One particular financial pattern which you need to be aware of, especially because it excites bankers, regulators and bureaucrats is the rapid transfer of money through accounts.
Under the guidance of the FATF, today's bankers are going out of their way to detect and report transactions that -- they would claim -- serve no other purpose but to move funds away from origin.
A substantial percentage of banks go as far as to bluntly warn new clients that so-called "pass-through bank accounts" -- that is accounts used for frequent inward remittances that are swiftly followed by outward payments -- are held to be "suspicious" and are not encouraged.
Why all the commotion? Apparently because such account activity indicates layering, a procedure by which criminals seek to disperse funds. Not surprisingly, suspected layering is responsible for a sizable portion of the STRs (Suspicious Transaction Reports) being filed with regulators and tax authorities.
But like most things in the upside-down world created by the new financial police, things are often not what they seem. Perhaps they have another agenda? Keeping your money in sight
Rapid movements of funds are one of the most unsettling aspects of the global economy for the high-tax regimes which may wish to your assets in sight.
Tax-hungry administrations naturally benefit if funds remain within reach and are not wired through multiple jurisdictions. Creating obstacles -- whether real or perceived -- for any funds in transit is an effective deterrent against capital flight.
In the new climate of paranoia, even funds that make it out of the bureaucrat's reach often end up within his sight, as bankers often feel compelled to file an STR that notes the money's destination.
Of course, if your banker detects a pattern of frequent money transfers destined for offshore tax havens, it's no longer a matter of just "feeling compelled to report" -- it's pretty much a certainty. Then the client (You) is denied his/her right to financial privacy. The onshore administration avoids the cost and effort of legally gaining access to offshore bank records through overseas courts. The offshore jurisdiction, on the other hand, avoids damaging publicity as the whole process is clandestine.
It is worth noting that Suspicious Transaction Reports can be shared amongst governments -- Brussels-based Egmont Group even has a network of FIUs (Financial Intelligence Units) for this purpose.
Bankers don't mind. In fact Bankers have seen good business sense in siding with the bureaucrat on the issue of money transfers. Naturally, they would much rather have customers who leave funds on deposit -- ideally in long-term money instruments such as Certificates of Deposit or bonds -- than be used as a staging post with some other bank being the final beneficiary.
Should the hassle and propaganda alone fail to convince you to leave your money where it is, there is a yet more sinister tactic that can turn "money in transit" into a source of compensation for unhappy banks weighed down with the administrative costs of spying on their clients. They can simply refuse to act on your transfer orders, citing "suspect" purpose of the transaction as the reason.
Bankers are well aware that any "suspect" funds they care to freeze will usually remain on deposit with them for a considerable amount of time -- legal battles can be lengthy. And remember: they have no reason not to take their chances. According to the FATF guidelines, "Financial institutions ... should be protected ... from criminal or civil liability ... even if they did not know precisely what the underlying criminal activity was, and regardless of whether illegal activity actually occurred."
It has been noticed that some of those banks who have so far refused to adopt policies designed to discourage effective transfers of funds are choosing to profit in another way: they have substantially increased fees for their range of wire transfer services -- some even charge a percentage of the amounts being transferred.
While it pays to be cautious when dealing with those banking institutions that are known to have internal policies of closing accounts without warning or freezing assets at every possible opportunity, it must be remembered that frequent incoming/outgoing transactions are in reality quite usual in everyday commerce. Providing your banker with a proper explanation is essential, however.
Those with a previous history of such account activity, such as established offshore trading corporations or transfer pricing companies, are typically exempt from intrusive questioning by their bankers. Consequently, they are finding a new source of profit as sophisticated privacy seekers turn to them for help with discreetly placing their funds offshore.
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