US confused over real financial crime, says lawyer

| 25/10/2011

(CNS): Onshore jurisdictions such as the United States which accuse offshore countries such as the Cayman Islands of harbouring stolen assets in bank accounts do not understand the concept of ‘stolen assets’ and are passing the buck by not dealing with the origins of crime in their own countries, John Masters, Senior Crown Counsel-International Cooperation for the Cayman Islands, has said. Speaking at a compliance conference last week, Masters explained the difference between proceeds of crime and stolen goods but he said onshore jurisdictions were getting the two confused and then pointing the finger at jurisdictions like Cayman.

Masters said the John Grisham image of criminals bringing in bags of money could not be a reality because it was a physical impossibility to transfer huge sums of money in this way when the US was talking about a trillion dollars of so-called ‘stolen assets’, he said.

During a session entitled There are no stolen assets in off-shore bank accounts – who is truly responsible for financial crime and balances appearing in offshore accounts? at this month’s Global Compliance Solutions Conference held at the Marriott Beach Resort, the lawyer said that if people tried to bring in large volumes of cash, they would be stopped by border control as a declaration has to be made if large sums were being brought into the islands.

And even if they got past the border, they would not be able to place it with local banks because they must file a suspicious activity report on large sums or risk prosecution themselves.

Masters also challenged the notion that such funds were even ‘stolen’ in the first place, explaining that when a bank customer makes a deposit, they were in essence creating a debtor/creditor relationship,whereby the bank promises to pay the customer the cash upon demand.

When a wire transfer of funds takes place, there is no actual movement of property; rather, what actually happens is a transfer of a debt. To underline the point he used the analogy of a criminal stealing the Mona Lisa painting, saying that the cash paid by someone for the stolen painting was not itself stolen property, although it was the proceeds of crime.

“All stolen property is the proceeds of crime but not all proceeds of crime are stolen property,” he explained, adding that a recent ruling in the UK House of Lords backed up this view.

Masters said it was important that the wrong label was not attributed in these cases because certain words conjured up particular negative sentiments and responsibility just by the label that was attached. He went on to say that there was a need for further clarity because once a jurisdiction was identified as in possession of stolen property there was a suggestion that they were somehow at fault.

The reality was that if a jurisdiction was in possession of the proceeds of crime, they often don’t know about it, Masters said. He illustrated his point when he describe the concept of a corrupt politician in the US receiving a bribe of a million dollars and spending it on vacation, jewellery, cars and transferring half of the money to a bank account in the Cayman Islands.

“How often would you hear the travel agent or jeweller criticized for taking the money?” he said. “Yet when it comes to the Cayman Islands it is infamously described as a haven for stolen property.”

By describing the money that gets sent to the Cayman Islands as “stolen assets” it shifted the responsibility from the jurisdiction where the offence was committed to the jurisdiction where the proceeds of crime had ended up, he said. “There has literally and metaphorically been a passing of the buck,” he said.

Offshore jurisdictions were, of course, eager to repatriate illicit funds, Masters said, but it was difficult for the authorities in the Cayman Islands to make their investigations when the crime was committed onshore. That said, investigators in Cayman were working extremely hard to track down the criminals in the onshore country, even when manpower in countries like the US were many times that of officers in the Cayman Islands.

When it came to transferring money via wire transfer, Masters wondered, if the money transfer to an offshore bank was suspicious, why the bank making the transfer in the first place had not also thought the transfer was suspicious. Masters said that even though places like the US believed that jurisdictions such as Cayman were at fault, the Cayman Islands were actually the solution, an attitude evident in the strength of Cayman’s laws, which he said were equalled by none.

“In reality when the Cayman Islands confiscates the property it has remedied the problem of some other jurisdiction and is never part of the problem,” he said, adding that it was, however, easy for the onshore country to shift the blame to the offshore.

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  1. criss cross says:

    I take it none of you responders are in finance.

    the process of vetting funds is the responsibilty of the bank it is deposited to. If funds are deposited in the states and wired here, it is the bank in the states that responsibility.. no ours. They have certified those funds to be legitimate.

    So what Mr. Master is 100% right with todays laws.

    If there is, and I assume there is lots of dirty money in our system, it was done back in the time when there was little to no regulations… and it made Cayman what it is today and that black eye will always be associated with Cayman and offshore tax havens.

    Lots of locals also prospered from this lack of regulations, turning many into millionaires.

    Since then, there is more regulation in Cayman then anywhere else in the world… We have signed tax treaties and unilatteral agreements with everyone and are compliant with all money laundering laws.




    • Anonymous says:

      The state of a Cayman bank's knowlege regarding funds wired or handed to it is not very relevant to whether the funds are the proceeds of a criminal enterprise, are stolen, have been obtained by fraud, etc. (assuming the bank is not itself engaged in the crime). Surely you Cayman folk are aware of that. The Cayman bank's knowlege of its customer and its customer's transactions may be relevant to a complete inquiry into a scheme to "cleanse" the money and I were a bank I would not want to rely on a defense that the transmitting bank had "vouched" for the funds.

  2. T.L. Haranguer says:

    Imagine if we where not an English colony, Obama would have sent 4 marines  in a Humvee to shut our  little party down the day after he won the election, remember Grenada Panama and Cuba, Thank God for England !

  3. Anonymous says:

    Of course it's everyone else who is confused – with two brilliant minds such as the Premier's and Mr. Masters', it's a wonder that Cayman is broke.  

  4. Anonymous says:

    Ms. Masters ought to try prosecuting criminals, the job he's being paid to do, instead of trying to make excuses for them.  

  5. Tiny Briefs says:

    There are hundreds of millions of stolen dollars in Cayman bank accounts, if not billions, any lawyer working in civil litigation would tell you that.

  6. Anonymous says:

    > investigators in Cayman were working extremely hard to track down the criminals in the onshore country



  7. Anonymous says:

    Huh? Say what now?