Slick Willie

Slick Willie was born on June 30th 1901 in Brooklyn. He had a forty-year criminal career as a bank robber, during which time he stole an estimated $2 million. His name was William Sutton, but was nicknamed Slick Willie, because of his masterful robberies, polite manner and immaculate dressing. He also managed to escape prison three times.


Once interviewed by Mitch Ohnstad he was asked why he robbed banks, his response ‘Because that’s where the money is’.


The same is true of all cash starved governments. They look at the $8.5 trillion sitting in offshore accounts and trusts tantalizingly out of reach of their grasp and long to tax it –their dream is soon to come true – but like Slick Willie the world’s wealthiest are already looking at ways to escape!


The world’s wealthiest became rich because they innovate to make our lives better, create businesses which employ our tax payers and oil the machine of our world economy. Like Slick Willie, some may get caught, but many others will find ways to escape. The OECD has told us how it intends to undermine these offshore structures, so we simply need to be prepared.


However, there are many professionals who delude themselves into thinking, that the OECD simply wants to catch criminals like Slick Willie and confiscate their proceeds of crime.  But, it is clear from what we have seen in the press in the last six months that money is not laundered through offshore financial centres, it is laundered under our very noses, through major banks in high tax paying countries. Criminals look for pockets of lax due diligence and exploit them.


Danske Bank last autumn was embroiled in a money laundering scandal.  The Danish lender’s Estonian branch is suspected of handling up to $230 billions of ‘dodgy’ funds from former Soviet states. This has now led to an investigation of Raiffeisen Bank International after a complaint was filed accusing it of ‘gross negligence or acquiescence’ in connection with suspicious flows of funds from Danske.


Last week, Sweden’s oldest bank Swedbank – the biggest lender in the Baltic got drawn into the mix. It is alleged that about E135 billion flowed from Danske’s Estonian branch through Swedbank’s local operation before entering the Western financial system. The scandal has already claimed the scalp of the Swedbank boss Birgitte Bonnesen. Investigations are now under way in Denmark, Estonia, Britain, France and American banks. It should also be remembered that in 2012 HSBC was fined $1.9 billion for handling Mexican drug money.


So, let’s therefore be very clear, the reason why the OECD and EU put pressure on the offshore financial centres is not because they are laundering money, but because this is where private international wealth goes to avoid tax.   


Until 2018, this money was out of sight and out of mind – but not any-more. The OECD has made it very clear it intends to go for the richest, the most-high profile, and the most prominent, and they are under orders to name and shame. It will argue that structures are nominee arrangements as evidenced, not by the pro-active and careful management of the trust by the professional trustees, but because of the existence of persons of significant influence, indemnity clauses, lack of substance and non-interference clauses.


The OECD has set out its stall and expects tax authorities to exercise zero tolerance, super aggression and total ruthlessness; tax authorities will not compromise, will not negotiate and do not care.


Most trustees GFOS knows and works with know the dangers and are alerting their clients. They know that they cannot rely on legal opinions and indemnities.  In November 2014 the IRS fined Credit Suisse $2.6 billion in a plea bargain, for conspiring to aid and assist taxpayers in filing false returns. Credit Suisse was working well within the law, but the IRS decided otherwise.


As Albert Einstein so cleverly remarked ‘We cannot solve our problems with the same thinking we used when we created them’.


We know that offshore structures evolved over the past 40 years, since exchange controls were lifted, by lawyers, using concepts familiar to trust specialists. The role of Protector for example, was first used in Will drafting. It is the person appointed to give direction to the executors on how to take decisions. Tax authorities are now pouncing on such persons of significant influence as evidence to argue that the settlor did not have the necessary intention to hand over absolute control to the trustees and therefore prima facie the structure is a nominee arrangement.


GFOS is working with its clients to find escape routes and draws on concepts used extensively in international business to provide protection, preservation and control for its clients. At the same time, it is looking to give comfort to the professional trustees that they will not get caught in the cross fire.


Clients of GFOS are looking now to refresh and review their international wealth ownership structures. Like Slick Willie some may get caught, but others would prefer not to wait and see they want to put in place some protection now.


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