Part 1 - AL-Tax

International Taxation Handbookwill often leave behind a paper trail (prime examples are wire transfers, traveldocuments, and offshore credit card records), a trail that will follow them manyyears after the activities that generated the proceeds that were laundered. Inmany instances, the actual steps involved in money laundering are not illegal ofthemselves (Savla, 2001). For example, it is not illegal to own an offshore bankaccount or be the proprietor of an offshore corporation. What is illegal is the useof those otherwise legitimate steps to conceal the criminal origins of the proceeds.The use of money-laundering schemes to conceal legitimate financial gainsfrom taxation liability may also result in criminal liability.13.6 Tightly closed eyesThere is also an increasing onus on bankers, brokers, and other providers of thekey financial services employed in money-laundering schemes to ‘know theircustomers’ and to report any suspicious account activity or unusual transactions.For example, the largest providers of private banking services worldwide haveadopted a set of guidelines – the Wolfsberg Principles – requiring customer identification,identification of all beneficial owners of accounts, due diligence to beperformed in relation to high-risk customers and their families and close associates,and the monitoring of account activity (FATF, 2002). Willful blindness –where, for example, a banker ignores the fact that a customer has made frequent cashdeposits or purchases of bank drafts within a very short period of time in amountsjust under the disclosable threshold – is thus no longer a shield to liability for assistingor conspiring with money launderers (Savla, 2001).13.7 The ‘John Doe’ methodThe US Internal Revenue Service has, as noted above, been able to obtain ‘John Doe’orders to go effectively on ‘fishing expeditions’ to obtain personal information fromthe major credit card organizations (American Express, MasterCard, and Visa) concerningthe holders of credit cards that have been issued by offshore banks. As aresult, credit card issuers in over 30 tax havens (including the Bahamas, the CaymanIslands, Guernsey, the Isle of Man, Jersey, and the Netherland Antilles) have beenforced to divulge transaction information and customer details relating to US residentsholding credit cards issued by them. The use of these credit cards to purchasegoods and services necessarily creates a paper trail of payment records that can betraced back via the credit card organization to the individual cardholder.320