Offshore provider accused of failing to follow money laundering rules

Pandora papers reveal regulator criticised Asiaciti over allegedly inadequate checks on sources of clients’ funds

For the Australian accountant Graeme Briggs, the meeting proved productive. It was September 2014 and Briggs was in Zurich on one of his frequent tours of Europe to drum up business for Asiaciti Trust, the Singaporean offshore services group he had founded in 1978.

Briggs was at offices in an ornate building across the park from Lake Zurich to meet the Russian businessman Kirill Androsov, the then chair of Aeroflot and a former deputy chief of staff to Vladimir Putin.

One result of the meeting would be a complex structure of trusts in Singapore involving Androsov and two other high-profile Russian businessmen, Herman Gref, the chief executive of the Russian bank Sberbank and a former minister of economics in Putin’s government; and Evgeny Novitsky, a former president of Russia’s largest publicly traded diversified holding company, Sistema.

Documents filed with the city state’s stock exchange show the structure held as much as $70m (£52m) worth of assets, including real estate in Moscow, stocks and bonds.

Details of the meeting and Asiaciti’s handling of its business relationship with the Russians in Singapore have been revealed in the Pandora papers, a trove of more than 11.9m files from 14 companies providing services to people and organisations that want to use offshore structures.

The documents reveal alleged failings in Asiaciti’s compliance with anti-money-laundering and counter-terrorism funding (AML-CTF) rules.

They show Asiaciti’s regulator, the Monetary Authority of Singapore (MAS), cited Asiaciti’s handling of some transactions involving two of the Russians as examples of the business failing to adequately corroborate the source of its clients’ funds, and criticised its senior management, including Briggs, for failing to set an “appropriate tone, risk appetite and compliance culture for the company”.

The MAS made no adverse findings in relation to the Russians themselves or their business dealings and there is no suggestion they were involved in any wrongdoing.

The leaked files also shed light on structures set up by Asiaciti to take advantage of legal loopholes to minimise or avoid tax in numerous countries, on superannuation funds set up for clients in Samoa – funds that have been in the sights of the Australian Taxation Office (ATO) for more than a decade – and on its relationship with one of Australia’s best-known offshore tax masterminds, the Sydney accountant Vanda Gould.

Dealing with the Russians was not without potential risks for Asiaciti. A due diligence report on Androsov, obtained by Asiaciti in October 2014, noted he was a politically exposed person (PEP) and identified that he had been the subject of concerning allegations, although Asiaciti was unable to substantiate those in its own research.

The Guardian has also not been able to independently substantiate those claims and has chosen not to detail them accordingly.

Kirill Androsov
Kirill Androsov is a former deputy chief of staff to Vladimir Putin. Photograph: Mikhail Metzel/Tass

Under AML-CTF rules, PEPs are regarded as a higher-risk category, and institutions dealing with them are required to do extra due diligence on them, because they hold positions that can be abused to launder money or engage in offences such as bribery or fraud.

The intergovernmental group overseeing AML-CTF standards, the Financial Action Task Force, makes clear that the requirement for enhanced due diligence in business relationships with PEPs are preventive (not criminal) in nature, and should not be interpreted as meaning that all PEPs are involved in criminal activity.

Unsubstantiated allegations had also been made publicly against Novitsky, whom the MAS also identified as a PEP, which led him to ask a former executive at the Swiss bank Banque Heritage Zurich to vouch for him to Asiaciti.

“Banque Heritage’s compliance department spent considerable time and resources in order to investigate the accusations and concluded that these allegations were baseless,” the banker said in a letter provided to Asiaciti in 2015.

Gref and Novitsky did not respond to a request for comment. Androsov’s legal representatives told the Guardian: “Mr Androsov categorically denies that any of his commercial dealings are in any way improper or unlawful, or that he has ever been the subject of criminal charges anywhere in the world. Mr Androsov fully complies with relevant legal and regulatory requirements in Singapore and other relevant jurisdictions.”

‘Multiple lapses’

In 2017, some Asiaciti files appeared in the Paradise papers leak. The following year, the Monetary Authority of Singapore conducted a three-month onsite inspection of Asiaciti, the new documents show.

It hit Asiaciti with a list of damning findings that identified what it described as multiple and in some cases systemic lapses in Asiaciti’s AML-CTF risk awareness and governance. It cited the company’s failure to appropriately identify and apply enhanced due diligence measures in relation to PEP customers, identifying the higher risks posed by the three Russians.

The MAS examiners criticised Asiaciti for its inadequate risk assessment and monitoring of some of the trust structures used by the Russians, given they were set up by closely linked PEPs and their associates.

The examiners said that over a period of three years there were some unusual transactions and patterns of fund flows that ought to have been flagged for closer scrutiny. It asked Asiaciti to conduct a “holistic review” of the structures it had set up for the Russians.

The MAS made no findings that Androsov, Gref or Novitsky were involved in money laundering or any other illegal activity connected with the trust structures set up and administered by Asiaciti, and the Guardian does not suggest anything to the contrary. Rather, the Russians were cited by the MAS as examples of higher risk customers, and Asiaciti’s administration of some of their offshore dealings highlighted alleged compliance failures at Asiaciti.

Herman Gref in Moscow for Vladimir Putin’s state of the nation address
Herman Gref in Moscow for Vladimir Putin’s state of the nation address in April. Photograph: Anadolu Agency/Getty Images

Last year, the MAS fined Asiaciti Trust Singapore S$1.1m (£600,000) for “serious breaches” of its anti-money-laundering and counter-terrorism finance requirements between 2007 and 2018. This included failing to properly establish the source of wealth of customers and failing to consider whether it should report “unusually large transactions with no obvious economic purpose, undertaken by customers who were politically exposed persons” to the authorities, the MAS said in a statement.

The MAS said Asiaciti had paid the penalty in full and taken remedial actions to address the risk management deficiencies that had led to the breaches.

Asked whether the fine was linked to its concerns about Asiaciti’s administration of the structures set up by the Russian businessmen, an MAS spokesperson said the authority was “unable to share further information on Asiaciti Trust Singapore”.

Legal loopholes

Business has been good for Briggs. It has helped him build a multimillion-dollar art collection and a well-stocked wine cellar. He has bought property around the world and owns a mansion in the wealthy Melbourne suburb of Toorak as well as a rural property in Red Hill on the Mornington Peninsula, the city’s playground for millionaires.

But dealing with Russian PEPs was not the only risky business Asiaciti was involved in, the Pandora papers show.

A 2001 presentation for Latin American clients explored apparently legitimate ways Asiaciti could help a hypothetical Mexican businessman who held offshore assets that “have not been declared to Mexican revenue authorities” and who did not expect to need to bring the money back to Mexico.

It proposed shutting down existing structures in the Caribbean and instead setting up a trust in New Zealand that would own a company in Singapore, which would in turn hold the businessman’s offshore assets.

Asiaciti also promoted the use of a structure available in Samoa, known as “creditor controlled companies”, using legal loopholes to minimise or avoid tax in Belgium, Canada, France, Germany, Japan, New Zealand, Russia and the US.

“The Samoa CCC can be an effective entity in which to accumulate foreign source income and to defer liability to domestic taxes,” Asiaciti staff said in a technical briefing note issued in July 2014.

The use of offshore funds has been targeted by the ATO because people can opt to benefit from the secrecy afforded by offshore jurisdictions to hide their income and they can be associated with illegal tax evasion or avoidance and used to obscure the true identity of ultimate beneficial owners.

However, the ATO has previously made public statements about data leaks revealing details of offshore holdings, making clear it is “not illegal to have an offshore business structure” and that “there are many legitimate reasons for doing so”.

“Most taxpayers included in data leak information have reasonable explanations for structuring their assets the way they do. Appearing in a data leak does not imply wrongdoing. We have been able to assure taxpayer behaviour; for example; many individuals who have offshore bank accounts have already declared those assets and their tax affairs are in order.”

Since the early 1990s, Asiaciti had also been offering Samoan superannuation funds, some of which were linked to Gould, the Sydney accountant, who in a 2014 tax liability case brought by the ATO was found by the federal court to be the secret controller of a vast network of tax haven companies – which Gould denies.

Nye Perram, the judge in that case – a tax liability dispute between the Australian tax commissioner and five companies allegedly connected to Gould – reached no conclusion as to illegality but asked for his judgment to be passed to the authorities to investigate further, saying: “The facts I have found strongly suggest widespread money laundering, tax fraud of the most serious kind.”

Gould had been charged with tax fraud offences but they were dropped before Perram’s ruling and he has always maintained he is innocent. Perram’s ruling found that Briggs and other directors of Hua Wang Bank Berhad, a Samoan company set up and administered by Asiaciti, while not responsible for illegality themselves, “were puppets who did as Mr Gould told them”. He ultimately found the five offshore companies controlled by Gould liable to pay Australian tax and penalties.

The Pandora papers reveal that the relationship between Briggs and Gould went back much further. They met at an international tax conference in the 1980s and were doing business together by the early 1990s. In a 1993 letter to Gould – not part of the papers – Briggs made it clear that the Samoan superannuation funds could be used to minimise or avoid Australian tax, because while tax was payable on contributions, there was no way for the ATO to collect it.

These structures also enabled so-called back-to-back loans, where the beneficiaries of the super fund can borrow their own money, bringing it back into Australia and claiming a tax deduction on the interest payments at the same time – a type of transaction that is legal provided it is declared to the ATO.

Gould is in Long Bay correctional centre in Sydney serving a prison term of at least three and a half years for attempting to pervert the course of justice during the federal court trial. He did not respond to questions from the Guardian, but speaking about the Samoan super funds to the ABC he said he “had no doubt that they were completely legitimate”.

“The tax office’s attitudes, I think, changed over time so that they took a more narrow sort of view of what was permissible because they could see that through a super fund, like any super fund in fact, there’s a leakage from the tax that ordinarily would otherwise be payable,” he said.

According to documents seen by the Guardian, it appears that Asiaciti staff have since spent time and effort to distance themselves from Gould and some of his super structures, which were described by one Asiaciti compliance manager in 2018 as a “ticking time bomb” in an email detailing their plans on “exiting the relationship”.

Asiaciti told the Guardian it was unable to comment on specifics because “stringent law and regulation requires us to strictly maintain confidentiality and protect personal data”.

Do you have information about this story? Email investigations@theguardian.com, or use Signal or WhatsApp to message (UK) +44 7584 640566 or (US) +1 646 886 8761

In a statement, it said information provided to it by the Guardian contained “many inaccuracies and instances where important details are missing, which have led to grossly misleading inferences and conclusions about Asiaciti Trust”.

“We take this opportunity to inform you that your allegations about us are premised on inaccuracies and incomplete information,” it said.

Asiaciti would not provide details of the alleged inaccuracies when asked by the Guardian.

It said it had a “strong compliance program” and “each of our offices have passed third party audits for anti-money laundering and counter-financing of terrorism practices in recent years, which reflects our intense focus on this area. No compliance program is infallible – and when an issue is identified, we take necessary steps with regard to the client engagement and make the appropriate notifications to regulatory agencies.”

It also said it had worked diligently to comply with regulations as they changed over the decades. “Compliance is core to our business and we have adapted our company to meet the changing requirements. Any organisation operating over such a length of time is likely to have legacy matters that do not reflect the current business,” it said.

“We recognize there have been isolated instances in the past where we have not kept pace, and in these situations we have worked closely with regulatory authorities to address any deficiencies and quickly updated our policies and procedures.”

Reached by telephone, Briggs declined to expand on Asiaciti’s statement. “You’re going to print whatever you want anyway,” he said.

Contributor

Ben Butler

The GuardianTramp

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