Treasure Islands - Nicholas Shaxson [107]
Krall would cold-call top lawyers and asset managers, hoping to get into what is known in the trade as the “Beauty Parade,” the lineup of obliging banks that clients and their representatives will look for to manage their riches. The key is to build a relationship of trust, mixing the good and the bad. With the good trust you offer a solid, safe return on the assets; the bad trust is a confidence that you will keep their identities secret and will break laws on their behalf. In pursuit of these elusive relationships, Krall went to polo games, the opera, orchestral concerts in Rio de Janeiro, and umpteen working breakfasts, lunches, and dinners in the most expensive restaurants in town.
Despite her growing qualms, Krall ended up working for a Swiss private bank in the Bahamas. This was no ordinary bank: It had only a hundred or so clients. It was also the only bank where she actually saw a suitcase full of cash. “My bank never once had a client walk through the door,” she said. “The bankers and their clients go on big game hunting trips, or to the ballet in Budapest. That is where it happens.” From her tone, she made the “it” sound like some sordid sexual act.
Her bank was run out of Switzerland, and the Bahamas was purely a “parking space” or transit point for money: an extra layer of secrecy. A major driver was, of course, the imperative to receive and store the proceeds of crime. “I felt I was prostituting my personality, just to get money in the bank,” she said. “I came to realize that the system I was involved in contributes to the perpetuation of poverty in the world.” She thought a bit, then added, “But I did enjoy the adrenaline. When it fuels you, you don’t question what you otherwise would.”
Her colleagues hailed from old European aristocratic circles. While Krall was perfectly good at her job and had close working relationships with top lawyers, asset managers, and so on, a gap remained. “They went to parties with royalty, with ambassadors,” she said. “I wasn’t in their circle.”
At the time, laws in the Bahamas were being tightened a bit, following a feeble global crackdown, and she moved sideways in the bank to work as a “compliance officer.” These days, offshore bankers make a big show of their “Know Your Customer” rules, to keep out the bad money. Depositors may have to supply a certified copy of a passport, for example, and divulge where their money came from. Jurisdictions like the Bahamas and the Cayman Islands put these requirements into their statutes, and banks must comply; they employ compliance officers like Krall to enforce this.
That, at least, is the theory.
In her new job Krall began to learn of the many devious avenues around the rules. “You would ask for the source of funds—and they could tell you anything,” she replied. “You didn’t ask for documentation.” Another compliance officer Krall knew was expressly forbidden from seeing certain files. A loophole in Bahamas law let institutions waive due diligence checks on clients if they were referred from a financial institution in a jurisdiction where the legislation is supposed to be good. Once in a while a bank would uncover a money-laundering case to show it is enforcing the law: They were happy to do this, Krall said, provided it did not expose anyone the bank would not want to upset. Legal frameworks that distinguish between the criminal and the legitimate have eroded away offshore, replaced by networks of trust that distinguish between the well established and respectable, on the one hand, and the unknown and dispensable, on the other.
Individuals with sums to launder or invest with minimal taxation want to know that they are dealing with people who can be trusted not to have moral qualms. If the bankers don’t know you, you will have to jump through many hoops; if you are a long-standing and trusted client, the rules fall away. These trust-based networks, deferential to the aristocracy of wealth and privilege and resistant to formal laws, are the ultimate source of comfort for the banks’ wealthy clients. The similarities with un-spoken