Concealment – foundation of money laundering and corruption scandals
In 2011, the World Bank and United Nations Office on Drugs and Crime’s Stolen Asset Recovery (StAR) Initiative published a report on the identification of beneficial owners, i.e. the natural persons who are the actual owners of assets. The study analyses 150 cases of serious international corruption (‘grand corruption’). In 128 cases, companies were used to hide the proceeds of corruption. According to the report “nearly all cases of grand corruption have one thing in common. They rely on corporate vehicles – legal structures such as companies, foundations, and trusts—to conceal ownership and control of tainted assets”.
Frequently used methods of concealment include:
- Shell companies: shell companies that are set up in order to conceal the financial affairs of other companies by creating another layer for tainted assets to pass through.
- Intermediaries: people who act on behalf of other persons, i.e. who’s names are used in the official company records and documents. For example, intermediaries are listed as the shareholder or manager of a company in the place of the actual beneficial owner.
- Falsified documents: invoices or contracts, for example, give assets a legitimate veneer.
GPF SA: Geneva-based company linked to a drug money laundering network
On 10 October 2012, the French police arrested 17 individuals after seven months of investigations. They included asset managers who were suspected of having run an extensive cannabis dealing business between Morocco and France. Nearly EUR 100 million was allegedly laundered. The affair implicated employees of GPF SA, a company headquartered in Geneva, who according to the indictment of the Paris criminal court had managed approximately USD 800 million worth of undeclared assets. Part of the proceeds from the drug trade went to Moroccan businesspeople, who sought to circumvent currency controls in their country. At the same time, GPF SA customers who sought to remove their money from Switzerland to withdraw it in cash in France benefitted from the arrangement. The deal was organised by GPF SA, which demanded 10-15% in the form of commissions and exchange fees.
In 2012, former investigating judge Eva Joly commented on the affair: “It is rare for a case to demonstrate so aptly what I have been saying for 20 years: you come across the same intermediaries, whether you’re looking at money laundering, asset misappropriation, corruption or drug dealing.”
In Switzerland, the investigations run by four Geneva-based public prosecutors, including Yves Bertossa, found that 350 trusts had been used. They were registered in Panama; most were set up by the company Mossack Fonseca. “Our task was to make the assets appear legal; we were aware of their illegal provenance” explained a former GPF employee.
In 2018, the Paris criminal court brought a case against some 40 people associated with the scandal, dubbed a ‘virus’ by investigators. Two of the accused were convicted of money laundering by the French court in October 2019. For its part, GPF was closed down in March 2013.