How to hide your wealth 101Posted: May 25, 2012
There is nothing more damaging for public officials than to have their secret and hard-to-explain assets exposed to the public. You’d think that they would have learned by now. And yet…
In the past weeks, I have been following from afar the travails of Renato Corona, the chief justice of the Philippine Supreme Court. Corona is in the midst of an impeachment trial and was found to have deposited millions of dollars in undisclosed bank accounts. As chief justice he should have known: Bank secrecy is not inviolable. As regulators worldwide crack down on money laundering and compel banks to be more accountable for their depositors, full secrecy is no longer guaranteed.
So here’s some unsolicited advice to those in public office: Be careful where you put your money. Be discreet about acquiring assets. Don’t be sloppy when you hide your wealth. Otherwise you’ll prove true what I’ve suspected all along: only the uninitiated and indiscreet get caught.
Here are some tips:
1. Avoid using your name. If you can’t explain where your money came from, don’t open a bank account in your own, very public name. You can use a relative or trusted associate as a front. Ideally, that person should be able to explain where the money came from and must have independent sources of wealth, in case he or she comes under scrutiny. But be careful whom you choose – you don’t want someone else running away with your money.
You can also open a bank account under a false name. Banking regulations prohibit this, but the rules can be bent if you own the bank or are good friends with the owners. Still this is risky and not to be recommended. Remember that former president Joseph Estrada used a fake name to open an account. He didn’t get away with that for very long because vice president of the bank herself ‘fessed up to this during his impeachment trial. So don’t trust banks or bankers. They’ll spill the beans on you if they have to.
2. Don’t deposit hard-to-explain cash in your own country. If you’re in public office, you are vulnerable to investigations instigated by journalists, activists or political rivals, even if you are, as we know now, chief justice of the Supreme Court. Most countries in the world now have anti-money laundering laws that allow bank secrecy to be waived as part of a criminal or corruption investigation. Putting bank deposits in another country mitigates the risks. This doesn’t mean local courts can’t subpoena your overseas bank records, but it’s a much more complicated process. They’d need to show evidence that the bank account was integral to the commission of a crime, and banks most anywhere in the world are often very reluctant to surrender records. It took years before Swiss banks froze the Marcos accounts, despite numerous cases and public pressure. By then Marcos was dead, and Imelda, acquitted in a New York court.
3. Use offshore trusts and companies. Learn from Russian and Chinese officials, Eastern European mafia bosses and Mexican drug lords. If none of them can give you advice, Google “asset protection” or the more direct “how to hide your wealth.” You’ll find law firms and independent wealth advisors who will set up an offshore company for you within hours for under $5,000. Many offshore jurisdictions do not require disclosure, so your identity is protected, unless of course you name the offshore company after yourself.
You can then invest your cash anywhere in the world – buy a Manhattan apartment or open a brokerage account in Singapore – using an offshore company’s name, not yours. One problem is how to get your money out of the country without leaving a banking trail. I suggest you get one of the Philippine senators to advise you on this. But I do not suggest having your wife carry out stacks of cash in suitcases. The wife and sons of Maj. Gen. Carlos Garcia, the Philippine army’s longtime comptroller, tried to do this and were stopped by U.S. Customs. Now he’s in jail on plunder charges.
4. Use multiple jurisdictions, layered companies and fake loans. This is how the a deputy prime minister of Russia did it, apparently without violating Russian law: He made his wife the sole shareholder of a company in the Bahamas, which was the main shareholder of another company in the British Virgin Islands, which was in turn owned by another BVI company. A Russian billionaire then deposited $50 million in the deputy prime minister’s Bahamanian company, which then lent it back to the Russian billionaire’s company as an investment. The deputy prime minister subsequently generated a 40-percent annualized return from that “loan.” Read all about it in this Barron’s piece. And this story by the Organized Crime and Corruption Reporting Project describes how a Romanian offshore master advises clients to “triangulate” their holdings in several countries.
5. Buy gold. This is not hard to do in the Philippines. Get someone in Chinatown or Diwalwal to help but be very discreet. Pay for all the transactions in cash and hide the bars under your bed. Prices are low at the moment because of the market jitters over Greece. But it’s still good as a long-term investment. In fact, now may be a good time to buy. Gold is considered a safe asset. Resist the temptation to engrave your name on the bars.