William Byrnes' Tax, Wealth, and Risk Intelligence

William Byrnes (Texas A&M) tax & compliance articles

Posts Tagged ‘Compliance’

EU Asset Management Careers and Compliance Expenditures Report   

Posted by William Byrnes on August 3, 2015

see it on International Financial Law Prof Blog.



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Posted by William Byrnes on October 3, 2014


a colleagues blog about compliance (in Spanish)

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Compliance Careers Far Outstrip Available Talent

Posted by William Byrnes on July 30, 2014

– very few persons graduating with compliance degrees, so positions go unfilled – listen to the podcast by the nation’s lead Compliance Recruiter and read the WSJ comment: 

“Most firms have hired their chief compliance officer in the last two years and now are further building out their compliance infrastructure. They need more hands on deck.”

contact me if you are interested in discussing how the degree in compliance and anti money laundering works… profbyrnes@gmail.com




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compliance jobs on upward trajectory after recent enforcement actions

Posted by William Byrnes on July 15, 2014

Read about Citi’s increase to 30,000 compliance positions by end of year, JP Morgan’s 30% compliance staffing increase and Bank of America’s doubling of audit staffing in last three years….

I’ve written several articles about compliance “whitewashing” on this blog (look under the tab compliance and money laundering). Compliance staffing at many banks has increased since the Patriot Act and renewed enforcement efforts against money laundering. More recently (in the past five years), financial institutions have been called out on dishonest activities with valuation of securities, on dishonest dealings with consumers (see my recent articles about the bank that simply threw away millions of customer mortgage workout files and sent mass mailing denials), on providing financial channels for a government involved in genocide…. I will not go though the entire list.  These cases just stand out as particularly egregious. Compliance looked at, and was in some cases involved with, these transactions.  So, throwing more staff into the cauldron does not quench the fire, nor, hopefully, will this mere fact  satisfy the regulators.

By example, as a regulator, I would need to understand the educational foundation qualification that maps to the employment position. What degree in compliance does the new staff member have? Or is it that persons have been moved into compliance positions without the requisite underlying knowledge to execute the compliance role?

Market Watch at: http://blogs.marketwatch.com/thetell/2014/07/14/citi-will-have-almost-30000-employees-in-compliance-by-year-end/

book cover

Read about financial institutions / banks compliance department requirements in the 5,000 page treatise and compendium of LexisNexis’ Money Laundering, Asset Forfeiture and Recovery and Compliance: A Global Guide

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Why are regulators so alarmed about Stored Value Cards? and Virtual Currency?

Posted by William Byrnes on July 11, 2014

Why are regulators so alarmed about Stored Value Cards?  Citron Research published a report about the impact on a financial institution’s share value when the financial institution ignores its anti money laundering compliance (and receives a regulatory warning consent order, and worst, a cease & desist order).

Citron Research’s report indicates that stored value cards pose a substantial risk for funding of terrorist activities.  The Report states:

“The Government crackdown on the stored value card business is real and not going anywhere.  In a banking industry article published TODAY, we read “I would think this action sends a message to every other prepaid issuer that they better be buttoned up on AML processes and work very closely with their clients,” Colgan said.

On another topic of money laundering concerns, the LexisNexis chapter on Virtual Currency (e.g. Bitcoin) is being updated by its authors: Emmanuel Rayes (TJSL alumni) and Dr. David Utzke (MAFF, CFE, CFI is a Sr. Agent and lead agent for Virtual Currency and Digital Transactions for the IRS).

Virtual currencies have caught mainstream popularity and use the past 24 months. It was only a matter of time before an internet currency would catch mass adoption because of the convenience, speed, and ease of use that the internet provides. Governments all over the world have had a difficult time regulating virtual currencies due to their unconventional structure that is not typical of paper or fiat currencies and due to the rapid evolution of technology. Bitcoin is one such virtual currency that has caught the attention of government regulators all over the world.

Bitcoin is not a typical currency, but rather it is a crypto-currency. In addition, Bitcoin is based on a decentralized peer-to-peer network that’s not only responsible for the issuing of the currency but also for the transfers of the currency. The general currency model followed by almost every government in the world designates a central authority or bank for the issuing of the currency along with intermediary banking institutions responsible for the transfers and record keeping of user transactions. In the Bitcoin model, the middleman, or bank, is completely removed and the user controls the issuance of the currency in addition to facilitating, verifying and recording every transaction.

book coverA greater concern is that criminals use the anonymity features of Bitcoin to launder money obtained from criminal activities or to fund criminal activities. The transactions made with Bitcoin are disclosed on a public ledger but the identity of the parties conducting the transactions are pseudo-anonymous which makes it laborious to identify the parties making the transfers. This creates increasing difficulty in charging and convicting criminals for crimes committed using Bitcoin.  Read the full crypto-currency chapter, which forms part of the 5,000 page treatise and compendium of LexisNexis’ Money Laundering, Asset Forfeiture and Recovery and Compliance: A Global Guide


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LexisNexis® Guide to FATCA Compliance release …

Posted by William Byrnes on May 3, 2013

Over 400 pages of compliance analysis !! now available with the 20% discount code link in this flier –> LN Guide to FATCA_flier.

The LexisNexis® Guide to FATCA Compliance was designed in consultation, via numerous interviews and meetings, with government officials, NGO staff, large financial institution compliance officers, investment fund compliance officers, and trust companies,  in consultation with contributors who are leading industry experts. The contributors hail from several countries and an offshore financial center and include attorneys, accountants, information technology engineers, and risk managers from large, medium and small firms and from large financial institutions.  A sample chapter from the 25 is available on LexisNexis: http://www.lexisnexis.com/store/images/samples/9780769853734.pdf

book coverContributing FATCA Expert Practitioners

Kyria Ali, FCCA is a member of the Association of Chartered Certified Accountants (“ACCA”) of Baker Tilly (BVI) Limited.

Michael Alliston, Esq. is a solicitor in the London office of Herbert Smith Freehills LLP.

Ariene d’Arc Diniz e Amaral, Adv.  is a Brazilian tax attorney of Rolim, Viotti & Leite Campos Advogados.

Maarten de Bruin, Esq. is a partner of Stibbe Simont. 

Jean-Paul van den Berg, Esq.  is a tax partner of Stibbe Simont.

Amanda Castellano, Esq. spent three years as an auditor with the Internal Revenue Service.

Luzius Cavelti, Esq. is an associate at Tappolet & Partner in Zurich.

Bruno Da Silva, LL.M.  works at Loyens & Loeff, European Direct Tax Law team and is a tax treaty adviser for the Macau special administrative region of the People’s Republic of China.

Prof. J. Richard Duke, Esq. is an attorney admitted in Alabama and Florida specializing over forty years in income and estate tax planning and compliance, as well as asset protection, for high net wealth families.  He served as Counsel to the Ludwig von Mises Institute for Austrian Economics 1983-1989.

Dr. Jan Dyckmans, Esq. is a German attorney at Flick Gocke Schaumburg in Frankfurt am Main.

Arne Hansen is a legal trainee of the Hanseatisches Oberlandesgericht (Higher Regional Court of Hamburg), Germany.

Mark Heroux, J.D. is a Principal in the Tax Services Group at Baker Tilly who began his career in 1986 with the IRS Office of Chief Counsel.

Rob. H. Holt, Esq. is a practicing attorney of thirty years licensed in New York and Texas representing real estate investment companies.

Richard Kando, CPA (New York) is a Director at Navigant Consulting and served as a Special Agent with the IRS Criminal Investigation Division where he received the U.S. Department of Justice – Tax Division Assistant Attorney General’s Special Contribution Award.

Denis Kleinfeld, Esq., CPA. is a renown tax author over four decades specializing in international tax planning of high net wealth families.  He is Of Counsel to Fuerst Ittleman David & Joseph, PL, in Miami, Florida and was employed as an attorney with the Internal Revenue Service in the Estate and Gift Tax Division.

Richard L. Knickerbocker, Esq.  is the senior partner in the Los Angeles office of the Knickerbocker Law Group and the former City Attorney of the City of Santa Monica.

Saloi Abou-Jaoude’ Knickerbocker Saloi Abou-Jaoude’ Knickerbocker is a Legal Administrator in the Los Angeles office of the Knickerbocker Law Group concentrated on shari’a finance.

Jeffrey Locke, Esq.  is Director at Navigant Consulting.

Josh Lom works at Herbert Smith Freehills LLP.

Prof. Stephen Polak is a Tax Professor at Thomas Jefferson School of Law’s International Tax & Financial Services Graduate Program where he lectures on Financial Products, Tax Procedure and Financial Crimes. As a U.S. Senior Internal Revenue Agent, Financial Products and Transaction Examiner he examined exotic financial products of large multi-national corporations. Currently, Prof. Polak is assigned to U.S. Internal Revenue Service’s three year National Research Program’s as a Federal State and Local Government Specialist where he examines states, cities, municipalities, and other governmental entities.

Dr. Maji C. Rhee is a professor of Waseda University located in Tokyo.

Jean Richard, Esq.  a Canadian attorney, previously worked for the Quebec Tax Department, as a Senior Tax Manager with a large international accounting firm and as a Tax & Estate consultant for a pre-eminent Canadian insurance company.  He is currently the Vice President and Sr. Wealth Management Consultant of the BMO Financial Group.

Michael J. Rinaldi, II, CPA. is a renown international tax accountant and author, responsible for the largest independent audit firm in Washington, D.C.

Edgardo Santiago-Torres, Esq., CPA, is also a Certified Public Accountant and a Chartered Global Management Accountant, pursuant to the AICPA and CIMA rules and regulations, admitted by the Puerto Rico Board of Accountancy to practice Public Accounting in Puerto Rico, and an attorney.

Hope M. Shoulders, Esq. is a licensed attorney in the State of New Jersey whom has previously worked for General Motors, National Transportation Safety Board and the Department of Commerce.

Jason Simpson, CAMS is the Director of the Miami office for Global Atlantic Partners, overseeing all operations in Florida, the Caribbean and most of Latin America. He has worked previously as a bank compliance employee at various large and mid-sized financial institutions over the past ten years.  He has been a key component in the removal of Cease and Desist Orders as well as other written regulatory agreements within a number of Domestic and International Banks, and designed complete AML units for domestic as well as international banks with over three million clients.

Dr. Alberto Gil Soriano, Esq.  worked at the European Commission’s Anti-Fraud Office in Brussels, and most recently at the Legal Department of the International Monetary Fund’s Financial Integrity Group in Washington, D.C. He currently works at the Fiscal Department of Uría Menéndez Abogados, S.L.P in Barcelona (Spain).

Lily L. Tse, CPA. is a partner of Rinaldi & Associates (Washington, D.C.).

Dr. Oliver Untersander, Esq. is partner at Tappolet & Partner in Zurich.

Mauricio Cano del Valle, Esq. is a Mexican attorney who previously worked for the Mexican Ministry of Finance (Secretaría de Hacienda) and Deloitte and Touche Mexico.  He was Managing Director of the Amicorp Group Mexico City and San Diego offices, and now has his own law firm. 

John Walker, Esq. is an accomplished attorney with a software engineering and architecture background.

Bruce Zagaris, Esq. is a partner at the Washington, D.C. law firm Berliner, Corcoran & Rowe, LLP. 

Prof. William Byrnes was a Senior Manager then Associate Director at Coopers & Lybrand, before joining academia wherein he became a renowned author of 38 book and compendium volumes, 93 book & treatise chapters and supplements, and 800+ articles.  He is Associate Dean of Thomas Jefferson School of Law’s International Taxation & Financial Services Program.

Dr. Robert J. Munro is the author of 35 published books is a Senior Research Fellow and Director of Research for North America of CIDOEC at Jesus College, Cambridge University, and head of the anti money laundering studies of Thomas Jefferson School of Law’s International Taxation & Financial Services Program.

Posted in Compliance, Estate Tax, Financial Crimes, information exchange, Money Laundering, OECD, Reporting, Tax Policy, Taxation, Wealth Management | Tagged: , , , , , , | 1 Comment »

Money Laundering, Asset Forfeiture and Recovery, and Compliance: A Global Guide

Posted by William Byrnes on December 2, 2011

Register now to access Money Laundering, Asset Forfeiture and Recovery, and Compliance: A Global Guide, and receive a complimentary chapter in PDF! Order before December 15, 2011 and save 20%!*

View more information here

Written by Professors William Byrnes & Robert Munro of Thomas Jefferson School of Law, the new publication contains in-depth coverage of the laws and government actions in 47 nations to combat money laundering, terrorist funding and similar practices. Each nation has its own chapter with sections covering:

  • Anti-money laundering and counter-terrorist financing;
  • Criminal and civil forfeiture;
  • Compliance & risk; and
  • International cooperation.

The remaining nations of the world will be covered in quarterly updates scheduled to go live in 2012 and 2013.

Because the new product spans so many practice areas, it appears on seven area-of-law pages (Accounting, Banking, Criminal, Foreign Law, International Law, International Trade, and Taxation), plus Lexis Tax Center.  Just look under “Search Analysis, Law Reviews & Journals”.

This title is also available as an ebook and mobile-book.

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SEC’s Plain English Requirement Equals Expensive Client Disclosures

Posted by William Byrnes on August 29, 2010

As of January 1, 2011, the Securities and Exchange Commission will require advisers to make plain-English disclosures to their clients, laying out the adviser’s business practices, conflicts of interest, and the background of the firm and its personnel.  The requirement is designed to drag information out of the fine print on client disclosures and present it in easily understandable language. Although innocuous sounding on its face, the requirement will carry a significant cost in time and resources.

Today’s analysis by our Experts Robert Bloink and William Byrnes is located at AdvisorFX Journal SEC’s Plain English Requirement Equals Expensive Client Disclosures

For previous commentary, see AdvisorFX Journal What You Don’t Know Yet Might Hurt You: A Broker’s Duties under the Financial Reform Act

After reading the analysis, we invite your questions and comments about indexed annuities by posting them below, or by calling the Panel of Experts.

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National Underwriters Appoints New Leader of Financial Advisory Publications

Posted by William Byrnes on July 14, 2010

National Underwriters Establishes Go-To Service for Producers

Effective this summer, in order to embrace the changing landscape of the greatest wealth transfer in global history, National Underwriter/Summit Business Media is honored to announce that the renown professor, author, and financial services industry analyst William Byrnes will lead our financial advisory publications.  In an interview William Byrnes stated that “I will leverage community-comment blogging with innovative multimedia to deliver daily strategies for insurance producers and financial service regulatory updates for risk managers.  National Underwriters’ Advanced Underwriter Service®(AUS®) will emerge as the dominant go-to strategy service for the insurance/financial planning industry.” 

When asked how he intends to effectively connect AUS® strategic information with the needs of producers, Byrnes replied, “Through direct engagement with producers’ burning questions via the new AUS® Advisor blog, through my editorial panel of connected industry experts and enterprise-wide subscribers, and through feedback from the elected production leaders from the over 50,000 chartered wealth managers of the American Academy of Financial Management®.  National Underwriters will proactively educate the AUS subscribers about developing insurance and wealth management advisory strategies and sales techniques before the subscribers’ competitors hear about them via industry word of mouth.”

William Byrnes’ Background

Byrnes continued, “I have a lot of experience delivering cutting edge information to professionals seeking to better serve their clients and win business from the competition.  About twenty years ago, Dr. George Mentz and I pioneered residential executive training, and soon thereafter online degrees, for wealth managers seeking to become top producers.  Over time we trained these industry leading wealth managers with our executive programs for the likes of EuroMoney-Institutional Investor, IIR, and the Society of Trust and Estate Practitioners.  We even managed for the first time ever that the American Bar Association acquiesced to an online wealth management oriented graduate law degree being granted to both lawyers and non-lawyers alike by an accredited law school in the USA.”

“And in terms of executing multi-media publishing, I’ve written and edited 10 books and treatises and 17 chapters for best-of-class publishers like Lexis-Nexis, Wolters Kluwer, Thomson-Reuters, and Oxford University Press, whereas Dr. Mentz focused on wealth management techniques and soft skills books distributed international via the 120-country membership of the American Academy of Financial Management.  I have published my multi-media textbooks online since 1998!”

New Community-Collaborative Technology

When asked how he transitioned from practitioner to education-pioneer, Byrnes reminisced “I never imagined when I was an associate director of international tax of the big 6 audit firm Coopers & Lybrand, now known as PwC, that I would move from serving high net wealth families to helping wealth managers better serve their clients via my role as the Associate Dean of an ABA accredited law school, Thomas Jefferson.  This year Thomas Jefferson School of Law will open its new $130 million dollar state-of-the-technology new campus in San Diego that will be able deliver via innovative ways interactive training and education to wealth managers across the nation, and the globe.  Over the coming year I will combine the cutting-edge technology of Thomas Jefferson law school, my online training expertise, and the National Underwriters best-of-class information services to deliver real-time fresh strategy and sales approaches to AUS subscribers, with followup webinars and training where subscriber interests warrants.”

Delivering the Competitive Advantage to Producers

Byrnes added, “National Underwriters/Summit Business Media wants to deliver an information service that will place its subscribers in a better competitive advantage.”  To this end National Underwriters has allowed me to assemble the industry’s finest editorial team in Investment Advisory, Wealth Management, and Risk Management.  I already have commitments from the two well known industry experts, investment-advisory attorney Robert Bloink, and the chair of the American Academy of Financial Management®, Dr. George Mentz, who will underpin this team”.

Robert Bloink’s Background

“I think it is critical for National Underwriters subscribers to know that Robert Bloink, one of two underpinning editorial team members, put in force in excess of $2B of longevity pegged portfolios for the insurance industry’s producers in the past five years.  Robert Bloink’s insurance practice incorporates sophisticated wealth transfer techniques, as well as counseling institutions in the context of their insurance portfolios and other mortality based exposures.  His success proves that he really has an unparalleled knowledge of the advanced insurance markets.”

“And in terms of risk management editorial expertise, I previously met Robert Bloink when he had just finished serving as Senior Attorney in the IRS Office of Chief Counsel, Large and Mid-Sized Business Division, where he litigated many cases in the U.S. Tax Court, served as Liaison Counsel for the Offshore Compliance Technical Assistance Program, coordinated examination programs audit teams on the development of issues for large corporate taxpayers and taught continuing education seminars to Senior Revenue Agents involved in Large Case Exams.  In his governmental capacity, Mr. Bloink became recognized as an expert in the taxation of financial structured products, and was responsible for the IRS’ first FSA addressing variable forward contracts. Mr. Bloink’s core competencies led to his involvement in prosecuting some of the biggest corporate tax shelters in the history or our country.”

Chartered Wealth Managers Endorse 

“It is also critical for National Underwriters subscribers who serve middle America to know that the editorial team has Dr. George Mentz, chair of the 50,000 affiliated members of the American Academy of Financial Management® (AAFM®), Byrnes said.”  In an interview with Dr. Mentz, he stated that “I am excited to introduce our membership of Chartered Wealth Managers to the competitive client advisory strategies of Advanced Underwriter Service® and Tax Facts®.”  The AAFM® has endorsed National Underwriters’ Advanced Underwriter Service® as the information service of choice for its board designation CWM®s (Chartered Wealth Manager) in all of its 150 countries of membership.

Panel of Experts

In describing the newly formed editorial team, Byrnes said “To provide AUS® subscriber examples of other experts who will round out various aspects of the new editorial team, let me introduce you to three others, Mike Rodman, Don Goode and Robert Stuchiner.  Mike Rodman is a three time qualifier for Top of The Table, MDRT’s highest honor, as well as a four-year member of the International Forum, and the Association of Advanced Underwriters (AALU). Rodman served as past president of NAIFA-San Diego as well as an active member of The Financial Planning Association (FPA), The Society of Financial Service Professionals (SFSP) and The National Association of Independent Life Brokerage Agencies (NAILBA).  He founded Advanced Planning Services, Inc. (APS) as “the Premier Advanced Sales and Advanced Underwriting organization” serving the entire industry, including producers, producer groups, and other agencies and carriers, for which it has been a two-time INC 500 winner.”

“Don Goode joined Potomac West, where he was instrumental in building their large case department.  Along with his partner, Don successfully designed and negotiated the Power Play program for American General, and most importantly to National Underwriter subscribers, his team lent support to the first agent in the history of the industry to ever receive more than $100mm in a single calendar year.  When he stepped down from partner status at Potomac West, Don accepted a one year contract to lead the sales and marketing department for the esteemed Producer’s Group.  Thereafter Don Goodman joined the Advanced Planning Division of the public company-Bisys-Potomac where he consistently produced individual policy transactions that were more than 20 times the company average.”

“Robert Stuchiner worked for some of the largest insurance companies, most recently AIG where he was Senior Vice President in charge of market development and strategy for the AIG Affluent Markets Group. He has also worked for consumers of insurance products ranging from large corporations (North American Phillips) to a major law firm (Davis, Polk & Wardwell).  Robert Stuchiner has published articles on life insurance products in “Trusts & Estates” magazine as well as “CCH” professional publications. He is a frequent speaker to the insurance industry associations. Robert is the winner of the “National Career Achievement Award” granted by the Lighthouse for the Blind.  

Community Calibration

Byrnes concluded the interview stating, “To bring AUS to the next level of becoming the industry’s leader for strategic information, this next six months is going to be about collaboration with AUS subscribers and calibration of the new information service to align to the feedback received from them.  John Frey, Head of National Underwriters Institutional Relationships, and I will reach out to establish a focus group of the enterprise-wide subscribers, as well as a focus group of the producers.” 

“Via my community-based feedback approach, the subscribers will drive AUS’ topic approach to strategic information, even receiving direct answers to ‘questions for the authors’ so that the producer may better address client questions either in the living room or in the board room.  AUS will be a subscriber-focused service, tailored to the needs of the producer to place more product with customers”.  Byrnes said that he welcomed feedback from current AUS subscribers and would provide his direct National Underwriters telephone number and email address on the AUS subscriber site.

Posted in Compliance, Courses, Insurance, Taxation, Wealth Management | Tagged: , , , , , , , , , , | 3 Comments »

Certified International Tax Analyst

Posted by William Byrnes on May 14, 2010

Professional Designation: American Academy of Financial Management

Exam preparation: International Tax Planning & Risk Management course

Topics: Treaty Structures, Transfer Pricing, Risk Score Cards, Offshore Strategies and Compliance amongst others – taught via case studies

Delivery: 40 hours of live lecture and case studies – audio headsets for web conferencing

Start: May 24 (Monday) – end August 13 (Friday)

When: New York 11am – 12:30 pm (Eastern Time)

Recordings: all lectures are made available within 1 hour on-demand

Contact: Prof. William Byrnes, Associate Dean – wbyrnes@tjsl.edu   +1 (619) 297-9700 x 6955

Materials: tuition includes full Westlaw, Lexis, CCH, IBFD, Checkpoint, Orbitax and 20 other professional databases

Accreditation: applies toward the Legum Magister (LL.M.), Juris Scientiae Magister (J.S.M),  Scientiae Juridicae  Doctor (JSD) of Thomas Jefferson School of Law (San Diego)

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Mutual Assistance in the Recovery of Tax Claims

Posted by William Byrnes on October 26, 2009

Historical anecdotes relating to tax information exchange and cross-border assistance with tax collection (continued)

This week I continue in my historical anecdotes leading back up to the subject of cross-border tax (financial) information exchange and cross-border tax collection.  In this blogticle I turn to the OECD Model Convention for Mutual Administrative Assistance in the Recovery of Tax Claims and the EU Directive on the Mutual Assistance for the Recovery of Claims  In our live webinars in the tax treaty course, Marshall Langer will continue to address these issues indepthly.

1981 OECD Model Convention for Mutual Administrative Assistance in the Recovery of Tax Claims

This 1981 OECD Model provides for both the exchange of information (article 5) and the assistance in recovery (article 6), which state respectively:


At the request of the applicant State the requested State shall provide any information useful to the applicant State in the recovery of its tax claim and which the requested State has power to obtain for the purpose of recovering its own tax claims.


1. At the request of the applicant State the requested State shall recover tax claims of the first-mentioned State in accordance with the laws and administrative practice applying to the recovery of its own tax claims, unless otherwise provided by this Convention.

Procedurally, the documentation must state (1) the authority requesting, (2) name, address and other particulars for identification of the taxpayer, (3) nature and components of the tax claim, and (4) assets of which the Requesting State is aware of from which the claim may be recovered.  The nature of the tax claim must include documentary evidence in the form of the instrumentality establishing that the tax is determined, that it is due, and that it is without further recourse to contest under the Requesting State’s laws.  The applicable Statute of Limitation is of the Requesting State.

The Requested State’s obligation is limited, as under the OECD DTA Model Article 26 and 27, if the request requires the Requested State to go beyond its own or the Requesting State’s capacity to either provide information or take administrative actions pursuant to their respective internal laws.  The Requesting State has a duty to exhaust its own reasonable collection remedies before making the request which procedural requirement may be relied upon by the Requested State.  All requests are also limited by ordre public.

1988 Convention On Mutual Administrative Assistance In Tax Matters

Coming into force April 1, 1995 amongst the signatories Belgium, Denmark, Finland, Iceland, Netherlands, Norway, Poland, Sweden, and the US, this multilateral convention was originally agreed in 1988.  The Convention provides for exchange of information, foreign examination, simultaneous examination, service of documents and assistance in recovery of tax claims.

Tax covered includes income, capital gains, wealth, social security, VAT and sales tax, excise tax, immovable property tax, movable property tax such as automobiles, and any other tax save customs duties.  The tax also includes any penalties and recovery costs.  The tax may have been levied by the State and any of its subdivisions. 

The convention allows the request of information regarding the assessment, collection, recovery and enforcement of tax.  The information may be used for criminal proceedings on a case-by-case basis pursuant to the Requested State agreeing, unless the States have waived the requirement of agreement.

Spontaneous provision of information shall be provided without request when a State with information:

(1) has “grounds for supposing” a loss of tax to another State,

(2) knows that a taxpayer receives a tax reduction in its State that would increase the tax in the other State,

(3) is aware of business dealings between parties located in both States that saves tax,

(4) has grounds for supposing an artificial intro-group transfer of profits, and

(5) that was obtained from the other State has led to further information about taxes in the other State.  

Similar to the OECD Model Conventions above, procedurally the requesting documentation must state (1) the authority requesting and (2) name, address and other particulars for identification of the taxpayer.  For an information request, the document should include in what form the information should be delivered.  For a tax collection assistance request, (1) the tax must be evidenced by documentation in the form of the instrumentality establishing that the tax is determined, that it is due and that it is without further recourse to contest, (2) the nature and components of the tax claim, and (3) assets of which the Requesting State is aware of from which the claim may be recovered. 

This Multilateral Convention’s limitations follow the 1981 and 2003 OECD Model, but further provide for a non-discrimination clause.  The non-discrimination clause limits providing assistance if such assistance would lead to discrimination between a requested State’s national and requesting State’s nationals in the same circumstances.

2001 EU Directive on the Mutual Assistance for the Recovery of Claims relating to Certain Levies, Duties, Taxes and Other Measures

The OECD is not alone in its quest to improve tax information exchanges.  On June 15, 2001 the EU Commission issued a Directive that amended a previous 1976 Directive which substantially changed the impact of that 1976 Directive (on mutual assistance for the recovery of claims resulting from operations forming part of the system of financing the European Agricultural Guidance and Guarantee Fund, and of agricultural levies and customs duties and in respect of value added tax and certain excise duties).

The 2001 Directive provided that Member States enact regulations that provide for the implementation of a number of EU Directives on mutual assistance between Member States of the Community on the provision of information in respect of, and the recovery in the State of, claims made by Other Member States in respect of debts due to the Member State in question from:

  • Import & Export Duties
  • Value Added Tax
  • Excise duties on manufactured tobacco, alcohol and alcoholic beverages and mineral oils
  • Taxes on income and capital
  • Taxes on insurance premiums
  • Interest, administrative penalties and fines, and costs incidental to these claims (with the exclusion of any sanction in respect of which the act or commission giving rise to the sanction if committed in the State would be criminal in nature)
  • Refunds, interventions and other measures forming part of the system of financing the European Agricultural Guidance and Guarantee Fund
  • Levies and other duties provided for under the common organization of the market of the market for the sugar section

In summary, the Directive provides for one Member State’s competent authority at the request of another Member State’s competent authority to disclose to the requester’s competent authority any information in relation to a claim which is required to be disclosed by virtue of the Directive.
On receipt of a request, the Revenue Commissioners can decline a request to provide information in the following circumstances:

– if the information would, in the opinion of the Competent Authority, be liable to prejudice the security of the State or be contrary to public policy;

– if the Competent Authority would not be able to obtain the information requested for the purpose of recovering a similar claim, or

– if the information, in the opinion of the Competent Authority, would be materially detrimental to any commercial, industrial or professional secrets.

Any information provided to a competent authority under the enacting regulations pursuant to the Directive can only be used for the purposes of the recovery of a claim or to facilitate legal proceedings to the recovery of such a claim.

Under the Directive, the collecting Member State is obliged to collect the amount of a claim specified in any request received from a competent authority in another Member State and remit the amount collected to that competent authority.

In the Tax Treaties course, Prof. Marshall Langer will be undertaking an in-depth analysis of these instruments and issues raised above regarding the IRS efforts to collect tax via assistance from foreign states.  For further tax treaty course information, please contact me at William Byrnes (wbyrnes@tjsl.edu).

Posted in Compliance, Financial Crimes, information exchange, Legal History, OECD, Taxation | Tagged: , , , , , , | 1 Comment »

Historical Anecdotes of Tax Information Exchange (continued)

Posted by William Byrnes on October 22, 2009

This week I continue in my historical anecdotes leading back up to the subject of cross-border tax (financial) information exchange and cross-border tax collection.  In this blogticle I turn to the FATF, Edwards and KPMG reports, OECD and Offshore Group of Bank Supervisors.  In our live webinars, Marshall Langer will continue to address these issues indepthly.

1990 – 2001 Financial Action Task Force (FATF)

In 1990, the FATF established forty recommendations as an initiative to combat the misuse of financial systems by persons laundering drug money. In 1996, the FATF revised its forty recommendations to address “evolving money laundering typologies”.  The 1996 forty recommendations developed into the international anti-money laundering standard, having been endorsed by more than 130 countries.  In 2001, because of 9/11, the FATF issued eight terrorist financing special recommendations to combat the funding of terrorist acts and terrorist organizations.  Regarding the micro-economies, the activities of the Offshore Group of Banking Supervisors (OGBS) have lead to agreement with the FATF on ways to evaluate the effectiveness of the money-laundering laws and policies of its members. The difficulty is that only about a half of offshore banking centers are members of OGBS.

See the FATF Methods and Trends page for detailed typologies.

1999 Review Of Financial Regulation In The Crown Dependencies (Edwards Report)

In 1999 and 2000, the UK government in association with the governments of its Crown Dependencies and Overseas Territories assessed the territories financial regulations against international standards and good practice, as well as make recommendations for improvement where any territory fell beneath the standards.  In general the reports concluded that the regulatory regimes were good, given limited resources, but that significant further resources had to be employed.  The primary conclusions of the reports included:

(1) employment of more regulatory resources,

(2) establish an independent regulatory body in each jurisdiction,

(3) maintain records of bearer share ownership,

(4) allow disclosure of beneficial owners’ names to regulators for possible onward transmittal to other jurisdiction’s regulators, and

(5) expand company disclosure with regard to the directors.

2000 KPMG Review Of Financial Regulation in The Caribbean Overseas Territories and Bermuda

In 2000, the UK government in association with the governments of the Caribbean Overseas Territories and Bermuda commissioned the London office of KPMG to assess the territories financial regulations against international standards and good practice, as well as make recommendations for improvement where any territory fell beneath the standards.  A brief example summary for Anguilla and British Virgin Islands (BVI) is below.


KPMG commented that while Anguilla’s offshore regulatory operations are “well-run by skilled officers”, KPMG critiqued that the regulatory operations were not fully in accordance with international standards.  KPMG’s principal recommendations for regulatory refinement were: 

  • Shift responsibility for offshore financial services from the Governor back to the Minister of Finance, specifically the Director of the Financial Services Department.
  • Fight money laundering and other fraud by keeping records of bearer share ownership, allowing, where necessary the disclosure of the owners’ names to Anguilla’s regulators for possible onward transmittal to other jurisdiction’s regulators.
  • Expand the IBC disclosure by including director’s names in the Articles of Incorporation as well as empowering the Registrar of Companies to apply for a Court appointed inspector.
  • Require partnerships to maintain financial records.
  • Enact a new insurance law.
  • Amend the 1994 Fraudulent Dispositions and 1994 Trust Act’s disclosure requirements to prevent insertion in trust documents of clauses hampering legitimate creditors or restricting official investigations.

 The KPMG Report concluded that Anguilla’s ACORN electronic company registration system “enhanced” the regulatory environment.

British Virgin Islands

KPMG commented that while BVI’s offshore regulatory operations are well run, KPMG pointed out that the regulatory operations were not fully in accordance with international standards.  KPMG’s principal recommendations for regulatory refinement were: 

  • Consolidating control of offshore financial services in an independent Financial Services Department (which was renamed the Financial Services Commission), which at the time functioned as the regulatory authority. This required devolving powers of licensing, regulation and supervision from the Governor in Council, composed of the Governor, Attorney General, Chief Minister, and four Ministers.  KPMG urged the FSD to give up its marketing activities.  In 2002 this activity was hived off and reposed in a newly established BVI International Financial Centre.
  • Grant the Registrar of Companies power to initiate an investigation of a company and petition the courts to wind up an IBC.
  • Establish standards, based upon the International Organisation of Securities Commissions, for supervision of mutual funds, drafting a regulatory code affecting all securities and investment ventures, and increasing the Registrar of Mutual Funds’ enforcement powers.
  • Enact enforceable codes of practice for company and trust service providers and increase the supervisor’s regulatory powers.

Influenced by international reports concerning combating money laundering, the BVI passed legislation restricting the anonymity and mobility of bearer shares through requiring them to be held by a licensed financial institution. The anonymity of directors was reduced by requiring information about them to be filed preferably in the Company Registry in the jurisdiction.

2000 Improving Access To Bank Information For Tax Purposes (OECD)

In 2000, the OECD issued Improving Access to Bank Information for Tax Purposes.  The 2000 OECD Report acknowledged that banking secrecy is “widely recognised as playing a legitimate role in protecting the confidentiality of the financial affairs of individuals and legal entities”.  This Report focused on improving exchange of information pursuant to a specific request for information related to a particular taxpayer.  In this regard, it noted that pursuant to its 1998 Report, 32 jurisdictions had already made political commitments to engage in effective exchange of information for criminal tax matters for tax periods starting from 1 January 2004 and for civil tax matters for tax periods starting from 2006.  We have already covered the corresponding TIEAs established in light of this report in a previous blogticle hereunder.   Black/White and Grey lists will be covered in a future blogticle.

2002 Offshore Group Of Banking Supervisors Statement Of Best Practices

In 2002, the OGBS formed a working group to establish a statement of best practices for company and trust service providers. The working group included representatives from the micro-economies of Bahamas, Bermuda, B.V.I., Cayman Islands, Cyprus, Guernsey, Gibraltar, Isle of Man an Jersey and from the OECD members   France, Italy, the Netherlands, the U.K., as well as the relevant NGOs of the FATF, IMF, and OECD.  The terms of reference of the working groups was to “To produce a recommended statement of minimum standards/guidance for Trust and Company Service Providers; and to consider and make recommendations to the Offshore Group of Banking Supervisors for transmission to all relevant international organisations/authorities on how best to ensure that the recommended minimum standards/guidance are adopted as an international standard and implemented on a global basis”.

The Working Group concluded: “There should be proper provision for holding, having access to and sharing of information, including ensuring that – 

       (i)  information  on the ultimate beneficial owner and/or controllers of companies, partnerships and other legal entities, and the trustees, settlor, protector/beneficiaries of trusts is known to the service provider and is properly recorded;

       (ii) any change of client control/ownership is promptly monitored (e.g. in particular where a service provider is administering a corporate vehicle in the form of a “shelf” company or where bearer shares or nominee share holdings are involved); 

       (iii) there is an adequate, effective and appropriate mechanism in place for information to be made available to all the relevant authorities (i.e. law enforcement authorities, regulatory bodies, FIU’s); 

       (iv) there should be no barrier to the appropriate flow of information to the authorities referred to in 3 (iii) above; 

       (v) KYC and transactions information  regarding the clients of the Service Provider is maintained in the jurisdiction in which the Service Provider is located; 

       (vi) there should be no legal or administrative barrier to the flow of information/documentation necessary for the recipient of business from a Service Provider who is an acceptable introducer to satisfy itself that adequate customer due diligence has been undertaken in accordance with the arrangements set out in the Basel Customer Due Diligence paper.

Please contact me with any comments or follow up research materials.  Prof. William Byrnes wbyrnes@tjsl.edu

Posted in information exchange, Legal History, OECD | Tagged: , , , , , , | 2 Comments »

Tax Information Exchange and Collection Assistance

Posted by William Byrnes on August 22, 2009

Over the past weeks, we have opened the exploration of issues addressing business and legal service outsourcing, new trends in wealth management, the history and taxation of charities, anti money laundering regulations, compliance training, and even The Obama administrations’ proposed international tax rule changes.  Many topics have been left hanging for which further researched exploration is warranted.

However this week, because of the continuing interest in Cross-Border Information Exchange, primarily due to the press about the UBS settlement and the soon turning over of approximately 5,000 tax-evading US account holders, over the coming weeks we will explore Information Exchange and Cross Border Assistance with Tax Collection.

Keep your emails coming about suggestion for this blog, and your comments.  I have been keeping up with answering each of you within a day or two.  Prof. William Byrnes (wbyrnes@tjsl.edu)

Cross-Border Information Exchange and Mutual Assistance (with regard to Tax) 

To uncover and analyze the issues of cross-border tax information exchange and also the mutual assistance with regard to tax collection by one jurisdiction on behalf of another one, we must at a minimum over the next few weeks examine the following:

(1) the behaviour of the OECD and its members toward the micro economy jurisdictions versus the OECD’s treatment amongst it own members and other economically significantly trade partners;

(2) the EU Savings Directive and other related EU Directives;

(3) the US proposal to automatically report to EU State’s bank interest of their residents;

(4) the tax application of the mutual assistance and extradition treaty between the US and EU;

(5) the geo-politics of tax information exchange agreements (TIEAs) such as positive inducements made and broken by the US to the Caribbean, and the inverse being recent threats made by the OECD to the international financial centers;

(6) other international initiatives for the provision of tax information, such as the FATF and Offshore Group of Banking Supervisors (OGBS) partnership and finally,

(7) the procedural process and practicalities of seeking tax information pursuant to an international agreement, be it a full tax treaty, a limited agreement only applying to exchange of information, another type of bi-lateral or multi-lateral instrument, or just simply domestic legislation. 

Tax Information Exchange Background

We will need to consult the following exemplary documents (amongst many others) over my coming blogticles, being: 

  • OECD Model DTA – Tax Information Exchange (Art. 26 & 27)
  • OECD Model Convention for Mutual Administrative Assistance in the Recovery of Tax Claims
  • Convention on Mutual Administrative Assistance in Tax Matters (OECD & Council of Europe)
  • UN Model DTA – Tax Information Exchange (Art. 26)
  • OECD Model Tax Information Exchange Agreement (TIEA)
  • EU Directive on Exchange of Information
  • EU Directive on Mutual Assistance for the Recovery of Claims
  • EU Savings Directive
  • Mutual Legal Assistance Treaties (MLATs) and US-EU MLATs
  • Improving Access to Bank Information for Tax Purposes
  • Financial action task force (FATF)
  • Offshore Group of Banking Supervisors Best Practices (OGBS)

Exchange Pursuant to the OECD Conventions

OECD MODEL DTA – Tax Information Exchange (Art. 26 & 27)

Article 26, Exchange of Information, of the 2003 OECD Model Convention reads: 

The competent authorities of the Contracting States shall exchange such information as is necessary for carrying out the provisions of this Convention or of the domestic laws concerning taxes of every kind and description imposed on behalf of the Contracting States, or of their political subdivisions or local authorities, insofar as the taxation thereunder is not contrary to the Convention. …  Any information received by a Contracting State shall be treated as secret in the same manner as information obtained under the domestic laws of that State and shall be disclosed only to persons or authorities (including courts and administrative bodies) concerned with the assessment or collection of, the enforcement or prosecution in respect of, or the determination of appeals in relation to the taxes referred to in the first sentence. Such persons or authorities shall use the information only for such purposes. They may disclose the information in public court proceedings or in judicial decisions.

 The 2003 OECD Model, pursuant to its Commentary to the article, allows the following methods of information disclosure[1]

  • By request
  • Automatically
  • Spontaneously
  • Simultaneous examination of same taxpayer between the two States
  • Allowing requesting foreign Revenue examination of taxpayer in requested State
  • Industry-wide exchange of tax information without identifying specific taxpayers
  • Other methods to be developed between the States

The 2003 Model established limitations on the request of information:[2]

  • Requested State is not obliged to go beyond its own or the Requesting State’s capacity pursuant to its internal laws in providing information or taking administrative actions.
  • Requested State should not invoke tax secrecy as a shield.
  • Requested State is not obliged to supply information which would disclose any trade, business, industrial, commercial or professional secret or trade process.
  • Requested State is not obliged to supply information regarding its own vital interests or contrary to public policy (Ordre Public).

 Article 27 of the 2003 Model addresses assistance in the collection of taxes, stating:

     1. The Contracting States shall lend assistance to each other in the collection of revenue claims. …

     2. The term “revenue claim” as used in this Article means an amount owed in respect of taxes of every kind and description imposed on behalf of the Contracting States, or of their political subdivisions or local authorities, insofar as the taxation thereunder is not contrary to this Convention or any other instrument to which the Contracting States are parties, as well as interest, administrative penalties and costs of collection or conservancy related to such amount.

     3. … That revenue claim shall be collected by that other State in accordance with the provisions of its laws applicable to the enforcement and collection of its own taxes as if the revenue claim were a revenue claim of that other State.

The limitations remain the same as under Article 26 but also include that the Requesting State must have exhausted reasonable efforts of collection and conservancy pursuant to its domestic law.  Also, the Requested State’s obligation is limited if its administrative burden would exceed the tax collected for the Requesting State.

2003 OECD Model Agreement for Tax Information Exchange (TIEA)

The OECD Model TIEA was developed by an OECD Working Group consisting of the OECD Members and delegates from Aruba, Bermuda, Bahrain, Cayman Islands, Cyprus, Isle of Man, Malta, Mauritius, the Netherlands Antilles, the Seychelles and San Marino.  The OECD Model TIEA obviates from several principles established in the 2003 OECD Model DTA, 2001 UN Model, 1981 OECD Convention on Tax Claims and 1988 OECD Convention on Administrative Assistance.

The Model TIEA provides that the Parties shall give “information that is foreseeably relevant to the determination, assessment and collection of such taxes, the recovery and enforcement of tax claims, or the investigation or prosecution of tax matters.”  The Model TIEA allows for a two year phase between information sought in criminal tax matters, i.e. criminal tax evasion, versus the later extension to information sought in civil tax matters i.e. civil tax evasion but importantly also tax avoidance.   

The TIEA obviates from the traditional requirement of dual criminality, that is the underlying crime for which information is sought should be a crime in both Parties’ domestic laws: “Such information shall be exchanged without regard to whether the conduct being investigated would constitute a crime under the laws of the requested Party if such conduct occurred in the requested Party.”

Because the OECD Model TIEA is meant to be applied to negotiations with jurisdictions that do not have a direct tax system, the TIEA provides that the Requested Party must seek requested information even when it does not need the information for its own tax purposes.  But a Requested State is not obliged to exceed the power to gather information that is allowable under its laws.  However, the TIEA is specific that each Party is obliged to provide:

“a) information held by banks, other financial institutions, and any person acting in an agency or fiduciary capacity including nominees and trustees;

b) information regarding the ownership of companies, partnerships, trusts, foundations, “Anstalten” and other persons,…ownership information on all such persons in an ownership chain; in the case of trusts, information on settlors, trustees and beneficiaries; and in the case of foundations, information on founders, members of the foundation council and beneficiaries….”

Procedurally, the Requesting State’s competent authority must provide, in order to “demonstrate the foreseeable relevance of the information to the request” the following information:

“(a) the identity of the person under examination or investigation;

(b) a statement of the information sought including its nature and the form in which the applicant Party wishes to receive the information from the requested Party;

(c) the tax purpose for which the information is sought;

(d) grounds for believing that the information requested is held in the requested Party or is in the possession or control of a person within the jurisdiction of the requested Party;

(e) to the extent known, the name and address of any person believed to be in possession of the requested information;

(f) a statement that the request is in conformity with the law and administrative practices of the applicant Party, that if the requested information was within the jurisdiction of the applicant Party then the competent authority of the applicant Party would be able to obtain the information under the laws of the applicant Party or in the normal course of administrative practice and that it is in conformity with this Agreement;

(g) a statement that the applicant Party has pursued all means available in its own territory to obtain the information, except those that would give rise to disproportionate difficulties.”

Next Blogticle

In our next blogticle we will next turn to the 1988 Convention On Mutual Administrative Assistance In Tax Matters and continue form there.  In case you are wondering what this Convention is and why it is relevant, it came into force April 1, 1995 amongst the signatories Belgium, Denmark, Finland, Iceland, Netherlands, Norway, Poland, Sweden, and the US,  providing for exchange of information, foreign examination, simultaneous examination, service of documents and assistance in recovery of tax claims.

In the Tax Treaties course starting September 14, Prof. Marshall Langer will be undertaking an in-depth analysis f these instruments and issues raised above. 

[1] Commentary to Article 26, paragraph 1 sections 9. and 9.1, OECD Model Tax Convention, 2003.

[2] Commentary to Article 26, paragraph 2 sections 14, 15 and 16, OECD Model Tax Convention, 2003.

Posted in Compliance, Financial Crimes, Taxation | Tagged: , , | 3 Comments »

Are Financial Service Firms Serving High Net Wealth Suffering As a Result of Compliance Costs?

Posted by William Byrnes on August 19, 2009

Over the past blogticles, we have been examining a number of financial crimes issues including several for anti money laundering.  Now we turn to compliance costs and the dis-connect?  Feel free to comment or email me with any burning questions, Professor William Byrnes (www.llmprogram.org), as well as join one of our weekly webcasts.

Are Financial Service Firms Serving High Net Wealth Suffering As a Result of Compliance Costs?

In my 900-page economic report on the international financial services industry, I examined and calculated the economic size and impact of the sector on local jurisdictions.[1]  But for periods of global financial crisis, the sector had experienced double-digit annual growth and contributed robustly to the local economy and society.  Since 1998, the international financial services sector client base has expanded nearly 10% on average. 

In the past decade, the number of global high-net-worth individuals (HNWIs) served by practitioners, such as my able graduates, has doubled to more than 10 million by 2008 (though the global financial crisis has caused a decline to less than 9 million) —and their assets have more than doubled from $17 trillion to $40 trillion though currently just under $33 trillion due to the last twelve month’s financial crisis.[2] 

Is The Future For Clients Dim?

Dim? On the contrary!  In just four years, the pool of HNWI clients’ assets is projected to grow to nearly $50 trillion.  Though the global re-calibrating of asset values may impact the nominal wealth value for HNWIs in the short term, historically, based upon both the recessions coined after the Asian Financial Crisis and the Tech-Bust, the wealth value will likely return to projected levels with a two-year lag. 

The average HNWI, excluding the value of primary residences and collectables, is worth approximately $4 million!  HNWI’s continue to leverage offshore skill sets, growing their assets from $5.8 trillion from 1998 to $11 trillion today.[3]  That $11 trillion under management represents, at combined fees of just 1%, at least $100 billion to private bank firms offshore, and six times that taking all HNWI assets into account.

Some Financial Centers Spend More on Compliance than Others

39% of Florida banks surveyed reported that private banking accounted for more than 50% of their operating revenues.  Florida’s international private banking and wealth management customers predominantly reside, as one would expect, in Latin America and the Caribbean, with 1/3 residing in Europe.  South American residents account for 44% of private banking and wealth management customers of Florida’s international banks.  Approximately 19% of international private wealth management clients reside in Mexico or Central America, while 4% reside in the Caribbean.

Even though the market has been growing in terms of the available pool of HNW clients, the international banking industry in Florida has been characterized by consolidation and contraction since 2000.  The number of foreign bank agencies operating in Florida fell from 38 in 2000 to 31 in 2005.[4]  There were 10 Edge Act banks operating in Florida in 2000, but only 7 in 2005.  The number of international banking employees (in foreign agencies, Edge Acts and the international divisions of domestic banks chartered in Florida) declined from 4,660 in 2000 to 3,027 in 2005.

Based on a survey of banks significantly engaged in international banking in South Florida, the economics firm based on direct surveys estimated Miami’s international bankers staffing cost for 271 full-time employees of anti-terrorism/anti-money laundering compliance at nearly $25 million in 2005. [5]  The average survey respondents indicated that it devoted 2.9 FTE employment positions to BSA/AML compliance in 2002 versus 6.8 FTE positions in 2005. The number of full-time employees devoted to compliance represented 9% of the workforce in 2005.  Staff resources devoted to compliance increased by 160% between 2002 and 2005.

So Where is the Dis-Connect?

So if enough money is being spent by some banks, by example in Miami, and this expenditure is even potentially impacting earnings in some regions such as Miami, (as an industry – small institutions are being clobbered compared to their larger brethren), then why are some banks and other financial service providers employees failing in their implementation of AML programs in light of the expenditure?   Where is the dis-connect between expenditure and results?  Might the expenditure be more about white-washing than about achieving an educated work force?  Might throwing money at the problem not be the answer?  Or is not enough money flowing to training?

As the Miami marketplace apparently illustrates, in general the compliance and training budgets have reached the deal-breaker point at some banks and in some regions.  Thus, rather than it being a quantitative issue of bigger budgets, it is more likely a qualitatively issue, that is, spending either on poorly designed products or on good products but with poor instruction, follow-up, and support.  It may be that purchasing decisions are based not on price, but rather are based on how to spend as little labor time as possible to meet a minimum level of information and training sufficient for an employee to appear to be able to implement AML policy.  That is, institutions may be spending more to obtain less quality products because the product requires less labor activity time.

By example, some institutions send the high level AML staff for a one or two day workshop at between one and three thousand dollars and now call that staff member an expert.  A time-saving approach certainly.  But is this a reasonable approach in light of the likely outcomes of such minimal education consisting of little to no follow up, guidance, and academic support?  Can a board member, much less a regulator, feel confident that such a staff member is able to exercise the necessary skills gained from the one or two day session to protect the financial institution and public from an money laundering/financial crime incident?

By another example, some financial service provider compliance officers and their advisors will establish a library budget, purchasing a variety of publications.  Yet the staff is not trained in knowledge management for the library, that is how to interact with and study such information. Thus, the library collects dust.


Is a two day course sufficient to qualify someone as a certified expert?  A one week course even?  How long will the regulators allow such white washing to continue, or is it merely an issue of fines when holes are found in the dikes?

[1] Report on the Economic, Socio-Economic, and Regulatory Impact of the Tax Savings Directive and EU Code of Conduct for Business Taxation upon Selected Offshore Financial Centers as well as a Competitiveness Report for Selected Offshore Financial Centers (Foreign Commonwealth Office 2004).

[2] Cap Gemini Merrill Lynch World Wealth Report 2003 through 2008.

[3] Tax Haven Abuses: The Enablers, The Tools and Secrecy” (Sen. Rep., Perm. Sub-Comm. On Investigations, August 1, 2006) and World Wealth Report 2008.

[4] In 2005, however, 7 of the 31 international banks had no deposits booked in Florida, while in 2000 only 2 of the 38 had zero deposits.

[5] It is important to note that these cost estimates only include manpower or staffing costs, and do not include costs such as transaction monitoring software, possible IT investments and services, legal counsel and similar support.  The Washington Economics Group, The Economic Impacts of International Banking in Florida and Industry Survey: 2005.

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