Treasure Islands - Nicholas Shaxson [106]
Shell banks handle business that many banks will not touch. U.S. senator Carl Levin notes that they are generally not examined by regulators, and virtually no one but the shell bank owner really knows where the bank is, how it operates, or who its customers are. The bank Krall worked for provided a well-known name to reassure the Bahamas regulator. I asked Krall how much due diligence her British bank did on these entities. “Ha ha. Yeah,” was her initial reply. “These banks would send quarterly statements to the Bahamas Central Bank—but it wasn’t our job to monitor them.”
There would literally be brass plates in her British bank’s reception area saying “Banco de X”—perhaps an Argentinian bank using the Bahamian address and phone number of the British bank on their headed notepaper. The Bahamas regulator could not find out what was going on back in Argentina, and vice versa: the classic offshore “elsewhere” technique. Predictably, some of these banks failed, despite being audited and passed by Big Five accounting firms,1 and Krall remembers taking calls from angry depositors. “People were on the phone in tears, with their life savings gone, and I was saying to them, ‘There is no point coming on a plane to look for the money because there is no money here.’” The money never was there.
With the terrorist attacks of September 11, 2001, prompting the United States to legislate against shell banks, a bank in the Bahamas now had to employ two senior bankers and keep its books and records there to be judged real enough to do business. “That means a bank maybe with a room or suite in a building, with two people in it—that’s a bank now,” Krall said. She pointed me to the current website of a Bahamas-based trust company that will provide you with exactly that: the appearance of being a real bank, including two staff members as directors of your bank and a place to keep the books and records. Such a set-up can allow business almost as usual, yet still check off the regulators’ boxes.
Krall moved to a big European bank, again as a client relationship manager—in effect, someone who finds wealthy clients and keeps them happy. Trawling for business, she was routinely pointed toward Latin America, where she traveled frequently.
“On the immigration form you would write that you are going for pleasure—though your suitcase would be full of business suits and portfolio evaluations, or marketing materials and presentations explaining the advantages of a trust in the Bahamas.” The client’s name would be absent from the portfolio evaluations: In fact, the bank would not even record it as the account name. “You’d cut off the account name and number so it was just a list of securities and holdings: you could never attach it to anyone.” It was nerve-wracking, sometimes, going through airports, but she always got through unchallenged.
Apart from the anxiety about getting caught, Krall said there was rarely, if ever, a feeling you were doing anything wrong, despite often helping clients break the law. Part of what she called “managing not to check into your conscience” was that there were always cases where you could believe you were helping someone. For example, countries like Brazil have “forced heirship” dictating who in a family gets the assets after the parents die—and an offshore trust may be a way to get around this. Krall cited a case she knew of in another country where forced heirship would have granted the assets to a playboy son instead of to the family’s preferred beneficiary, a daughter with special needs. As I explained in the last chapter, human stories like this are commonly used to justify oceans of wrongdoing in the offshore world.