BILLION DOLLAR CASE FOCUSES ATTENTION ON THE USE OF FAMILY OFFICES FOR MONEY LAUNDERING

This week's $2.4bn asset seizure case in Singapore, involving the arrest of several Chinese nationals in an organized crime money laundering investigation, has drawn attention to the use, by laundrymen, of family offices in their illicit operations. Singapore, which has over 1000 family offices maintaining their principal place of business there, in an effort to increase the attractiveness of the jurisdiction to financial firms, until recently had minimal disclosure requirements for such entities. The favorable treatment included no taxes levied upon Capital Gains. Remember the Law of Unintended Consequences? 

Apparently, the government failed to recognize that such a situation was a magnet for money laundering. reports from Singapore indicate an estimated $1.5tr (yes, that's trillion dollars) has flowed into  the country in response to the lack of financial regulation of family offices. Money launderers are constantly looking for what we call Targets of Opportunity, situations where the facts permit penetration of the legitimate financial structure by enterprising and imaginative laundrymen, who use financial flaws to practice their illicit profession.

While we are on the subject, if you are a compliance officer at a financial institution that numbers family offices among its client base, have you insured that Source of Funds and Source of Wealth in their large accounts has been examined? Money Launderers are often sophisticated attorneys who are able to artfully construct what appears to be a legitimate entity, working to handle multiple wealthy clients at the same time, when in truth and in fact the entire enterprise is a front for cleaning the proceeds of financial crime. Are their clientele truly whom the family offices says they are? While there is no history of family offices being used as money laundering fronts, given this Singapore case, can you really be sure that all your family office bank clients are clean, unless you take a hard look at them?