December 11, 2017
Friday, November 4, 2016

The government is revamping the fight against money-laundering

By Pablo Waisberg
For the Herald

The UIF watchdog seeks to relax the controls on evasion and thus offer tax relief

The UIF (Unidad de Información Financiera) watchdog against money-laundering is advancing towards a policy aimed at excluding tax evasion as a crime linked to money-laundering. Law 25.246 against money-laundering, which was amended in 2011 as part of the policy designed to take Argentina off the “grey list” of the international Financial Action Task Force (GAFI in its Spanish acronym) establishes that evasion is a crime “preceding” money-laundering. In other words, that the money diverted from the payment of taxes and channelled into ghost investments can be considered to be the laundering of assets. UIF head made it clear some days ago that the body finds tax evasion “understandable” when the tax burden is high or when the state services provided to tax-payers are inefficient. In this context the state waives its active role as a plaintiff in some emblematic court cases such as the BNP Paribas, a French bank being investigated for laundering assets and capital flight to the tune of over a billion dollars.

The decision of the new UIF leadership, handpicked by the Mauricio Macri government, thus sent a clear message to the Argentines with money abroad — the controls on tax evasion (hitherto considered a criminal offence) will be relaxed. The aim of this message seems to be to seek the best possible result for its capital whitewash plan. This week the first stage of that plan concluded with some 4.5 billion dollars regularized — far removed from the 60 billion dollars which the government sought when it launched the proposal even though there are over two weeks ahead before the final deadline on November 21.

Nevertheless, the contents of Law 25.246 worry the banks operating in this country. The norm points out that these banks are responsible over a period of five years for informing about any suspicious movements of money on the part of their clients and obliges them to control all funds deposited as being consistent with their income. If this is not the case, they must inform the UIF.

The prosecution of tax evasion is not the same in every country with Argentina being one of the most advanced. “Some countries have double standards — locals cannot get away with it but foreigners come. That applies in the United States and Britain where they only ask about the activity from which the money originates but could not care less whether or not the foreigner depositing money there evaded taxation in his native country. And there are many developed countries where evasion is not the preceding crime or even a crime but rather an administrative misdemeanour,” explained the economist Juan Valerdi, professor of Macro-economics at the National University of La Plata and a former advisor of the Central Bank and UIF.

Reasonable flight

The biggest worry of the UIF, whose president Mariano Federici worked in the International Monetary Fund (IMF) and in one of the biggest law firms advising banks, is how financial institutions are going to react to legislation.

“We have a problem because international standards require that evasion be a crime preceding money-laundering. Following the last reform in 2012 based on the recommendations of GAFI, this has remained clear,” said the UIF head during a talk with students, teachers and judges organized by the Law Faculty of Belgrano University.

“This reform has led to enormous distortions in the global financial system and undesired consequences. What is being seen at a global level is the enormous difficulty banks have in finding any incompatibility between the preventive mechanisms used to fight against money-laundering and terrorist financing and with the battle against evasion. And this difficulty has led many international banks to withdraw from markets where the implementation of these norms has proved impossible in practice. Above all in the emerging regions with large underground economies,” maintained Federici, who considered it “understandable” and “reasonable” that many Argentine savers evade their taxes and take their money to countries with “safer laws or stabler currencies.”

This approach led to tension in that university hall as the co-head of the Procelac prosecutor’s unit against business crimes and money-laundering, Gabriel Pérez Barberá, quoted Stuart Green, the author of the book Lying, cheating and stealing, as pointing out that tax evasion was linked to fraud.

“Not paying taxes is cheating. But deceit and fraud are not the same morally. You can cheat without deceit. Cheating implies breaking the rules governing collective and co-operative activities to gain undue advantage. That’s what happens when you don’t pay taxes,” the prosecutor said.

“But when you evade taxes, you are doing something worse because it is deceit, which is always worse than cheating,” pointed out Pérez Barberá, warning that allowing impunity for that kind of crime “greatly irritates the ordinary citizen.”

Beyond the new orientation of the UIF, most of the money in the offshore system is estimated to come from elusion — i.e. “creative accountancy” and deals with governments to pay less taxes — and tax evasion. According to Nichols Shaxon in his book Treasure islands, the president of Global Financial Integrity (GFI), Raymond Baker, calculated that two-thirds of those funds come from the commercial transactions of the multinationals across frontiers — i.e. both elusion and evasion —, while around a third comes from organized crime and three percent from corruption.”

“Drug-traffickers, terrorists and other criminals use exactly the same extra-territorial mechanisms and subterfuges deployed by corporations, financial trusts and ghost companies,” rounds out Shaxon.

In Valerdi’s eyes, “the banks today have a problem because if they allow an evader to walk in without going through the due process of “getting to know your client,” they can be prosecuted by both UIF and AFIP. This is not a problem for the multinationals but it is for those who have half a million or a million dollars and cannot explain the numbers. Or for the Macri Group, which did not want to pay the Big Four (i.e the world’s four biggest auditors) and went to Mossac Fonseca — those better advised go to the Seychelles, which is ultra-VIP.”


María Eugenia Talerico, the vice-president of the UIF and the ex-lawyer of a top HSBC banker, also ratified the change of orientation towards the prosecution of public corruption and drug-trafficking as the main crimes linked to laundering. This was not only wishful thinking — the UIF did not attend the appeals court hearing confirming the trials on charges of laundering and illicit association of the top brass of the Argentine branch of the BNP Paribas bank. All those charged worked in a clandestine office, which functioned within the same bank to “advise, expatriate, administer and repatriate the illegally obtained money of their clients,” concluded the judges.

Under the previous government, the UIF was a plaintiff in this case investigating the flight of around a billion dollars between 2000 and 2007 but Federici sent no lawyers to the hearing at its decisive stage, thus opening the door to the trial of 14 top bankers. The probe involves former national officials, judges and businessmen who used the services permitting capital flight. UIF’s press department told this writer that it could not provide an opinion or information of any kind on the judicial proceedings nor on the watchdog’s role

“The hearing was important because the defence appealed against the trial at the first instance when both sides were supposed to present their arguments. The new defence lawyers went, as did we prosecutors and also the lawyers of the Central Bank, which is a co-plaintiff alongside UIF, and we all presented our arguments.After hearing them all out, the appeals court confirmed the indictments,” explained the prosecutor general Carlos Gonella.

The new UIF orientation, which unfolded in the midst of the Panamá Papers scandal, is being finalized by meetings with the Inter-American Development Bank (BID). There they are thus working on a new framework of norms which tries to make the changing policies and the pro-market vision of the new Argentine government more compatible with national legislation and with the international agreements reached within the framework of GAFI, where BID also participates.


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