SECRET MONEY

A PLAGUE ON OUR HOUSES

In 2004, when Heinrich Kieber told a criminal psychologist that he, “no longer held the keys to the kingdom of Liechtenstein”. Kieber wasn’t telling the whole truth.

Liechtenstein is one of the world’s leading centres of shadowy private banking services to the wealthy. The others are Switzerland, Monaco, Israel (secret if you are not Jewish), Singapore and Dubai. Kieber was the most significant defector and whistleblower from the world of secret banking in the last 65 years. 

Kieber’s  ‘declaration’ that he had returned all of the confidential client data he had stolen in 2002 from LGT Group, the financial fortress owned by the Liechtenstein royal family  was in fact not true at all.

At the time, we all trusted him,” said Wolfgang Mueller, his lawyer in Vaduz, the capital of Liechtenstein. Muller’s fees at the time ironically and in a bizarre twist of events were paid by LGT.  

The bank and a few thousand very wealthy individuals in Europe and the United States were very worried. And they had good reason to be so.

KLIEBER’S AND OTHER REVELATIONS

Income tax and generally tax evasion is a criminal offence in Europe and the United States punishable with a jail sentence and confiscation of untaxed assets.

Kieber, who has been in hiding with a new identity has also possibly undergone cosmetic surgery to conceal his physical identity. He is known to have sold copies of the data he downloaded at the bank to several foreign governments. It does not stop there. Kieber is also wanted by Interpol.

Kieber a former data entry clerk at LGT, not a very highly rated position in the bank precipitated one of the biggest banking scandals in years.

Nearly a dozen global tax authorities, including the United States Internal Revenue Service are now using Kieber’s treasure trove to ramp up their scrutiny of former LGT clients. Kieber is not alone.

In 2008 Credit Suisse handed over to US authorities over 2000 names of account holders at their bank whose accounts may have violated US laws. In 2013 the Hong Kong and Shanghai Banking Corporation (HSBC) revealed to US IRS (Internal Revenue Service) the identities of several suspected money launderers from Mexico, Columbia and the US who had laundered tens of billions of dollars through their bank over the past decade.

For its early admission HSBC was fined over US$1.9 billion.

More recently French bank BNP Paribas agreed to pay US$8.9 billion in fines for unlawfully laundering Iranian oil money in breach of a US embargo on Iran. Germany’s Commerzebank is likely to have to cough up over $500 million US dollars for the same offence. Each of the major European banks have histories of concealing and salting away illegally obtained money from politicians in the developing world.

The cross trading of PETRONAS oil from its vast and diverse oil assets worldwide, supplying  to customers of Iranian oil in Europe and in Asia is being investigated by US authorities for breaches of the Iran embargo. Nothing concrete of the investigation has yet yielded a prosecution in the case of PETRONAS.

What has to be said about the PETRONAS case is this. Whilst it is without doubt a 90% Bumiputera dominated and run institution the benefits of cross trading of its oil  and the profits from those activities are going to investment banks in Europe, Singapore, and China. And the operatives in this business apart from a handful of elite foreign trained and educated Bumiputeras in PETRONAS’S case are mainly Chinese in Malaysia and Singapore.

WHO AMONGST IS WITHOUT GUILT?

In 2010 another informant, believed to be a German intelligence operative, breached banking secrecy again provided an American TV network with information relating to private accounts held in Singapore by government officials, industrialists and high profile personalities from places as far away as Australia and New Zealand and as close to Singapore as Malaysia. is.  Europe was his primary target though. The rest of his information was collateral damage to his cause.

But the Kieber affair is not just peeling back layers of banking secrecy and exposing a tiny Alpine country blacklisted by the Organization for Economic Cooperation and Development (OECD) for being a money-laundering haven.

His revelations have had far reaching effects in governments far and wide. It has rattled the cages of a range of institutions from the Vatican to the US senate and more relevantly in places such as Malaysia.

SOURCES AND APPLICATION OF FUNDS

The data from Kieber and the more recent revelations by other foreign banks forced by US authorities to hand over information has revealed a wide range of illegal depositors from an equally wide range of countries.

There are Princes, Kings from Europe, Sultans, royalty in general in the Malay states, churches, NGO’s and their executives issuing false invoices to their organizations or paying off the local media. A Scandinavian princess and the wife of Spain’s recently crowned King are but two examples of Royalty engaged in criminal activities using secret banking accounts. 

More interesting in this cache of information obtained from Kieber and others recently is the revelation of the sources of money and its links to political and clandestine organizations in places like Malaysia, Afghanistan, Syria, Tunisia, Hong Kong, Pakistan, Egypt and Thailand.

The relevance of  the discovery of these sources of funds and their political purposes was not apparent till the uprisings in Thailand, Egypt, Tunisia and Malaysia reached their peak and local agencies attempting to trace the origins of funding for these “springs” began running into a common source, where previous inquiries ran into ‘brick walls’. It was the ICCI Bank all over again.

The resignation of the last Pope Benedict the XVI threw up more information about the uses of secret money passing through these banks to organizations in places such as Malaysia in furtherance of ultra right wing activities by their ultra right wing think tanks set up during Pope John Paul the II’s time.

The widening investigations which had earlier threatened to bring to light more LGT client names, according to a person briefed on the matter came to a halt in 2012. It has now come back to life with the discovery of new identities arising out of US investigations into circumvention of the Iran embargo by banks.

Kieber’s treasure trove, which he sold secretly to authorities in Germany, Britain and the United States, details billions of dollars in tax evasion by 1,400 LGT clients, 150 of them American, according to officials who have seen the documents.

Malaysia interestingly did not seek to access any of the information from Kieber’s treasure trove. Of the remaining 1250 in Kieber’s list at least 60 are known to be Malaysians. High profile Malaysians whom people would least expect to be violators of tax laws and laws against money laundering.

The Kieber data cache, the subsequent German intelligence coup and the Swiss hand over to the US of secret banking information is conveniently avoidable issue for Malaysia.

MALAYSIA AND THE TIP OF A VERY LARGE ICEBERG

In general countries like Malaysia do not go after tax dodgers abroad. The situation with this revelation by Kieber’s conduct changes that perception that Malaysia’s tax dodgers and clandestine money (Black money) industry is an  unsophisticated one.

In February of 2005 German tax authorities raided the home of Klaus Zumwinkel, a corporate pillar who is the former chief of Germany’s postal system based on Kieber’s information.

Not long afterwards Kieber was filmed, face blocked out by investigators for a United States Senate subcommittee in which he described LGT’s inner workings and disclosed other global clients, including an unnamed “head of a social government department” in “a third world country” with $5 million in income from unexplained sources.  What the redacted information did not reveal was that this was merely the tip of a very large ice berg.

There was in fact much more of unaccounted for wealth from the third world. The money of former Indonesian minister for petroleum under Suharto, Ibnu Sutowo which passed through LGT disguised as a trust of a foundation which his and Suharto’s families controlled. And their booty ran into billions of dollars.

Malaysia’s PETRONAS did not appear in the Kieber data although there is widely held suspicion from later revelations that kick backs flowed into Swiss, Dubai and Singapore accounts for contracts traceable to PETRONAS from the 1990’s. These are believed to have been discovered in other records if not discoverable.

CORRUPT EUROPEAN GOVERNMENTS AS BAD AS THOSE OF ASIA

Several other government officials and ministers in these so called “third world” countries had deposited tens of millions of dollars in private secret accounts.

Subsequent information emerging from later revelations would provide the impetus for anti corruption and pro compliance  audits capable of implicating heads of European and Asian governments and the multi lateral organizations in the west that sprout NGO’s as an arm to their political activities in donour states.

Many of those in Europe implicated in bribery scandals and secret commissions took secret commissions from recipient countries for the aid given to them. These commissions were stashed in secret accounts in the LGT or Switzerland.

Very few European countries, Australia or the US are not guilty of the foreign aid kickback scams. Australia’s government is still reeling from disclosures they bribed Saddam Hussein in the food for oil scams.

Money sources ranged from disaster relief donations, foreign aid and money for political causes paid for by countries like the US, France, the UK and other developed nations funding regime change in smaller countries.

OH HOW THE MIGHTY FALL

The recent arrest and charging by French police of former French Prime Minister Nikolas Sarkoszy whose government decorated Malaysia’s Bersih leader, is the target of a wider investigation that began with Kieber’s whistleblowing and grown into a monster of intrigue and political bastardry. There is more to come on the Sarkoszy affair.

Malaysian industrialists, Churches, NGO executives, Sultans, heads of several funds (including a large Islamic religious statutory benevolent fund) and members of parliament including prominent members of the opposition in Malaysia have all been stashing away money obtained illegally and placed in secret foreign accounts. Most of it not settling in Lichtenstein.

The arrest of two Cardinals of the Vatican on similar money laundering offences by the Italian and French authorities is also believed to have its origins in the Kieber revelations even though it occurred over a decade ago.

THE TENGKU ABDUL RAHMAN – “MR. CLEAN” THE MYTH

In Malaysia the Tengku the much revered “Mr. Clean” of Malaysian politics appears to have been the most corrupt of them all. He had 4 wives. One an English woman, two Chinese women and a Malay wife who was nothing more than a part of his accessories and a dress up if there ever was one to satisfy his Malay Muslim credentials. These were, Meriam Chong, Violet Coulson (his landlady in England and a former Special Branch UK operative), Sharifah Rodziah Alwi Barakbah and another Chinese but unnamed woman (for legal reasons).

A prominent Chinese banker in Malaysia at the time laundered all of the Tengku’s 10% of almost every deal that was awarded by the public sector. Tengku for his part had a relatively small Swiss account. Most of his fortunes were kept behind proxies in Singapore banks. It is known that when the Tengku was cultivated by the CIA having already been secured by British Intelligence and set up by them, he was plied with women, money and property in exchange for his services to the organization. 

One of his roles, created for him by the CIA was to help set up the Organization of Islamic Conference in 1969. Corrupt as he was he was seen as a better less controversial Muslim leader (wine women and song) and a more malleable one at that for the CIA to manipulate. And manipulate him they did with little effort.

The Tengku would also be supported by Washington to help set up the Islamic Development Bank which acted as a personal piggy bank not to him alone but also to a large number of Malaysian Chinese and at least 3 known British businesses to which he channeled Islamic Development Bank monies. This was the quid pro quo for his compliance with the CIA’s agenda for him.

In 1960, when he was still the Prime Minister, the Tengku declared Islam the official religion of Malaysia and established the Islamic Welfare Organization (PERKIM) as a guiding body for Muslim converts. He became president of PERKIM and served until a year before his death.

As President of PERKIM, he  channeled money from PERKIM and other sources through PERKIM to mainly Chinese businessmen who converted to Islam for convenience. One of these is believed to have been the late Lim Goh Tong of Genting Highlands fame. 

PERKIM also received funding for its activities from the Saudi and other pro western Muslim governments for a different purpose. But who was checking? It was a convenient ruse by a corrupt political elite in Malaysia then who continue to claim the Tengku was Mr. Clean.

A number of Malaysian cabinet ministers over the years including a prominent member of a royal family who had fallen out of favour with the Mahathir government had also amassed a sizeable fortune courtesy of an English private bank and his Hong Kong connections. Much of it unaccounted for wealth.

There are others in opposition prominent and those within government who are as dirty as they come with public money. And if the government were truly serious about putting an end to corruption all they need do is to ask. Money channeled out of government coffers during the time of Anwar’s stewardship of the ministry of  finance is staggering.

It is difficult in the circumstances if not impossible to believe that as responsible minister in that portfolio Anwar Ibrahim had no knowledge of the plunder of state coffers and the corruption within particularly the insurance and banking sectors then.

Nothing remains hidden forever.

HOW SECRET BANKING WORKS

What is not known by those who siphon money from places like Malaysia to deposit it in foreign secret accounts via Singapore is that the process which works like this leaves behind a trail.

Initially a fee for setting up the account is charged to the client. Setting up the account say, at the Union Bank of Switzerland Singapore branch, necessarily involves the use of a shelf company first (Shelf company 1). It is used to deposit the money of the client in the Singapore branch of a foreign bank like the UBS. The depositor is the first shelf company. Its directors all nominees provided by lawyers and the UBS.

At the next step the Singapore Bank like the UBS (for example alone) then wires that money on the instructions of the client (that shelf company 1) to a third country (Bahamas or Lichtenstein countries with similar banking secrecy legislation) where it arrives and is deposited in the name of another shelf company (Shelf company 2) created in the Bahamas for the purpose with nominee directors again provided by the bank in Bahamas. The Shelf company  1 is now deregistered in Singapore. No trace now of the original depositor or that transaction (well…… to a point).

The money is then passed through another bank like the LGT group bank in another secrecy banking country from the Bahamas.  The Shelf company 2 and the account is now closed in the Bahamas after the money is transferred from the Bahamas to the LGT in Liechtenstein. Here Shelf company 3 is waiting to receive the funds. Again its directors are provided by the bank all nominees. 

In its final stage the money from Shelf company 3 is then wired back to Singapore into a numbered account from Liechtenstein into a Singapore bank which only the client and certain bank officers know the details of. The entire transaction can take an hour to accomplish. The account in the LGT is not closed.  It is where the money now remains.

The Singapore account is nothing but a reflection of what Liechtenstein’s LGT keeps in its secret books accessible by the client and the responsible officer known only to the client. Singapore has no jurisdiction over the money unless the bank is a Singaporean bank. 

DIRTY MONEY FROM MALAYSIA

A prominent Malaysian entrepreneur with connections to franchising businesses and sports is known to have been identified by another whistleblower this time in Switzerland and not by Kieber. His money is believed to have been passed through several transactions originating in KL via Singapore then returning to Malaysia via Singapore as loans and profits to his companies and his personal wealth.

Several of Royalty, Sultans and their connections including members of parliament  in Malaysia connected to them have also been identified as holders of secret numbered accounts going through Liechtenstein and Switzerland to Singapore and Dubai. These accounts comprise “commissions” paid for influencing deals and at least two are known to have receive money this way for providing Knighthoods (Datukships).

No one in Malaysia has been yet been charged or investigated as far as we know for money laundering through numbered foreign accounts o this day. The Bank Bumiputera scandal in Hong Kong in the early 1980’s did leave a trail which did not go quite cold as believed to be by the key players in that scandal. George Tan and his friends did open their mouths to avoid prosecution by US authorities in Oakland California and in other places.

That information was subsequently passed on to third parties and more importantly and in breach of client confidentiality stored by accountants in the employ of two of the large accounting firms of the time. That information has been sighted by one of the authors.

Money in commissions originating from transactions involving Malaysia’s national Airline MAS is believed to have gone through Swiss, Singaporean, Dubai and Liechtenstein banks to conceal commissions between 1995 and 2009. The recipient and payee were German nationals and a Chinese Malaysian national. 

Nothing about the controversial French submarine deal so widely touted by NGO’s has surfaced thus far.

Neither side of government in Malaysia is keen to pursue the issue of foreign accounts and tax evasion of this sort because Malaysia’s legislation is weak in this respect.

The KL turf club, two of the largest accounting firms in Malaysia and several large law firms have also been identified as being conduits for the rich and well connected having sent money abroad on their behalf and under the radar so to speak.

Most large Malaysian companies are known to use foreign banks in secret banking domains as Switzerland, Lichtenstein, Dubai and Singapore in this regard to effect transfer pricing of their goods and services. Transfer pricing is a practice whereby skimming off the top any profits rightfully belonging to their customers  via accounting means and third party intermediaries not at arms length.

A reason proffered for the lack of prosecution or investigation into compliance issues in the corporate sector in Malaysia is that the vast majority of Malaysians companies even the listed ones have been historically treated by their majority shareholders as virtual personal piggy banks. 

There has been little or no shareholder activism to check the excesses of corporate boards and management and the legal fraternity lack the will the skills sets or the capacity to tackle such problems. In many cases they are complicit in the commission of these offences. The practice has become so rampant that the regulator is not interested or  willing to investigate what is now customary practice there.

Mario D’Marco, David Capella and Stella Chan each contributed to this article

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