Bank Secrecy
| Pages | 113-116 |
| Date | 01 April 2000 |
| DOI | https://doi.org/10.1108/eb025973 |
| Published date | 01 April 2000 |
| Subject Matter | Accounting & finance |
Bank Secrecy
Keynote address given by the Hon. Ramesh Lawrence Maharaj, SC, MP, Attorney
General of the Republic of Trinidad and Tobago at the 17th International Symposium on
Economic Crime
Journal of Financial Crime — Vol. 8 No. 2 — Analysis
Bank secrecy and how it facilitates multiple oppor-
tunities for money laundering and various other
criminal activities arc matters in which governments
must be interested. These matters have recently been
the subject of a study carried out on behalf of the
United Nations entitled Financial Havens, Banking
Secrecy and Money Laundering. The study concluded
that criminal organisations arc making wide use of
the opportunities offered by financial havens and
offshore centres to launder criminal assets, thereby
creating roadblocks to criminal investigations.
The report goes on to state that financial
havens offer an extensive array of facilities for the
foreign investor who is unwilling to disclose the
origin of his assets. It highlights the difficulties
which law enforcement agencies have, because
financial havens enforce very strict secrecy rules,
effectively shielding foreign investors from
investigations and prosecutions in their home
country.
The report shows that although bank secrecy and
financial havens are separate issues, they both have
legitimate purposes and commercial justification.
However, without adequate regulation, they both
offer unlimited protection to criminals. The
report also makes it clear that the indiscriminate
enforcement of bank secrecy laws as well as the
rapid development of financial havens constitute
serious obstacles to criminal investigations and jeo-
pardise efforts undertaken by the international
community since the adoption of the UN Con-
vention Against Illicit Traffic in Narcotics, Drugs
and Psychotropic Substances 1988, which first
required the establishment of money laundering
as a criminal offence.
Since then, there has been a trend towards enacting
money-laundering laws that regulate banking and
financial secrecy in appropriate circumstances. But
bank secrecy continues to remain an impediment to
criminal investigations in many jurisdictions. In
addition, international criminal activity has increased
in the wake of globalisation and the advancement
of technology and communication. New money-
laundering methods have been identified and there
has been an increased use of professions, including
lawyers, corporate registration agencies and certain
types of trust.
More than a third of the world's wealth, approxi-
mately USS5trn, is held through offshore financial
centres. A recent UN report stated that the annual
turnover from the international trade in illicit drug
business alone is estimated at USS400bn. If to this is
added the proceeds from other transnational orga-
nised crimes, such as financial fraud and prostitution,
the amount flowing into the criminals' pockets each
year is even larger.
The statistics arc alarming. In 1996 the Interna-
tional Monetary Fund estimated the gross criminal
product at perhaps USS500bn. The crooked cash
already invested in financial and other assets must
be greater than USS500bn.
Money laundering destabilises civil society, under-
mines the rule of law and poses serious threats to the
economics of nations. Bank secrecy has enabled
corrupt politicians and public officials to deplete
and hoard national patrimonies for their own use.
They have, by the use of numbered accounts and
other disguised devices, concealed from their peoples
and the international community the source of their
ill-gotten gains.
Bank secrecy in onshore and offshore financial
services permits dirty money to be laundered
into legitimate financial systems. It permits the
fuelling of criminal activities which include drug
trafficking, arms smuggling and financial fraud.
Add to that corruption, alien and contraband
smuggling, extortion, counterfeiting and intellec-
tual property theft, and the gravity of the problem
becomes apparent. Bank secrecy in the name of
protecting privacy rights and interests is protecting
criminals engaged in regional and international
criminal activities from legal accountability for
their actions.
The duty of banks to maintain confidentiality and
secrecy in respect of customer transactions has never
been absolute. It is a qualified right. The rule exists
subject to public interest considerations. The two
exceptions that arc relevant here arc:
Journal of Financial Crime
Vol.
8,
No.
2,
2000.
pp.
113-116
© Henry Stewart Publications
ISSN 0969-6458
Page 113
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