougher money laundering fight
Bank of Bermuda president and CEO HenrySmith has called for international cooperation between enforcementagencies to stop the $600 billion global money laundering trade.
He was speaking at the 12th annual Anti-MoneyLaundering Audit & Compliance Forum in New York on Friday,attended by representatives from the offshore world and from agenciessuch as the US Securities and Exchange Commission (SEC), InternalRevenue Service, New York Stock Exchange and some of the world'sleading investment firms.
According to an article in the Royal Gazette,Mr. Smith said law enforcement authorities could be very territorialand that for the system to work, there must be a way to buildtrust and encourage open communication among the participants.
As an example, Mr. Smith highlighted thebank's own involvement with a ponzi scheme in the bank's Caymanoffices a few years ago which arose out of a legitimate cash fortitles loan business. He said it was a terribly frustrating experiencefor the bank and himself as CEO, but added: "What reallyupset me was the approach taken by the authorities."
He said the first real indication that therewas anything wrong was when the US Justice Department announcedthat, after a multiyear investigation, they were bringing chargesagainst the organisers of the scheme. Mr. Smith said: "Itwas alleged that investors lost some $300 million in the scheme,and I am utterly convinced that, if the authorities had alertedus and asked for our assistance, the losses would have been afraction of that number."
In the Royal Gazette article, Mr. Smithadded: "Why didn't the authorities involve us in their investigation?I can only assume that they jumped to the judgment that we weresomehow directly involved and couldn't be trusted, and that reallyangers me. It was a poorly advised and counterproductive judgmentto make, and it really brought home to me the enormity of thechallenge we face to achieve effective cooperation."
Mr. Smith said it was important not to talkabout offshore and onshore jurisdictions in the fight againstmoney laundering, but rather to worry about the big picture: "Howdo we all work together to break the money laundering chains anywherewe can?"
Mr. Smith suggested that it would be impossibleto launder $600 billion entirely offshore.
He explained: "Indeed, I think we allknow that most of the criminal activity and the initial launderingof the cash takes place onshore, usually in major urban centres.
By the time the money actually arrives offshore,it is usually quite a few steps removed from the initial launderingand pretty well disguised. Yet, when a money laundering schemeblows up and an offshore centre is involved, the centre usuallygets the headlines."
Mr. Smith said that he did not know howauthorities came up with the $600 billion estimate, but said largescale criminal operations could not succeed without finding waysto legitimise their income.
He also pointed out that money launderersthemselves were usually very smart and often had more resourcesto work with than the authorities did in combating their activities.He added: "And, while we in the offshore world argue strenuouslyand, I think, correctly, that it is fact that these cash depositsrarely occur offshore, we have to admit that it is also fact thatthe money laundering chains themselves often include an offshorelink or two."