Phyllis Atkinson
Senior Advisor, Asset Recovery
Phyllis Atkinson is a Senior Advisor, Asset Recovery for the training team of the International Centre for Asset Recovery (ICAR), having served as Head of Training ICAR from 2010 to June 2023. In this role, she was responsible for providing technical assistance to developing and transition countries through the design, development and delivery of interactive, practical and participant-based training workshops on anti-corruption, anti-money laundering, financial investigations and asset recovery.
Based in Cape Town, South Africa, Phyllis has been an Advocate of the High Court in South Africa since 1981. Prior to joining the ICAR on 1 June 2009, Phyllis was employed at the Deloitte Forensic & Dispute Services office in Cape Town, South Africa where she held the position of Principal. She played a national role in the Forensic Team, driving growth in cross-border services, including anti-money laundering and anti-corruption training initiatives, amongst others. Whilst with Deloitte, Phyllis also played the lead role in a USAID-funded project spanning 8 months involving the establishment of a Financial Intelligence Unit (FIU) in Tanzania during 2008, to investigate or report cases of suspicious or unusual financial transactions.
Before joining Deloitte in July 2004, Phyllis held the position of Deputy Director of Public Prosecutions at the Directorate of Special Operations (DSO) – also known as the Scorpions – in South Africa. Phyllis spent 23 years as a Public Prosecutor, 5 years of which were served as an advocate in the former Office of the Attorney General (now known as the Director of Public Prosecutions) and 12 years with the Office for Serious Economic Offences (OSEO), later merged with the Scorpions. She was the first woman to join the ranks of the professional staff in the Office of the Attorney General in 1987 after a period of 14 years without women in such positions.
Phyllis, a former Certified Fraud Examiner, has been involved in numerous high profile commercial crime investigations and prosecutions over the years. Her expert knowledge of and extensive experience in the field of international mutual legal assistance has strengthened her network with foreign jurisdictions such as the United Kingdom Central Authority, the Attorney General of the Isle of Man and the Federal Department of Justice and Police, Switzerland. She has been actively involved in training for many years, and a guest speaker at a number of conferences on a broad range of topics including anti-money laundering, mutual legal assistance, investigative methodology and interviewing skills.
Publications
Quick Guide 22: Analysing a suspect’s financial affairs in a corruption case
This quick guide explains how investigators and prosecutors can use Source and Application of Funds analysis to inform corruption and money laundering investigations and prosecutions and to generate evidence for use in court.
The method enables anti-corruption officers to build financial profiles of suspects by systematically calculating the amount of money that the suspect has accumulated and spent during a particular period, compared to their legal and known income.
It is authored by the Training team of the International Centre for Asset Recovery, which trains law anti-corruption officers around the world in the use of Source and Application of Funds analysis as part of financial investigations and criminal proceedings for corruption and money laundering offences.
The Basel Institute also provides a free eLearning course on Source and Application of Funds analysis and has published a technical guidance document on the method with specific application to illicit enrichment cases.
About this Quick Guide
This work is licensed under a Creative Commons Attribution-NonCommercial-NoDerivatives 4.0 International License. It is part of the Basel Institute on Governance Quick Guide series, ISSN 2673-5229.
Quick Guide 19: Offshore structures and beneficial ownership
This quick guide by Phyllis Atkinson looks at how criminals manipulate and misuse corporate vehicles in offshore jurisdictions to launder money. It focuses on the meaning of “corporate vehicle” and “offshore” and other related concepts such as beneficial ownership. It also gives an example of how a trust, which is one common type of corporate vehicle in the vast “offshore ecosystem”, can be used for illicit purposes.
About this Quick Guide
This work is licensed under a Creative Commons Attribution-NonCommercial-NoDerivatives 4.0 International License. It is part of the Basel Institute on Governance Quick Guide series, ISSN 2673-5229.
Quick Guide 6: Effective training on financial investigations
Sophisticated and complex financial crimes span the globe. “Following the trail of the money” can involve many jurisdictions, each with their own laws and practices, and varying capacity or willingness to cooperate internationally.
Fighting corruption and money laundering, and recovering criminal proceeds, are therefore complex challenges. Specialised legal, financial accounting, analytical and investigation skills are essential.
Phyllis Atkinson, Head of Training at the Basel Institute’s International Centre for Asset Recovery (ICAR), explains ICAR’s unique training approach – and how it helps investigators, prosecutors, members of the judiciary and Financial Intelligence Units in partner countries gain these investigative skills quickly and effectively.
This work is licensed under a Creative Commons Attribution-NonCommercial-NoDerivatives 4.0 International License. It is part of the Basel Institute on Governance Quick Guide series, ISSN 2673-5229.
News and blog
A personal history of ICAR training – Q&A with Phyllis Atkinson
Phyllis Atkinson has led the training team of our International Centre for Asset Recovery ICAR since 2010, having joined ICAR in 2009. The team’s work is essential to ICAR’s mission to support partner countries in developing their capabilities to investigate corruption and recover stolen assets. The training programmes are widely acknowledged as unique in their methodology, which emphasises collaborative learning and involves simulated investigations tailored to local contexts. Phyllis has herself trained over 4,000 investigators, prosecutors, judges and others in more than 40 countries, often travelling more than six months of each year. As she prepares to hand over the reins to her long-standing colleague Thierry Ravalomanda in July, she reflects on the evolution and impact of ICAR training over the years. How did it all begin? For me, it began in 2008 while I was working for Deloitte Forensic & Disputes Services in Cape Town as a forensic specialist investigating white-collar crime and participating in anti-fraud and corruption training initiatives. Daniel Thelesklaf and Tom Lasich, then at the Basel Institute and its newly established ICAR, supported a training initiative on a project I was supervising in Tanzania. As a former prosecutor and investigator in South Africa for 23 years, focusing on economic crime for much of the time, I was immediately struck by the uniqueness of their training approach. I could see its potential to make a difference in developing and transition countries. I joined ICAR in 2009 as a Senior Asset Recovery Specialist, succeeding Tom Lasich as Head of Training in 2010. I can only describe Tom as the mastermind behind the ICAR training methodology. He has been an experienced and trusted mentor, advisor and friend throughout the years. The Basel Institute’s Managing Directors, Daniel Thelesklaf and later Gretta Fenner, have also played a pivotal role in nurturing our training offer as our Institute and asset recovery work expanded. What makes the approach unique and successful? Of all the many things that make our training unique, I want to highlight that we don’t offer an “off-the-shelf” product. Rather, both the theory and the extensive practical exercise – a simulated investigation – are customised to the specific needs of a country and adapted to its legal and institutional context. We achieve this by closely liaising with relevant national authorities and working onsite in the concerned country, including during the preparatory stages of a training programme. This is because we are seeking to build the technical skills of trainees in handling concrete cases within the constraints of their own legal system and proceedings. It takes time and effort to customise the training programmes. But the reward is that it results in training that is credible, tailored and relevant to participants. What role does the simulated investigation play? As I explain in my quick guide to effective training, a simulated corruption and money laundering investigation is the centrepiece of all our training programmes. Participants work together in groups to “follow the money” and gather evidence for use in court. “Learn by doing” is something I repeat and encourage over and over again. The exercise is interspersed with short sessions on theory – laws, procedural aspects, etc. – to enable them to advance to the next stage of the investigation. This not only helps participants immediately put their new skills and knowledge into practice. It also fosters peer learning and networking among participants from different agencies and institutions along the criminal justice chain. Investigators, prosecutors and analysts often need to work together in real life on corruption investigations, yet usually work in silos. Our recent training programme in Zambia is an example: the 34 participants came from eight different institutions, from law enforcement to prosecutors, the procurement authority and the Central Bank. Our regional training programmes foster similar peer learning and cooperation among counterparts across borders, aiding in and supporting international co-operation in transnational investigations. How has ICAR training evolved under your leadership? The core principles have remained, but we have developed additional modules on topics like mutual legal assistance, dealing with offshore structures such as the Common Law trust, cryptocurrencies, and most recently non-conviction based asset forfeiture. We introduced a blended learning element a few years ago. Participants take our self-paced Operational Analysis eLearning course, developed in collaboration with the Egmont Group of Financial Intelligence Units, before attending our onsite Advanced Operational Analysis training. Gaining the foundational skills in advance through eLearning maximises the amount of time participants can spend putting theory into practice in the classroom. We have also become more digital, for example providing the course materials through our Basel LEARN platform rather than paper. This has not only reduced the environmental impact of printing but also followed the welcome wave of digitalisation that has taken place globally, including in law enforcement agencies. Since the coronavirus pandemic and related restrictions on travel and meetings, we have been offering adapted versions of some of our training programmes virtually via video conferencing and the Basel LEARN platform. Our programmes feature intensive, hands-on group work and are designed to be delivered in person. However, we are open to virtual delivery whenever it makes sense. What about sustainability? Ultimately our goal is to build long-term capabilities in our partner countries. One way we do this is our train-the-trainer programme, which aims to result in four or five ICAR Certified Trainers while simultaneously training other local participants in the process. In Kosovo, where we delivered a five-part train-the-trainer programme from 2022–2023, we collaborated with the Academy of Justice and helped their staff to integrate the ICAR customised training material onto their own online platform for professional development. This will help the certified trainers to continue training their peers efficiently and independently in the future. Our remarkable in-country teams and external partners, including development agencies, international organisations and multilateral development banks, often have a continued presence in our partner countries. This also helps maintain momentum in between training programmes and make sure new skills are put into practice. Does the training really make a difference? Yes. First, there are the statistics. Alongside pre- and post-tests, we started conducting impact surveys some years ago to assess the effectiveness of our training in the short and long term. We measure whether the training led participants to: Significantly change their approach to work Use new tools or procedures Use professional contacts/networking to facilitate work Replicate learning with peers In 2022, for example, 79 percent of impact survey respondents reported a significant change to their way of working as a result of the training, including the application of new investigative tools or procedures. 93 percent of those who took our core financial investigations and asset recovery module said they had had an opportunity to apply their new knowledge and skills in their work. Over half indicated a case success or significant milestone that they could attribute to something learned during the training. Beyond statistics, I would like to point to the many wonderful people we have helped to achieve their dreams of fighting corruption effectively in their countries. Many trace their first successes back to an ICAR training course. People like Martin Chipofya, for example, a Senior Resident Magistrate in Malawi who has testified to the impact of our training on inter-agency cooperation. The multi-agency group work is “crucial for getting to know each other and understanding the challenges that our counterparts face” and a “platform for getting feedback on how our agencies are performing and how we are complementing or assisting the work of officers in other agencies,” he said. Or Phillip Kagucia, now Head of Asset Recovery at Kenya’s Ethics and Anti-Corruption Commission, who has explained how a specific financial analysis method acquired during our training led to a successful prosecution and “paved the way for the use of unexplained wealth legislation in Kenya.” Passion and commitment to drive change Of course, individually our training programmes are a small contribution to the wider fight against corruption. But as I have said for over 20 years: The biggest mistake of all is to do nothing because you can only do a little. Hence my determination to continue doing what I could to assist developing and transition countries to fight corruption and money laundering and to recover stolen assets. All those I have been lucky enough to work with and to meet over the last 14 years will doubtless attest to my passionate belief in the relevance and effectiveness of our training. That is because I see its capacity to bring about a paradigm shift in how our trainees behave in their work and how they work with each other. Achieving quality takes time and effort. I have never allowed shortcuts and never compromised on quality, because bad training is a waste of money and a waste of the participants’ time. And in the fight against corruption, I truly believe the stakes are too high. Learn more Read Phyllis Atkinson’s quick guide to effective training on financial investigations. Learn more about ICAR training programmes and download a brochure in English, French, Spanish and Portuguese.
Quick guide to analysing a suspect’s financial affairs in a corruption case
How investigators and prosecutors can use Source and Application of Funds analysis to inform corruption and money laundering investigations and prosecutions and to generate evidence for use in court. A quick guide by the Training team of the International Centre for Asset Recovery. If it looks and smells like corruption… “How could he afford that car on his salary?” “Where did she get the money to buy those expensive clothes?” “How is that public official able to stay in a luxury beachside property when he only earns enough for a small house in the suburbs?” These simple questions are often the starting point for investigations into suspected corruption, including under laws targeting unexplained wealth. Answering them, and proving in court that the money has been obtained illicitly and should therefore be subject to recovery, is a lot trickier. … that’s still not enough for a court Corruption is a particularly difficult crime to investigate and prove beyond reasonable doubt. Why? Because it usually takes place behind closed doors between two or more willing parties who are unlikely to report the matter to the police or cooperate in an investigation. These days, technologies such as digital transfers, mobile money and cryptocurrencies make it far easier for illicitly obtained money to change hands. Stolen funds disappear across borders and into secret accounts in a click. Many corrupt officials seeking to launder money also hire unscrupulous corporate service providers, accountants and lawyers. These professionals help them to create complex financial structures in offshore jurisdictions to conceal the true ownership of their assets, as explained in our quick guide to offshore structures and beneficial ownership. These factors combine to thwart the attempts of investigators to follow the trail of the money. Caught red-handed? Not often The increasing sophistication of criminals means it is rare to find direct evidence of corruption or other financial crimes, such as an eyewitness, a video or audio recording, or a bank transfer from a company to a public official who can be proved to have performed a particular corrupt action in return. Moreover, even such evidence is not conclusive. Witness accounts may be flawed, and documents, videos and audio recordings are nowadays easily forged. This is why it is vital for anti-corruption officers to be able to build financial profiles of individuals suspected of corruption and money laundering. Systematically calculating the amount of money that a suspect has accumulated and spent during a particular period, compared to their legal and known income, is a powerful means to demonstrate, or provide corroborative evidence in respect of, their illicit activity even in the absence of a smoking gun. Source and Application: a common-sense calculation One particularly effective tool for building such a financial profile of a suspect is the Source and Application analysis. It is a simple formula to calculate the difference between two figures over a specific period of time selected by the investigator and based on allegations or suspicions of corrupt activity: For example: If a suspect can be shown to have spent or accumulated $500,000 in 2020 but only had $250,000 legally available to her during this time according to official records and other relevant evidence, she has enjoyed $250,000 of unexplained income. This amount may or may not be the proceeds of corruption, but unless she can explain the source of the additional money it is strong circumstantial evidence of illicit behaviour. This financial evidence can be used in court to support a traditional corruption, fraud or money laundering case in a criminal context. In countries with illicit enrichment laws, it can also be used as direct evidence and as a basis for recovering the unexplained wealth. For more on illicit enrichment, see our open-access book and its Annex II guidance on Source and Application of Funds analysis at illicitenrichment.baselgovernance.org. Gathering the information – a valuable exercise in itself In addition to generating crucial financial evidence of illicit activity, the process of conducting a Source and Application analysis is a useful investigative tool. This is because it offers a systematic framework for investigators to gather all documentary and other relevant evidence that relates to the suspect’s use of funds vs the funds legally available to him or her during a specific period of interest. The Source and Application computation sheet in itself is not evidence per se but merely a method to organise and present financial evidence gathered during the investigation in a way that highlights or identifies illicit or unknown income. Examples of legal sources of income are salary payments, declared income from property rentals or company shareholdings, sales of assets, inheritances or loans. This category also includes the suspect’s bank balances at the start of the period, since the money contained in these accounts was available for him or her to spend. In terms of applications, investigators will use bank or mobile money statements, invoices and other documents to gather information about the suspect’s use of funds during that period. This includes, for example, purchasing assets, paying property rentals or bills, repaying loans, employing staff or taking holidays. It also includes the suspect’s bank balances at the end of the selected period, as this reflects money he had not yet spent but still had available to spend. Other applications may involve the purchase of crypto assets which can be kept in a self-custody wallet or with a third party such as a cryptocurrency exchange. All of these documents and other relevant evidence can contain vital clues that assist in tracing illicit flows of money and reveal further suspects in the individual’s corrupt network. No silver bullet, but a useful tool There are challenges to using the Source and Application analysis, of course. One arises in countries with large informal and cash-based economies, which makes it harder to obtain documents and records to prove either the source or the application of a suspect’s funds. Good old-fashioned detective work can help to overcome this, such as surveillance, speaking to neighbours and knowing the market prices of goods that a person claims to have sold. Furthermore, this tool is not meant to be used in each and every corruption case but rather when it appears that the suspect is enjoying a lifestyle that is not commensurate with his/her legal and known income. Another difficulty is finding hidden assets, bank accounts, mobile money accounts or cryptocurrency wallets, especially when the suspect refuses to cooperate or the information is held abroad or protected by banking secrecy laws. Our quick guide to fundamental skills in tracing assets gives investigators some tips on uncovering new leads, again through good old-fashioned detective work. Meanwhile our guide to international cooperation explains how investigators may obtain such information from foreign jurisdictions, and our quick guide to cryptocurrencies and money laundering reveals how it is possible for law enforcement to “follow the virtual money”. In court, it may be that magistrates and judges are unaware of this method or unwilling to accept the final computation as financial evidence. We do believe, though, that it is much simpler to explain a Source and Application calculation than alternative methods of financial profiling such as Net Worth analysis, as explored in our free eLearning course on Source and Application of Funds analysis. There is no silver bullet or magic tool to calculate illicit funds in a corruption case and generate rock solid financial evidence of wrongdoing. But the analysis is often a crucial piece in a complex puzzle that can prove, or corroborate evidence of, the possession of illicit assets and point to related criminal activity. In our experience conducting training programmes around the world, we see time and again how the Source and Application analysis resonates with investigators and prosecutors as both a useful tool in investigating corruption and money laundering cases and generating evidence of these crimes for use in court. Download this quick guide as a PDF. See all quick guides on our Basel LEARN virtual platform, many in multiple languages.
New online course on cryptocurrencies and anti-money laundering
The Basel Institute on Governance is offering a new Cryptocurrencies and Anti-Money Laundering Compliance Training course aimed at law enforcement officials, professionals in AML compliance and FinTech/RegTech fields, as well as policymakers and investigative journalists. Delivered over four three-hour online sessions, the course covers the essentials of how to detect and prevent the use of virtual assets for illicit activities. In this short article below, course leaders Federico Paesano and Phyllis Atkinson explain why it’s vital for a wide range of stakeholders in the public and private sectors to be able to investigate and defend themselves against criminals’ abuse of cryptocurrencies and other virtual assets. Cryptocurrencies at the centre of attention Cryptocurrencies have become an increasingly prominent topic of discussion amongst both public and private sector professionals involved in the prevention and combatting of money laundering. The most well-known cryptocurrency, Bitcoin, has generated a lot of interest, particularly as the media continues to cover a number of high-profile investigations and prosecutions worldwide. The notoriety of this currency is not ill-founded. The apparent anonymity and invisibility that cryptocurrencies offer is progressively attracting more and more international criminals and money launderers. Financial flows that fly under the radar Cryptocurrencies have characteristics that can confound the efforts of the authorities and make such mediums attractive to the informal and illegal economies. Notably, they appear to offer the much-craved anonymity and, indeed, invisibility that organised crime requires. In a strongly regulated formal financial sector, this is increasingly difficult to find. This perceived anonymity is the main attraction of cryptocurrency as a medium for laundering the proceeds of crime. Although the main cryptocurrency exchanges exercise Know-Your-Customer KYC and due diligence procedures, there are a number of other options to purchase bitcoins or other cryptocurrencies privately between individuals and bypass online exchanges completely. Fortunately, as we will cover during the course, cryptocurrency is not as anonymous as many people imagine. Intrinsic characteristics of the blockchain, coupled with an understanding of users’ habits and the use of sophisticated investigative techniques employed by law enforcement, make it possible to identify users. Put into the context of grand corruption and organised crime scenarios, the use of cryptocurrencies is an example of the ever-evolving tactics employed by criminals to frustrate financial investigations and launder illicit assets. How law enforcement and compliance professionals can keep up We now have numerous successful criminal investigations where proceeds of crime, laundered through the use of cryptocurrencies, have been recovered. Contrary to popular belief, what makes Bitcoin and other cryptocurrencies work has significant benefits for law enforcement as well. A public and freely accessible ledger of every transaction ever conducted allows law enforcement to trace transactions in a way that would never have been possible before. Being borderless, law enforcement can access information without some of the barriers of international cooperation that can hinder cross-border investigations. Since it is immutable, there is no risk that the data will be unavailable after a few months. There are various techniques that make attribution a task that is within the reach of not only law enforcement but also compliance professionals in the private sector. About the course This course is meant to address an audience of law enforcement and professionals dealing, at different levels, with virtual assets. The course will deepen the experience and expertise of practitioners in understanding cryptocurrencies and the risks associated. The participants will explore the legislative frameworks and learn how to trace illicit financial flows channelled through cryptocurrency. Given the inevitable overlap between virtual assets and ordinary assets such as fiat currency, real estate, yachts and jewellery, this course also touches briefly on the issue of beneficial ownership. Assets acquired as a result of criminal activity in the form of cryptocurrency may well be exchanged for other assets, thus requiring the identification, tracing and seizure of the proceeds of crime. Determining the beneficial owner of illicit assets remains an integral part of the process, and represents a significant challenge to practitioners across the globe. The workshop will be centred around a practical case scenario building on known and potential uses to “clean” stolen assets for integration into the financial system. Participants will be asked to trace transactions through the blockchain. This practical exercise will be interspersed with key presentations, starting from the basics of cryptography, exploring how cryptocurrencies work, how to use the blockchain in financial investigations, understanding compliance and due diligence, through to the final recovery of assets. A presentation on European Union Anti-Money Laundering Directives EU AMLDs and Ultimate Beneficial Ownership UBO requirements, and the use of layering and direct ownership chains by beneficial owners, will be included. The training will also take advantage of an external speaker, Christine Gschwend from MME Legal, a renowned expert on compliance and anti-money laundering. She will cover the compliance and legal aspects of cryptocurrency and virtual assets, and the way the private sector can be compliant with the legislation set forth internationally. How to sign up The next course will take place in English from 7–10 December 2020 09:00–12:30 CET each day with a half-hour break . The fee is CHF 500 per person, with a discounted rate of CHF 200 per person available to members of public-sector, international, non-profit and academic organisations, plus independent journalists. Find out more and book your space now
Phyllis Atkinson's quick guide to offshore structures and beneficial ownership
Money laundering schemes frequently involve complex webs of transactions and structures that offer disguise, concealment and anonymity, and transcend international borders. The use of corporate vehicles or “structures” is a common way to launder dirty money and make it appear to come from a legitimate source. Yet while major corruption and money laundering cases often have an international dimension and involve such complex schemes, investigators and prosecutors generally have little knowledge of corporate vehicles outside their own country, and often lack the resources to obtain evidence from other jurisdictions. These difficulties are compounded by differences in legal systems and terminology, and by the random use of terms like “tax haven” and “secrecy jurisdiction”. This quick guide looks at how criminals obtain a veneer of respectability and exploit secrecy by manipulating and misusing corporate vehicles in offshore jurisdictions. It focuses on the meaning of "corporate vehicle" and "offshore" and other related concepts such as beneficial ownership. It also gives an example of how a trust, which is one common type of corporate vehicle in the vast "offshore ecosystem", can be used for illicit purposes. What is a corporate vehicle? Corporate primarily means relating to a company, as defined here. From the juristic point of view, a company is a separate, legally recognised corporate entity, created by means of a fictional veil between the company and its members. This “corporate veil” shields the people behind the company from personal liability. The corporate veil is pierced when: Firstly, it is established that the individuals behind the corporate entity control its finances and business practices to the extent that it no longer has a separate will or existence. Secondly, the control has resulted in a criminal, dishonest or unjust act which caused injury or unjust loss. Corporate vehicles, including corporations, trusts, foundations, partnerships with limited liability and similar structures, have become an integral and indispensable component of the modern global financial landscape. However, as the Financial Action Task Force FATF has emphasised for years, they may be exploited for unlawful purposes including money laundering, in addition to bribery/corruption and the misappropriation of public funds. Criminals can be extremely creative in their use of techniques and mechanisms to obscure their ownership and control of illicitly obtained assets. The challenge for practitioners is to "see through" the corporate veil provided by the structure to identify the controlling party and ultimate beneficial owner. Offshore financial centres – what and where are they? Although the term offshore is not defined by the FATF, in the context of corporate vehicles, offshore refers to something located or based in a foreign country. It is commonly used to describe foreign banks, trusts, corporations, investments and deposits. Although a company may legitimately move offshore for the purpose of legal tax avoidance or to enjoy relaxed regulations, offshore structures can also be used for illicit purposes such as money laundering and tax evasion. This is particularly the case for structures such as companies, partnerships or trusts formed in offshore financial centres OFCs . OFCs are jurisdictions whose corporate vehicles are primarily used by non-residents. They include well-known centres like Switzerland, Bermuda and the Cayman Islands, and less well-known centres like Mauritius, Dublin and Belize. The level of regulatory standards and transparency differs widely among OFCs. The significance of offshore jurisdictions in the context of criminal investigations is the manner in which some provide excessive secrecy for their corporate vehicles, thereby creating a favourable environment for their use for illicit purposes. How are corporate vehicles used for criminal purposes? Corporate vehicles often play a central role in concealing the proceeds of corruption, money laundering and the beneficial ownership of illicit assets. Corrupt public officials and money launderers do not want to keep their dirty money in their own names. Therefore, what they typically do is create a company – or a series of companies – and have the company own their assets. The company can open a bank account, buy a yacht or a mansion, and wire money around the world. Particularly in offshore jurisdictions that offer excessive secrecy for their corporate vehicles, it is immensely difficult and sometimes totally impossible to trace the money back to the person who really owns it. This makes these vehicles an attractive mechanism for hiding, moving and using illicitly obtained money or other assets. There is a large range of corporate vehicles in different jurisdictions. Sometimes they have the same or similar names but different characteristics or else similar characteristics but different names. This brief description of three commonly used structures – shell companies, shelf companies and trusts in the English common law tradition – is designed only to give a flavour of how offshore structures can be abused. Shell company A shell company can be defined as a non-operational company, i.e. a legal entity that has no independent operations, significant assets, ongoing business activities or employees. Typically, a shell company is provided by a professional intermediary to a corrupt party who then uses it to obscure the money trail by transferring the illicit funds into and out of the company’s bank accounts. A shell company has no physical presence in its jurisdiction. Its main or sole purpose is to insulate the real beneficiary ultimate beneficial owner from taxes, disclosure or both. Shell companies are also referred to as front companies or mailbox/letterbox companies. One specific type of shell company structure is the international business corporation IBC which is typically used for shell companies set up by non-residents in OFCs. IBCs make ideal shell companies because they are not permitted to conduct business in the incorporating jurisdiction and are generally exempt from local income taxes. Shell companies constitute a substantial proportion of the corporate vehicles established in some OFCs. Given their function, shell companies face an increased risk of being misused. Shelf company A shelf or off the shelf company is a category of, and similar to, shell companies, in that it offers no real "brick and mortar" company. A shelf company is a corporation that has had no activity. It has been created, left dormant and put on the "shelf". This corporation is then later usually sold to someone who would prefer to have an existing corporation than a new one. The significant difference between shell and shelf companies lies in the age of the respective companies since incorporation, with the value of a shelf company being based upon its history and banking relationships in addition to its age. In some jurisdictions, incorporation procedures can be time-consuming. It is often easier, quicker and less expensive to transfer ownership of a shelf company than to incorporate a new one. Lenders sometimes require a business to have been in existence from six months to two years or more before lending it money, and many agencies will only sign contracts with a company that has been in business for at least two years. Trust The concept of a trust is probably less familiar with most than that of the company but it has been around for longer. The trust is a legal relationship which originated historically in England and developed mainly in states with a common law or Anglo-Saxon legal tradition, e.g. Great Britain, USA, Australia, Canada, South Africa and New Zealand. Structures similar to trusts can be found in other countries, e.g. Japan, Panama, Liechtenstein, Mexico, Colombia, Israel and Argentina. A trust in this sense is a legal arrangement or relationship whereby a person "trustee" owns assets not for their own use and benefit but for the benefit of others "beneficiaries" . Unlike a company, it is a corporate vehicle which does not have a separate legal personality and distinguishes legal ownership from beneficial ownership of assets vested in a trust. The key points to understand are: The essential components or parties to a trust are the settlor, trustee, beneficiaries and trust property. The settlor transfers ownership of certain assets to trustees by means of a trust deed or declaration of trust although it does not have to be reduced to writing . These assets are to be managed and used for the benefit of named or unnamed beneficiaries. This constitutes a binding obligation. In the process of transferring, or "settling", certain property, the legal ownership or control of the assets known as the trust property is separated from the beneficial interest in such assets. In this context, a beneficiary is a person who is designated to receive something as a result of a trust arrangement. A trust may be set up with no identified existing beneficiaries, but the beneficiaries to a trust must be ultimately ascertainable. In this case, the trust provides the trustee with certain powers to administer the assets, which operate until such point when, under the terms of the trust, an individual or group of individuals become entitled as beneficiaries to income or capital on the expiry of a defined period. Some types of trust allow the beneficiary to be named or changed at any time, meaning their identify can be kept secret until ownership of the assets is transferred to them. The separation of the legal ownership of the trust assets, which lies with the trustee, from the right to benefit from those assets, which lies with the beneficiaries, is the crucial factor to understanding trusts. Simultaneously, it is essential to understand that a "beneficiary" is not the equivalent of a "beneficial owner" see below . Unravelling beneficial ownership of trusts During a criminal investigation involving corporate vehicles, particularly those formed in offshore jurisdictions, the crux of the issue for any practitioner is identifying the "beneficial owner" of the corporate vehicle. This refers to the person or group of people who have an interest in or control over ill-gotten gains and are trying to conceal the fact through the misuse of corporate vehicles. According to the FATF definition, beneficial owner refers to the natural person s who ultimately owns or controls an asset, and directly or indirectly enjoys its benefits. The beneficial owner also owns or controls the customer and/or the natural person who may appear to own or control the asset and on whose behalf a transaction is being conducted in order to hide the true ownership. The term also includes those persons who exercise ultimate effective control over a legal person or arrangement. The defining characteristic of the beneficial owner of a trust asset as opposed to a beneficiary is that he or she holds a degree of control over the asset that allows him to benefit from it. Whether he is the legal owner, i.e. holds a legal title to it, or a trust beneficiary is irrelevant. Importantly, a beneficial owner must always be a natural person, as a legal person cannot exert "ultimate" control over an asset. This is due to the fact that legal persons are always controlled, directly or indirectly, by natural persons. In the context of legitimate trusts, none of the following qualify as the beneficial owner as previously defined: The trustee exerts control over an asset but is not an ultimate controller as he is legally bound to act in the interests of the beneficiary. The settlor of the trust initiates the trust and relinquishes legal ownership of trust assets to the trustee for the benefit of the beneficiary; however, he may also continue to exert some level of control or influence over the trust. The beneficiary stands to benefit but generally cannot exercise any control over the trust. However, for criminal investigative purposes, beneficial ownership for trusts can arguably encompass a combination of actors: the settlor, the trustees, the beneficiaries or any other individual who, in practice, exercises ultimate effective control over the trust and enjoys its ill-gotten benefits. Find out more These topics are covered in much much greater detail and depth in training courses of the International Centre for Asset Recovery ICAR , in particular on Offshore Structures and Mutual Legal Assistance. As Head of Training ICAR, the author Phyllis Atkinson has developed and delivered highly specialised training on these and related topics to investigators, prosecutors, financial analysts and judges all over the world. You can find out about ICAR’s unique approach to training in her quick guide to effective training on financial investigations. The OECD’s 2001 publication Behind the Corporate Veil: using corporate entities for illicit purposes looks at the types of corporate entities that are most frequently misused and “urges governments to combat such misuse by acting to ensure the availability of information about ownership and control”. Key FATF publications on this topic include: FATF guidance on transparency and beneficial ownership October 2014 and Best practices on beneficial ownership for legal persons October 2019 . Download this guide as a PDF or view on our LEARN platform alongside other quick guides and resources to fight financial crime.
Phyllis Atkinson’s quick guide to effective training on financial investigations
Sophisticated and complex financial crimes span the globe. “Following the trail of the money” can involve many jurisdictions, each with their own laws and practices, and varying capacity or willingness to cooperate internationally. Fighting corruption and money laundering, and recovering criminal proceeds, are therefore complex challenges. Specialised legal, financial accounting, analytical and investigation skills are essential. Phyllis Atkinson, Head of Training at the Basel Institute’s International Centre for Asset Recovery ICAR , explains ICAR’s unique training approach – and how it helps investigators, prosecutors, members of the judiciary and Financial Intelligence Units in partner countries gain these investigative skills quickly and effectively. Demystifying financial investigation First, what exactly is a financial investigation? Basically, it is an enquiry into the financial affairs related to a criminal activity. One of the main aims is to identify and trace the proceeds of the crime. It can also be used to develop evidence for use in criminal proceedings. A “parallel financial investigation” means a financial investigation that takes place alongside a traditional criminal investigation into money laundering, terrorist financing and/or related offences. What do the training programmes cover and why? ICAR’s training team has delivered practical, interactive and highly customised training programmes in financial investigation and asset recovery to public authorities in partner countries for over 10 years. The programmes are designed to enhance skills to analyse, investigate and prosecute complex corruption offences, financial crime and money laundering cases, and to recover criminal proceeds. Building capacity and knowledge in partner countries increases their autonomy in fighting financial crime and money laundering, as well as in recovering stolen assets. An additional benefit is improved inter-agency collaboration in cases of corruption, money laundering and asset recovery. We regularly hold training programmes for mixed groups of representatives of various law enforcement agencies in a country or region. From basic concepts to real-life simulations ICAR programmes balance hands-on exercises with interactive learning methods. Through lectures, workshops and country-specific practical exercises, participants are taken from the basics to an advanced level of financial investigative techniques and asset tracing. The centrepiece is a complex simulated investigation that replicates the real world as closely as possible. Participants learn how to unravel the web of deceptive financial transactions. This enables investigators to find their way through the murky world of international banking transactions, offshore shell companies, financial centres and nominees. The participants work in small teams and make independent decisions on investigative actions. These might be surveillance, search warrants, interviewing hostile witnesses and tracking the proceeds of large-scale corruption across international borders. Group discussions focus on key topical areas, identify problems that have occurred in actual cases, arrive at potential solutions and compare international standards to their country-specific issues. Hands-on investigation and data analysis The simulated case involves analysing large volumes of data, gathering and assembling evidence for use in court, and establishing a basis for the confiscation of assets. This practical exercise incorporates country-specific laws, commercial and banking records and enforcement procedures, making it directly useful to participants’ everyday work. The participants learn how to employ criminal investigative techniques to identify relevant witnesses and evidence, and use software for some of the financial analysis. What does the simulated case look like? Like a real case, in fact. Here’s a simplified example using a fictitious country, Turania, and a fictitious company, Fero Gold. In return for lucrative mining contracts in Turania, a company called Fero Gold paid large bribes to public officials. A direct transfer from Fero Gold to these officials would be suspicious, so Fero Gold used a middle-man. This middle-man was insulated from the company and the officials in Turania by two shell companies with nominee directors and shareholders. The financial flows between each link in the chain are disguised as payments for “consultancy” and “marketing” services. To prove that a corrupt agreement has been struck, investigating authorities have to follow each link in the chain across different jurisdictions to prove that these “independent” parties are, in fact, all part of the same criminal enterprise. Learning by doing – even virtually Designed to be delivered in person, ICAR’s tailored training programmes are hands-on and heavily based on interactive group tasks. The approach is aimed at helping participants from different disciplines and agencies learn not only new skills but also how to work together better in real life. This is extremely difficult to replicate in the online space, especially in contexts with less-than-perfect IT equipment and connectivity. However, despite the challenges of replicating this kind of practical work online, the ICAR trainers have successfully taken the first of its modules online and also succeeded in forming virtual breakout groups of practitioners from various agencies and countries. Find out more ------------- Read about ICAR’s training programmes. Download the latest brochure. Download a PDF of this quick guide in English, Spanish, French and Portuguese.
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