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Journal of South Pacific Law - Working Papers

Working Paper 5 of Volume 2 1998

Off-Shore Banking, a Legal Fabrication for Money Laundering?:

A Critique of the Legal Framework of the
Western Samoa Off-Shore Finance Center.

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This Project is submitted in partial fulfillment of the requirements for the Bachelor of Law Degree of the University of the South Pacific.

 

Acknowledgments

I would like to thank you the following persons for their assistance;

•Mohammed Ahmadu
•Professor Lindsay Trotman
•Carmel Moore
•Kolone Vaai
•Maeva Betham-Vaai
•Mrs Leata.

Your help is appreciated
Thank you.

ABSTRACT

Off-shore banking have an aura of mystery about it, portrayed by movies as sun-drenched resort islands infested with international crooks, tax evaders and drug peddlers. 'It's one of the great ironies in offshore financial circles that the sunniest spots in the world often afford protection to the shadiest characters.1 This is the concerned view of this project.

Offshore banking is all about providing international financial services such, as international banking, insurance and trusts to non-resident companies and businesses, and access to a wide range "of professional services and products to better manage their finances, reduce taxes and conduct business in an international arena." Thus, offshore banks are a "strategic element for competing and prospering in a global economy",2 and Western Samoa has taken this step into global financial services by establishing its own Off-Shore Finance Center. No doubt it is the legitimate businesses of successful multinational companies that utilise these financial services, and whether people accept it or not, it is naive to discard the possibility that money launderers also exploit those services to their advantage.

 

TABLE OF CONTENTS

ABSTRACT                                                                                                                   

Introduction                                                                                                                 

      What is the research about?
      Thesis
      Governing Laws                                                                                                                                            

Chapter 1                                                                                                                     

Structural Framework of an Offshore Banking Center                                                                

      General Definition                                                                                                                                         

      Statutory Definition                                                                                                                                      

      General Structural Make Up                                                                                                                      

      Features of the Western Samoa Off-shore Finance Center                                                                      

Chapter 2                                                                                                                     

The Money Laundering Regime                                                                                          

      Money Laundering Defined                                                                                                                        

                 •Traditional Definition                                                                                                                      

       •Extended Definition after the Vienna Convention 1988                                                                

      The Money Laundering Process                                                                                                                 

      Is money laundering a criminal offence in Western Samoa?                                                                     

Chapter 3                                                                                                                    

Licensing and Registration of Off-Shore Users                                                                       

      Licensing                                                                                                                                                       

                  •Licence Types                                                                                                                                

      Registration                                                                                                                                                  

Chapter 4                                                                                                                    

The Off-Shore Finance Center Services & Implications                                                             

      Offshore Banking Services                                                                                                                          

                  •Dichotomy between Confidentiality and Disclosure                                                                            

                  •Share Capital Requirement                                                                                                                

      Off-shore Insurance                                                                                                                                    

      Anonymity of International Trusts                                                                                                              

      Taxation Exemptions                                                                                                                                   

      Exchange Controls Exemptions                                                                                                                 

Chapter 5                                                                                                                     

The Role of Companies and Implication                                                                               

      Trustee companies as Nominees                                                                                                                

      Transfer Pricing                                                                                                                                           

Chapter 6                                                                                                                    

Regulation and Control Measures                                                                                      

Domestic regulatory and control measures

                  • Accounting Records and Auditing                                                                                                    

                  • Know your customer                                                                                                                       

                  • Money Laundering as a criminal offence in Western Samoa                                                              

      International Initiatives to Counter Money Laundering                                                                          

Conclusion                                                                                                                   

      Recommendations                                                                                                                                      

Appendix                                                                                                                    

Bibliography                                                                                                                                                        

Resource Materials                                                                                                                                           

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Introduction

What is the research about?

Western Samoa, as a developing country with few natural resources and limited exports, has turned to financial services in the form of offshore banking, to assist in its economic development. Established in 1987, its Off-Shore Finance Center provides services in the areas of offshore banking, insurance and trusts. These offshore financial services provide the ease with which money can be shifted from account to account in different countries.' It facilitates the transfer of money, legally or illegally obtained, with the latter providing the internationalisation of money laundering, which ultimately undermines the integrity of offshore finance centers.

A crucial question to ask then is, whether the legislative framework of the Western Samoa Off-Shore Finance Center is foolproof against being used for money laundering operations?

 

Thesis

The thesis statements this project attempts to establish are;

1.Whether an offshore banking center, whilst providing international banking and other financial services, may also serve the purpose of money laundering, either covertly or overtly?

2.If so, does the current offshore banking legislation provide all precautions for the protection of the Off-Shore Finance Center from being used for money laundering?

The first proposition will be examined by discussing what money laundering is and how offshore center services can be used for money laundering operations either overtly or covertly. For the second proposition, the current legislation for offshore banking will be discussed as to the adequacy or otherwise of its structures to minimize and deal with money laundering activities. The key to a successful and credible offshore financial center is to have a sound legal framework. Thus it is crucial to examine this aspect of the system. This is not merely a guide to the Western Samoa offshore banking legislation but is also a "perspective on the extent and limits of regulation in this field in the future."4

 

Governing Laws

The main legislation is the Off-Shore Banking Act 1987, Off-Shore Banking Act 1987 No.44 (as amended by the Off-Shore Banking Amendment Act 1998 ). OffShore-Banking Act 1988 No.7, Off-Shore Banking (Amendment) Act 1992/3, Off-Shore Banking (Amendment) Act 1996. The supporting legislation are;

1. International Companies Act 1987 No.10, international Companies Act 1987 No.47 (as amended by the International Companies Amendment Act 1988), International Companies Amendment Act 1991 No.10

2. International Insurance Act 1987 No. 41, International Insurance Act 1988 No.43

3. Trustee Companies Act 1987 No.46 (as amended by the Trustee Companies Amendment Act 1988), Trustee Companies Act 1988 No.8

4. International Trusts Act 1987 No.45, (as amended by the International Trusts Amendment Act 1988), International Trusts Act 1988, No.9

5. Offshore Center Legislation Amendment 1992/3 No.30 - an Act to amend the Offshore Banking Act 1987, the International Companies Act 1987 and the International Insurance Act 1988. Reference is also made to other relevant legislation affecting services offered by the Off-Shore Finance Center.'5

The research project thus critically analyses the Western Samoa offshore banking legislation, with the aim of ascertaining the possibilities and implications of money laundering activities. The project is to determine whether an offshore banking center is a mere legal fabrication for money laundering. The project also provides suggestions for a preventive role that the Western Samoa Off-Shore Finance Center should play, and recommendations for future safeguards.

 

Chapter 1

Structural Framework of an Offshore Banking Center

Introduction

This chapter explains the business of offshore finance. It discusses general and statutory definitions, its general features and the specific features of the Western Samoa Off-Shore Finance Center.

 

General Definition

The term offshore banking, means that the business of banking and related financial services engaged in, must be transacted overseas by non-residents for the benefit of non-residents. Whatever its form, the transactions are characterised by its international nature. The domestic economy is involved by providing, registration, licensing, notarisation, legal and secretarial services and financial advice.

 

Statutory Definition

The Offshore Banking Act 1987 6 in section 2 defines offshore banking business as; any banking business conducted in any currency other than the currency of Western Samoa transacted exclusively by, for, and in respect of non-residents.7

It connotes that the business of offshore banking, comprises of three important elements viz.; banking business, conducted in foreign currency and the transacting party must be a non-resident.

'Banking business'8 includes savings and a whole range of banking services like those offered by the local banks. This definition is limited as it does not encompass the other financial services of international insurance, reinsurance, captive insurance and international trusts which all form part of the offshore banking business, operating in Western Samoa.

The requirements for the use of foreign currency and for transacting parties to be non-residents, distinguish the international standard of offshore banking business. Foreign currency obviously means any other currency other than the Samoan TALA. The term non-resident is defined as;9

a person not ordinarily resident in and not domiciled in Western Samoa who does not engage in a trade or business in Western Samoa10

The emphasis is that parties must be non-residents. The term 'person' is defined in section 2 as 'any body ... corporate or unincorporate" and company means "any body with a legal personality, ... constituted, incorporated or formed "under the laws of Western Samoa or in accordance with the laws of any other country or place."11 This definition satisfies the requirement in section 4 that a licensee of the Off-Shore Finance Center must be a company. Such as any company incorporated or registered under the International Companies Act 1987 and any trustee company registered under the Trustee Company Act 1987 The prescribed companies who can engage in offshore banking services are foreign registered companies and international companies, who are not residents nor domiciled in Western Samoa.

The meaning of the business of an offshore center stated in the relevant legislation, should clearly show what features it is built and marketed upon.

 

General Structural make up

There are some seventy offshore finance12 centers in the world with varying characteristics, providing an offshore center's own uniqueness. The essential building block for the framework of an offshore center include some or all of the following in varying measures;13

1. A favourable tax regime where there is little or no tax levied on the profits of non-resident users. The tax regime of a offshore center becomes attractive where another jurisdiction "applies comparatively penal rates on taxation," 14 allowing business to move into the offshore finance centers where profits can be accumulated without losing it to taxation

2. The absence of exchange control regulations, which facilitates the flow of currency for transfers and investment purposes. This gives freedom for foreign banks to operate with little or no regulatory regime operating.

3.Sececy and confidentiality. This involves the ability of the banks/companies operating in the offshore market to maintain secrecy and confidentiality of clients' accounts and records. Offshore bank officials are required under secrecy provisions of offshore legislation, not to divulge information relating to the accounts of their clients and users. The extent of secrecy and the commensurate obligations vary considerably between centers15

4. Political stability. The political status of a country is important as it should be seen by investors to be running smoothly to ensure the economy is stable.

5. Availability of a range of local support services, such as "banking and insurance companies, together with the legal and accountancy services required to service their demands," as well as "management of private trusts, corporate registration services, captive insurance, cash management and the ability to book either loans or other assets which have been entered into in another jurisdiction."16

6.Advantageous time zone for banking and business purposes.

All these features are typical of an offshore center but each jurisdiction may chose a specialised feature to market itself, in the competitive world of offshore finance centers.

 

Features of the Western Samoa Off-Shore Finance Center

As it competes for investors against the neighbouring tax havens of Vanuatu and the Cook Islands, and the Tongan Offshore Banking Center, the Western Samoa Off-Shore Finance Center has been vigorously marketed on the following features, 17

1. Quick and efficient incorporation and registration with little 'red tape' bureaucracy where an international company can be registered within 24 hours, 18 and reasonable fees for applications and registrations19 One special feature of the Western Samoa international company which has attracted large corporations especially from South East Asia, is the "ability to file Chinese language Memorandum and Articles of Association for international companies registered in Western Samoa with Chinese names."20 The Government has encouraged this with the adoption of procedures to facilitate the incorporation of companies with Chinese language names. A Certificate of Incorporation can be issued with the name in Chinese characters (an English translation is included for identification purposes). The Embassy of the People's Republic of China readily facilitates the notarisation, apostilling or authentication of corporate documents in the Chinese language. These unique advantages make Western Samoa international companies the perfect offshore vehicle for business dealings with the People's Republic of China.

2. Statutory secrecy and confidentiality provisions in all the offshore banking legislation. There are strict secrecy provisions and heavy penalties against persons in breach of it. For instance, sections 25 and 26 Off-Shore Banking Act 1988, provides for secrecy and penalties in relation to a breach. Even with the recent amendments to the five Acts in February 1993, which allows for the Registrar of Companies to make available for inspection by any person the memorandum and articles of association of a company registered after 1st February 1993. All other documentation lodged by all companies are confidential and are not subject to public scrutiny unless there is written authorisation from the clients themselves, or an order from the court.

3. Taxation exemptions are generous with no income tax, or any other direct or indirect taxes, stamp duty and any other duties, levied on transactions and profits of any international companies, international trust companies, international insurers and registered foreign companies, licensed or registered under the various offshore banking Acts. For instance, under the Off-Shore Banking Act 1988, section 28 exempts offshore banks licensees from income tax and dividends tax, and under section 29 is exemption from stamp duty. Another advantage is that Western Samoa has not entered into any tax treaties with any countries so there are no problems with double taxation. These tax exemptions permit active business income to be earned and accumulated in a zero tax environment.

4.Foreign exchange control exemptions, with the absence of exchange regulations and levies on the taking or sending of any foreign currency out or into Western Samoa, by an international or registered foreign company. This applies to transactions undertaken as an offshore bank (under section 30 Off Shore Banking Act 1988), or a registered trust (under section 26 International Trusts Act 1988), or the business of a registered insurer (under section 36 International Insurance Act 1988).

5. Political stability with the current Government of the Human Rights Protection Party (HRPP) having remained in power for the last twenty five years.21 Political stability is crucial for stabilising the economy, which is what investors are attracted to knowing their investments will be safe.

These features provide a clear illustration of the business of offshore banking than what is stated in the statutory definition. The latter is limited, as it does not make reference to special features such as taxation and foreign exchange control exemptions, secrecy provisions, and the quick registration and incorporation processes. These are the features which greatly influence a user's choice of an offshore banking center. The statutory definition should state the principal purpose of an offshore banking center, which is to secretly and securely hold assets in a tax free environment in a variety of investment structures, to ensure asset protection and accumulation of income and profits.

 

Chapter 2

The Money Laundering Regime

Introduction

This chapter discusses money laundering by examining its traditional and statutory definitions, and more importantly by analysing its three main stages. Money laundering is an area of great concern as it undermines the integrity of financial systems, which are misused for criminal purposes22 This is the overt purpose served by offshore centers.

It is unknown when the term 'money laundering' came into use, but it is believed that it dates back in the 1940s in America when gangsters made money through drug sales. To legitimize the source drug money, which was mainly in coin, it was said to have been literally laundered. Some believe the laundry business was used as a legal front for legitimizing drug money, whilst others believed that it was first coined by American law enforcement officials, with "popular usage during the watergate inquiry in the United States in mid 1970s."23 The term was used for the first time in the judicial context in the United States, and the 1982 case, US v $4,255,625.39 (1982)551 Fsupp.314.24 Since then, it has been widely used to describe the process of legitimizing the sources of drug trafficking money.

 

Money Laundering Defined

Despite the recent development of the terminology, "the concept is one of very long standing in relation to financially motivated criminal conduct "25 Criminals who gain large sums from drug trafficking have been able to filter their profits through a system where detection risks are minimal. In that way, criminal proceeds or 'dirty' money is said to be 'laundered' or '"'put into a state in which it appears to have an entirely respectable provenance."26 Thus money laundering is the "process by which criminals attempt to conceal the true origin and ownership of the proceeds of their criminal activities.27 If successful, it will enable them to provide a legitimate cover for their source of income.

Money laundering provides the link from the underground economy to the legal economy of a country. That is, money launderers accumulate money by engaging in activities criminalised by legislation in the legal economy. Firstly there was drug sales, but as surveillance by national police and the INTERPOL increased it pressured drug dealers and smugglers, to move into other criminal activities such as black mailing, extortion; bank robbery, selling false bank guarantees and security bonds, jewelry and art theft and money counterfeiting. Large sums of illegally obtained money were then filtered back into the legal system via a legal activity. The most convenient businesses targeted for laundering or legitimizing criminal proceeds are financial institutions such as banks. Over the years, the availability of offshore banking centers and financial services have facilitated and made accessible an avenue for illegitimate funds, accumulated in one country, to be transferred and legitimized in another country.

 

To counter the move by money launderers into criminal activities other than drugs sales and smuggling, the law extended the statutory definition of money laundering and offences to encompass all proceeds of serious criminal activities. Consequently, the offence of money laundering extends to proceeds of any serious crimes or any "practice which seeks to conceal the true origin and ownership of property obtained through illegal means in order to give the appearance that it has originated from legitimate sources."28 This definition was adopted by the Criminal Justice Act 1983 UK,29 extending money laundering offences to cover the "proceeds of general criminal conduct not previously covered by legislation [such as] theft, robbery, burglary, criminal deception, handling stolen goods, blackmail, and extortion" in addition to the existing offences of drug trafficking.

Further, the Criminal Justice Act 1983 UK, created "new offences designed to penalize those who inadvertently or otherwise become involved in transactions involving money laundering and who fail to make appropriate disclosure to the authorities.30 Such offences also cover "assistance, tipping off and failure to report money laundering",31 thus making every one potentially liable for direct or indirect involvement in money laundering activities. This expansion of money laundering offences shows the extent and seriousness of the problem.

The public policy issues raised are; the "public interest in ensuring that wrong doers are not allowed to enjoy the proceeds of their criminal activities'' which if go unpunished would "subvert the integrity of the world's financial markets. 32 On the other, the current legislation on financial institutions have placed a burden "upon the shoulders of those whose business it is to handle money in all its form, which carries with it the risk that they themselves may be liable to criminal sanctions."33 Both issues relate to the maintenance of the integrity of financial centers and ensure that criminals using financial centers to legalise their criminal proceeds are punished.

Perhaps the establishment of offences will provide legal safeguards against the use of financial centers for laundering criminal proceeds. It is however difficult to detect money laundering without understanding how the process works.

 

The Money laundering Process

Although the process of money laundering follows no set procedure, the general stages by which money is laundered is placement, layering and integration.34 In the placement stage, criminal proceeds usually in cash form enter the financial system by some legal means. This is done by disguising it, that is, by "changing it into another form of asset",35 either by depositing the cash in an account at a deposit-taking financial institution, or by purchasing investment or securities bonds or property assets. In most cases, money representing criminal proceeds is transferred to an offshore financial center in the form of a deposit in numbered accounts as an investment or in satisfaction of the capital requirements for obtaining a license to operate as an offshore banking user.

Once the money is placed "the proceeds are no longer in the form of cash", and the money laundering continues through to the layering stage36 The purpose of layering is "to separate the illicit proceeds from their criminal source by creating complex layers of financial transactions so as to disguise the audit trail."37 For instance the payment of a dividend or an investment. Recent developments in "electronic funds transfer systems help the layering process by enabling assets to be switched rapidly between accounts in different names and jurisdictions."38 The layering process makes it "exceptionally difficult to distinguish between legitimate and illegitimate wealth once assets have changed form and/or location a number of times."39 Thus making the detection of money laundering activities difficult as the line between the transfer of criminal proceeds to legitimate business finance, is too fine and deceptive. The burden then falls on those screening licensee applicants as well as auditors, to be able to ascertain and verify the nature of an applicant's business and source of funds and be satisfied it was not sourced from criminal activity.

Once the layering stage is complete integration is achieved. Integration is the "provision of apparent legitimacy to criminally-derived-wealth."40 Thus when the investment or property purchase earns profits and dividends are paid out to the offshore bank's shareholders, the integration stage is complete and criminal proceeds are legitimised.

When all these stages are complete, so too is the process of money laundering.

It has been argued that the following types of transactions should alert a financial institution as to the possibility of its business becoming involved in a money laundering schemes. Where large cash deposits where the "ostensible business activities of the depositor do not normally generate substantial amounts of cash or where the deposits have no obvious relationship to the business or customary banking activities of the depositor "and "a substantial increase in the amount of the deposits especially if such deposits are transferred within a short space of time to destinations unassociated with the depositor or between different client or trust accounts operated by the depositor."41 The difficulty here is that offshore bankers/users are permitted by the offshore banking legislation to deposit and transfer any large sums of money. Also where offshore bankers -'.make or receive regular large payments to and from countries which are associated with the production or prohibited drugs, or which are involved in laundering the proceeds of drug trafficking, although this category can be easily circumvented by re-counting funds."42 After all, the purpose of an offshore finance center is to provide a haven for asset (including cash) protection and ease with which it can be transferred to and from different numbered accounts at various jurisdictions.

This problem can be countered by imposing currency reporting requirements, where offshore users are required to report the amount of deposits made into the system if it exceeds a certain amount, for instance US$100,000.00. Yet this requirement is ineffective as international and registered foreign companies through their trustee companies representatives, can manipulate the system to their advantage. That is, they can make installment deposits of any amount exceeding US$100,000.00, hence avoiding the requirement without breach. The installments deposits method facilitates the deposit of substantial illegal proceeds without suspicion from authorities and without breach of the requirements.

Further, securities transactions of "high value settlements are made in cash, especially where the securities in question are readily marketable or payable to bearer."43 Again this poses difficulty in tracking down which securities transactions are financed with criminal proceeds, as most if not all securities transactions involve high value settlements. Unless, the records of transactions are consistently audited.

 

Is money laundering a criminal offence in Western Samoa?

There is no specific legislation criminalising money laundering in Western Samoa. The Crimes Act 1961 does not provide for any offence of money laundering or related activities. The five offshore banking legislation also makes no reference to money laundering. It merely provides monetary penalties if any provision of the said legislation is breach. Thus there is no prevention against the use of the Western Samoa Off-Shore Finance Center as a money laundering center or transit point, where money laundering is not an offence.

Although any business can be involved in money laundering schemes, it is the financial institutions that are most at risk. Money laundering "can not take place without using financial institutions, especially in countries where banking secrecy is paramount"44, exchange control is dismantled and taxation exemptions are generous. Such an environment is present in the Western Samoa Off-Shore Finance Center.

Hence it would be naive for the Government of Western Samoa to think that money laundering will not affect its Off-Shore Finance Center. It is advisable that the five offshore banking legislation must expressly provide for an offence of money laundering. Even if the Central Bank and the Minister of Finance claim that they are fight on their security system in the scrutiny of potential and existing offshore banking users, and the auditing of current licensees financial records, the deceptive nature of money laundering makes it difficult to detect and deter.

The remaining chapters will illustrate how money laundering in its three stages can exist within the structures of an offshore banking center. The placement process can take place at the point of entry where there is lack of control over licensing and registration and this will lead to a discussion of the roles of companies licensed to use the Center's services. layering is more likely to occur at the stage where the offshore user in engaged in the services. Finally, where the integration process is achieved, the regulation and control measures should be examined to determine whether there is adequate or otherwise legislation to deal with problems of money laundering existing. There is a need for both remedial and long term strategies to be adopted by the Western Samoa Government with a view of minimizing the risks of money laundering.

 

Chapter 3

Licensing and Registration of Off-Shore Users

Introduction

The chapter analyses legislative provisions for licensing and registration of offshore users of the Western Samoa Off-Shore Finance Center. It aims to identify loopholes that would undermine control over who engages or invests in businesses within the Center. The implication being that the placement stage of money laundering is facilitated due to a lack of legislative control.

The licensing and registration of offshore users, provides a crucial control device over parties who wish to carry on business using the Center's services. The Government is vulnerable at this early stage of entry, as it strives to maintain a credible offshore banking system, whilst vigorously competing for its share of the offshore banking market. For the sake of credibility, the entry or filtering process has to be water-tight to enable officials to promptly detect money laundering placement.

The offshore banking legislation provide for the incorporation of international companies (limited life or long term) and for the registration of trustee companies and a foreign companies. Any of these three companies can be registered and licensed as an Offshore Bank Licensee, an International Trust, or an International Insurance Licensee.

 

Licensing

Part II sections 3-17 of the Off-Shore Banking Act 1987, provide for the licensing of offshore banks in Western Samoa. An intended operator must obtain a licence as section 3 prohibits any transactions using the offshore banking services if the user is not a duly licensed operator.

According to section 4, only companies or corporate bodies can obtain licences to operate as offshore bankers. Such as the international company incorporated overseas, a registered foreign company which is an overseas company incorporated under the Companies Act 1955(NZ) Western Samoa, and a trustee company which is a domestic company also incorporated under the Companies Act 1955 (NZ) Western Samoa. This is to ensure that a legal personality exists which can be sued upon, hence offering protection to creditors. A Company is the ideal legal structure used by money launderers to gain entry into offshore finance centers as it provides a legitimate facade for its operations.

All licence applications45 are send to the Central Bank of Western Samoa addressed to the Minister of Finance. This is accompanied by `a certified copy of the Act, memorandum of association, articles of association, payment of the prescribed fee, financial standing, stock ownership, shareholding and management.46 Evidence is also required to the effect that the foreign company has complied with "the laws of the jurisdiction under which the company is incorporated," the nature and character of company concerned, and references from referees and guarantors. All this information enables the authorities to check and verify whether the applicant is engaging in credible business with sound financial standing. There is however, no requirement for the disclosure of source of funds or investment in that company, which suggests that illegally obtained funds can flow into the system undetected. This could be argued as being identified from the nature and character of the company concerned. That in itself is not conclusive as the company set up for the purposes of entering the offshore finance center may not necessarily show any connection with drug organizations, jewelry theft, and other fraudulent criminal activities.

The requirement for the applicant to give "notice of an address for service within Western Samoa"47 enables authorities to contact such offices for confirmation and verification of any of the information already provided. A Central Bank Officer under section 8(3), can take all documents, certificate or other written evidence to be proved in Court. This provision indicates a very limited jurisdiction of the domestic courts into the operations of the Off-shore Finance Center. Thus the court's powers are ineffective in relation to the substantive issues of which it is excluded.

 

Licence Types

Section 5(2) provides for 'A' and 'B' classes of licences, which the Minister may grant.

 

'A' Class Licence48

An 'A' class licence is granted to a person 49 who has "an aggregate of his capital issued and paid up in cash and unimpaired reserves of not less than 10 million dollars or an equivalent in a currency approved by the Minister." The licence is valid for five years and renewal for another five years term.50 The Off-Shore Banking Act 1987, fails to state whether these sums of money are deposited with the Central Bank or retained by the offshore bank itself. If deposited with the Central Bank then the authorities will be able to keep control over the amounts of money transferred into the system. Otherwise, the large capital amounts required facilitate the placement process of money laundering, given a company is engaged in criminal activities. The cash transfers are legal but if that source of money is illegal, then it will constitute the placement of 'dirty money' for laundering.

Class 'A' licensee can also operate on-shore banking through an office established and maintained in Western Samoa, with special approval by the Minister.51 This provision open Samoa's economy to foreign investment and there is no guarantee that large sums pouring in are for all legally purposes.

Economic benefits feature more prominently in the Government's fiscal policy than anything else. Once the licence is granted, an class 'A' licensee operating either through its own business office established in Western Samoa or a trustee company52 is to "recruit and employ all necessary workers on appropriate terms and conditions."53 This further facilitates placement where the 'dirty money' is invested in the-domestic economy through setting up the company's onshore business and is used for normal business purposes. Ultimately hiding the illegal source of the funds.

Under section 14, a licensee is required to have its head office in Western Samoa or a "principal office authorised to represent the company to accept legal services and to sue and be sued in the name of the company"; or an authorised agent or person present in Western Samoa. That is, the offshore bankers must have a business representative or make their presence in Western Samoa, which ever will satisfy the legal services requirement for suits if eventuate. This provides some indication of the activities of the Off-shore Bankers being subjected to the jurisdiction of the courts of Western Samoa.

 

'B' Class Licence

There are two groups of 'B' class licensee, differing in capital issued requirements and types of transactions engaged in. Both licence types are valid for one year periods only and can be renewed upon application.54

Section 7(1)(a)55 requires from the B1 class licensee "capital issued and paid up in cash and unimpaired reserves of not less than 2 million dollars or an equivalent amount in a currency approved by the Minister" Other conditions, which apply, include restriction on transactions to offshore banking business, transactions in the specified currency, and all business to be conducted through a trustee company. However, this class can apply under section 7(2), to "establish maintain and operate a business office of the licence holder in Western Samoa" through its trustee company. This provision makes the distinction between 'A' and 'B1' a legal fiction, in relation to the activities they are permitted to engage in. Operations through trustee companies enable the Government to keep track of the activities of its offshore users. As domestic companies, the Government is more able to keep control of their operations as it is subject to the domestic Companies Act 1955 (NZ) and the Trustee Company Act 1987

The B2 licensee under section 7(1)(b),56 is required "an aggregate capital issued and paid up in cash and unimpaired reserves of not less than 250,000 dollars or an equivalent amount in a convertible currency approved by the Minister.57 This class is restricted to offshore banking business58 and transactions in a specific currency. It is prohibited from servicing cheque account facilities for any of its depositors and not allowed to solicit or accept valuables from the general public. These restrictions narrow the scope of activities of the B2 licensees.

The Minister basically has an unfettered discretion as all applications for licensing are subject to his approval and he can even vary or revoke or add any of the terms and conditions to the licence.59 These wide clauses means that the Minister is prone to bribery, political, social and economic influences which will affect his judgment. This discretion is absolute as section 9(6) expressly states that in granting or refusing a licence, the Minister's discretion "shall not be reviewed or questioned in any Court by way of appeal prerogative writ or otherwise." That is, it can not be challenged on judicial review or any other means. It may be possible though, for the aggrieved party to apply for a declaratory judgment against the Minister's decision, under the Wednesbury principle .60 That is, where in the interest of justice is not served by the decision it should be set aside. The discretion of the Minister is too wide to be in one person's hands. Perhaps a Board or Committee should be exercising this wide discretion.

 

Registration

One of the promotion features of the Western Samoa Off-Shore Finance Center, is the "timely registration of companies with the minimum of red tape."61 Registration of offshore users are conducted under the separate Acts depending on the type of company to be registered. These types are the trustee companies, international companies, international trusts companies, international insurance companies and foreign registered companies.

Trustee companies are registered under the Trustee Companies Act 1987 sections 5 and 6. and is prohibited by section 4 prohibits to carry on the business of a trustee company, unless it has been duly registered. Section 5 permits domestic companies "incorporated under the Companies Act 1955(NZ) or registered as an overseas company under that Act" to apply to be registered as a trustee company. Applications with the prescribed fees, must be accompanies with an "aggregate capital issued and paid up cash and its unimpaired reserves" of not less than five hundred thousand TALA or an equivalent amount in any other currency approved by the Minister.62

An international trust according to section 15 International Trusts Act 1987, is a trust where "at least one of the trustees, donors or donees of a power ... is either a registered foreign company, an international company or a trustee company" and beneficiaries are non-residents at the time. Under section 19, registration is deemed to have taken place when the Registrar has signed and entered a memo of the name and particulars of the trust. Annual registration is required at the end of every 12 months from the previous date of registration. Since 1994, international trusts have grown by 179% "principally from the registration of offshore superannuation funds under the International Trusts Act 1987"63

As for international companies, these are incorporated and registered under section 7 International Companies Act 198764, with a certificate of incorporation issued for a period of 12 months only. This Act allows for long term international companies to be registered for 5, 10 or 20 years and for the registration of foreign companies, which want a permanent establishment in Western Samoa. It further provides for "a company incorporated else where to be re-domiciled in Western Samoa and vice versa."65 The number of international companies registered in Western Samoa grew by 67%.66

International insurance companies are registered under sections 4-8 International Insurance Act 1988. Section 4 requires any person conducting any "offshore insurance business in or from within Western Samoa" to hold a valid certificate of registration issued under this Act. Applications made to the Registrar of Companies, under section 5, must be accompanied with a "certified copy of the Act, charter, deed of settlement, memorandum of association and articles of association, the prescribed fees, evidence of nature and character of the applicant's business, financial standing, shareholding and management, ultimate beneficial ownership of stocks and shares, the address of its registered office and any other documents and references as requested by the Registrar. All these information will enable the authorities to make an informed decision on whether or not to accept that company. Applicants have to be either an international or a foreign company67 and such certificate of registrations if granted is valid for 12 months only, renewable for another 12 months.68 The restriction over the period of registration to 12 months is to enable the Government to make money on annual registration, which is its only real source of income earned from the operations of its Center.

The growth of the Western Samoa offshore sector has been gradual with an "average of 300 companies registering each year."69 This steady increase is indicative of the ease with which applications are accepted and of the quick and efficient registration. This is indeed advantageous for the promotion of the OffShore Finance Center. However, the time frame of at least 24 hours for registration, may not be sufficient time for Central Bank officials to check on the source of funds of applicants or to verify their documents. This check is important, as it is an indication of whether or not any placement has taken place, especially with the requirements for large capital issued to be paid in cash. Once the illegal source of funds is ascertained, then declining that company's application for licensing or registration can prevent placement. The licensing and registration provisions should also require the disclosure of the source of funds and the ultimate beneficiaries of trust, or insurance policy or bank account. Of course that information will be subject to secrecy to the Central Bank officials only.

 

Chapter 4

The Off-Shore Finance Center Services & Implications

Introduction

This chapter examines the services offered by the Western Samoa Off-Shore Finance Center. The three main financial services offered are; offshore banking, offshore insurance and international trusts, as prescribed by legislation.70 The chapter will analyze selected services, which highlight the lack of statutory control and provide opportunities for money laundering activities to filter into the Center. The areas discussed are; confidentiality guarantee, share capital maintenance, offshore insurance, international trusts, taxation exemptions and exchange control exemptions.

The Off-Shore Finance Center make available its financial services facilities to several countries like New Zealand, Australia, Hawaii, Singapore, the Philippines, Hong Kong, Japan, San Francisco and Los Angeles in the United States of America, Argentina, Germany, Austria, Belgium, Greece and South Korea. Using a multitude of financial service facilities with links to all these countries, it is possible for money laundering operations to filter through Western Samoa. In particular where these financial facilities are to secretly and securely hold assets in a tax free environment in a variety of investment structures thereby minimizing taxation, ensuring asset protection and providing access to investment opportunities which may not be available onshore."71

 

Offshore Banking Services

Section 2 Off-Shore Banking Act 1987 defines the variety of banking services available through its Off-Shore Finance Center. These banking services include accepting deposits in current, savings and deposit accounts, which facilitate placement given there is no reporting requirement imposed on Offshore Banks.

That is, there is no statutory limit on the amounts that can be deposited into an account.

Dealings can also be done in a variety of instruments such as bills of exchange, promissory notes, and bills of lading, whether negotiable or transferable or not. Further, acquisition, holding and issuing of debentures, debenture stock, bonds, obligations and securities are permitted. These are ideal for the layering process, where the illegal money is re-invested in other asset forms. With no statutory currency reporting requirements imposed on offshore bank licensees, there appears to be no control on the flow of money in and out of the Center. Without some form of control, the Center authorities will never be able to detect money laundering activities.

The Off-Shore Banking Act 1987, also permits the licensing of captive or inhouse offshore banks which are permitted "to raise funds from their shareholders or specifically nominated associated depositors."72 This is an ideal set up for companies involved directly in criminal activities, as this banking service will allow them to limit its depositors to its business associates and refinance its own shareholdings.

Further, the Minister of Finance may exercise his discretion to allow offshore bankers to engage in other 'business outside the customary scope of the business of banking."73 Thus there appears to be a wide scope of offshore banking services available, providing legal opportunities for money laundering operations to filter through the system without detection.

 

Dichotomy between Confidentiality and Disclosure

The dichotomy between confidentiality and disclosure in relation to information passing between offshore banks and its customers, is important as it is the secrecy element that provides the niche for illegal activities such as money laundering to flourish.

The banker/customer relationship is contractual in nature and gives rise to the duty of confidentiality, which is protected under statutory secrecy provisions. It is implied that that a banker will not divulge to third persons any information on the "customer's account, or any of his transactions with the bank, or any information relating to the customer acquired through the keeping of his account."74 This duty is however not absolute as held by the Court of Appeal in Tournier v National Provincial and Union Bank of England75 It is qualified where the consent of the customer express or implied is obtained, or unless the banker is compelled to do so by a Court order, or the circumstances give rise to a public duty of disclosure, or the protection of the banker's own interests requires it. These common law principles are safeguarded under the offshore banking legislation of Western Samoa as an attraction.

Section 25 Off-Shore Banking Act 1987, expressly states that the Minister, the Central Bank officers and any Government officials engaged in the regulation of the operations of the Off-Shore Finance Center "shall not reveal any information to any person." All information submitted by a potential or current licensee, "shall be regarded as secret." These secrecy provisions are attractive to investors who wish to keep their flies under wraps. The exception being where the Minister "may publish a consolidated statement aggregating the figures in the statements or returns.76 This disclosure by the Minister is however limited to statements and returns statistics for the purpose of public reports.

Section 26 77 makes it an offence where professional secrecy is breached and is punishable in court for a "term not exceeding 5 years, or to a fine of 50,000 dollars or both."78 The breaches cover instances of divulging information within Western Samoa or elsewhere in relation to offshore banking business and details of licensee accounts. It also includes any "attempts to induce others to breach professional secrecy" in such matters.79 Further, section 2780 imposes a vicarious liability onto the employee of licensee and auditing companies, where an employee is in breach of the secrecy provisions. These secrecy provisions extend beyond the employment period of the official concerned, hence they are effective. On the other hand, it provides the perfect secretive environment needed by money launderers to transfer their illegal proceeds and invest it into the system.

However there are recognised exceptions under section 26(3) 81 which allow for disclosure. It is not an offence where information is divulged to the Central Bank82, the client, local representatives of the licensee and employees of an overseas financial institution with the consent of the licensee. The disclosure of certain information is too sensitive that it requires the prior written approval of the Minister of Finance.83 Such information as to the amount representing the total assets of the licensee in Western Samoa, amount and currency of a transfer into or out of Western Samoa, amount of individual banking transactions, account names and account balances. Thus secrecy provisions are paramount as disclosure is limited to certain cases and sensitive information still requires the Minister's approval.

 

Share Capital Requirement

In the case of international companies, the "principle of capital maintenance is abolished in favour of a solvency test in regard to any distribution of capital or reduction of liability in respect of capital."84 This places the burden on directors who "must have a honest belief [subjective test] that any such distribution or reduction will not result in the company being incapable of meeting its obligations to creditors as they fall due."85 The absence of the share capital requirement means the absence of control over what the operations of international companies. Those international companies engaged in criminal activities are then able through being licensed in the Western Samoa Off-Shore Finance Center to filter illegal proceeds into the system for 'laundering'. The fact that details for allotments and redemptions of shares are not required to be filed with the Registrar, means that any illegal activities engaged in will not be easily detected and prevented.

 

Off-shore Insurance

Offshore insurance services are provided under by the International Insurance Act 1988. International companies and foreign companies registered under the International Companies Act 1987, may apply to the Registrar of International Insurance to carry out the business of offshore insurance.86 These types of companies can engage in offshore insurance, reinsurance or captive insurance and is strictly not allowed to carry on domestic insurance business.

Applicants are required to maintain high capital requirements for issued capital and unimpaired reserves. That is, "for general insurance business, the aggregate is US$500,000; for long term business US$500,000, for reinsurance business US$200,000 and for captive business US$100,000."87 These large sums are ideal for placing illegal proceeds into the system.

Reinsurance services involve small companies insuring their clients assets' with larger insurance companies where the latter has the finance to cover the risks insured. Captive insurance services involve accepting premiums from a limited group of companies or related parties. Companies undertaking captive insurance services are only required to maintain a minimum paid up capital and reserves of US$100,000 which need not be held in Western Samoa. There is also no requirement to maintain any margin of solvency.

As the nature of this service demands, insurance, reinsurance or captive insurance thus provides legal facades for illegal proceeds of money launderers to filter into the system. There is neither ceiling on the amounts or restriction on the assets types to be insured, hence it provides the ideal investment structure for illegal proceeds.

 

Anonymity of International Trusts

Any trustee company, international company or a registered foreign company, can register to operate as a trustee for an international trust created by the process of registration under the International Trusts Act 1987 The beneficiaries are at all times non-residents of Western Samoa. If either of these companies is operating as an international trust it is not required to file any accounts or reports at all with the Registrar of International Trusts. This provides the anonymity of beneficiaries of a trust which could possible include undesirable companies, businesses or individuals. Further, no records of international trusts transactions are required to be kept or filed with the Central Bank. This lack of disclosure of information to the Registrar of International Trusts, in relation to the filing of accounts and reports, makes it difficult for auditors to audit trust accounts for possible fraud and illegal activities.

The Act provides minimal asset protection. It does not invalidate a trust where the settlor has become bankrupt, so that the assets kept under the trust cannot be touched by the creditors or anyone else. Also where creditors allege that the settlement was made with intent to defraud them, the onus is on the creditors to prove it. These asset protection features assist the situation of money launderers.

A significant feature of the International Trusts Act 1987, is the ability to form and register non-charitable purpose trusts. This allows a trust to be created for a specific purpose and without the need for a specific or identifiable class beneficiary. This type of trust is becoming an important vehicle for tax planning arrangements and for holding voting shares of a company. This makes it possible for a purpose trust to own the shares in a private trust company, which then acts as trustee for a family or shareholders trust. 88 Such an arrangement enhances the confidentiality of investment structures, required for layering and integrating illegal proceeds. The ultimate beneficiary will never be known.

 

Taxation Exemptions

The tax free environment is ideal for the free in-flow and out flow of criminal proceeds for laundering, without losing its value. Tax exemptions ensure the unrestricted accumulation of wealth. There is no withholding tax on dividends, interest or royalties paid to shareholders of offshore companies. There is full stamp duty exemption on contracts entered into by offshore companies, and total capital gains tax exemption on capital gains.

Section 24 International Trust Act 1988, exempts international trusts from paying tax on profits or dividends paid out The same applies to the income of a foreign company incorporated. Section 28 Off-Shore Banking Act 1987, provides for no income tax, or any other direct or indirect tax, or duties levied "on the profits or gains or interest earned or dividends earned by a licensee or on dividends paid to a depositor by the licensee, in respect of the offshore banking business it does from within Western Samoa." Section 29 also exempts offshore banks dealing with any negotiable instrument from stamp duty that is normally 10% of the value of that instrument. 89

However, under Section 22 Trustee Companies Act 1988 the income of a registered trustee company, "being a locally registered company, remains liable to income tax except where it relates to dealings on behalf of an international or registered foreign company."90 According to Section 30, if that income was earned from transactions undertaken on behalf of an international or registered foreign company, then there is no tax imposed. In practice, this provision is difficult to exercise and control because trustee companies can claim that a transaction was done on behalf of an international company or a foreign company. It is difficult for the Inland Revenue Department to determine what transactions are for offshore purposes only and which ones are for the local operations of that domestic company.

The commonly asked question is, whether offshore banks are set up for tax evasion. Most offshore banking centers "require little or no tax for businesses in their regime"91, this is tax avoidance which is perfectly legal. Provisions like section 28 92 permits no tax to be paid so long as the licensee is engaged in offshore banking business. Thus offshore finance centers condones tax avoidance schemes but not tax evasion. However a possibility for tax evasion may arise where Western Samoa is not a signatory to any 'Double Taxation Treaties'93 which would allow the offshore company to be taxed in the offshore center. 'The products they supply, built on low taxes and high secrecy, can be used as perfectly valid tax-planning techniques for expatriates and non-residents of the offshore center, or thoroughly invalid schemes for the unscrupulous. Nowhere is this more evident than in the use of offshore companies."94

 

Exchange controls Exemptions

Section 30 Off-Shore Banking Act 1987, states that all offshore banking business "shall be exempted from any currency and exchange control restrictions or regulations" and from any ''foreign exchange levy." This relates to the -"taking or sending of any foreign currency out of Western Samoa, by an international or registered foreign company or trustee company or in respect of the transactions of an offshore bank or registered trust or the business of a registered insurer."95

This exemption allows for the free flow of large sums of money in and out of the Western Samoa Off-Shore Finance Center. This provides the perfect avenue for criminal proceeds to flow into the center where it can be invested and dealt with through legal means so as to 'launder' it before being extracted as profits on investments or as dividends on shares. The main effect of this absence of exchange control is that it reduces control over capital retention as assets freely flow in and out of the economy.

No country, which is integrated into the international financial system, is going to escape the attentions of money launders. The dismantling of exchange controls and taxes, reduction in capital requirements, availability of purpose trusts, all facilitate the mobility of cash flows.96 This is the environment created by the services available from the Western Samoa Off-Shore Finance Center. It is naive then to think that the Western Samoa system is safe from intruding money launderers.

 

Chapter 5

The Role of Companies and Implications

Introduction

This chapter analyses two important incidental roles of companies operating within the Off-Shore Finance Center. That is, the role of trustee companies as nominee shareholders or directors and of companies in transfer pricing. This will explain how companies facilitate the 'placement` and 'layering' processes of money laundering.

The three main companies are the international companies (limited life and long term), registered foreign companies and trustee companies. Any of these can be registered and licensed as an offshore bank licensee, an international trust licensee or an international insurance licensee.

 

Trustee companies as Nominees

A trustee company is the "one domestic entity necessary to service the international companies under the scheme."97 Hence all applications for incorporation, registration or issue of licences by international and foreign companies must be channeled through a trustee company.98 This places on the trustee companies, the onus of the initial vetting of applications to ensure that only quality business is accepted. Their main role as the middle man between the Government of Western Samoa and international companies, 99 is to ensure that all requirements under the offshore banking legislation are complied with and that all applicants are financially sound. It can be held liable where its clients disclose false information. Thus it provides the link between the services offered by the Center and money launderers.

In relation to international or registered foreign companies, the trustee company's role is to provide nominee corporate services. Upon application for licensing and registration it enters itself as the sole subscriber or nominee company "acting on behalf of the beneficial owner, whose name need not be disclosed."100 Except in cases where it Is registering an international trust, as it is required by section 9(2) International Trusts Act 1987, that all beneficiaries "shall be identifiable by name or ascertainable by reference to a relationship to some person." Although the names of the beneficial shareholders are disclosed to the Central Bank, their identity is protected under the confidentiality duty. The effect is that often the "beneficiaries are unknown, the shareholders elusive" and the directors are law firms registered to carry out the business of trustee companies. 101

Under section 2(e)(ii) Trustee Companies Act 1988 a trustee company can provide directors. secretaries and registered offices for international and registered foreign companies. They can also appoint their subsidiaries as nominees instead. 102 The implications of this nominee role is it allows for anonymity "of the beneficial shareholders in an offshore company" by the use of nominee shareholders. This in turn facilitates the placement and layering of money laundering. How? As a nominee for the international company, it deals directly with bank transactions where large sums of cash are deposited into numbered accounts, or in arranging purchases of investment bonds or real property. These transactions provide legal means to 'place' illegal proceeds as it is disguised by changing its form to another asset type. That money will later on be invested or used for other transactions, thus legitimizing its illegal source. This is further facilitated by the trustee companies' interaction with the local professional firms on behalf of its non-residents clients, by providing; accounting, legal and auditing services, banking facilities, certification and notarisation services. All of which provide a complex layer of financial transactions permitted by the offshore banking legislation which facilitates 'placement' and 'layering', making it difficult for the audit to track down illegal funds filtering into the system.

The role of trustee companies in essence, provides the anonymity required by offshore users who engaged in money laundering, and services the financial and legal services needed for the 'placement' and 'layering' of illegal proceeds.

 

Transfer Pricing

Companies licensed or registered to carry on business within the Western Samoa Off-shore Finance Center, are either a subsidiaries Shore or the parent companies of the multinational corporations engaging in businesses worldwide. In most instances, the parent company is located in a heavily taxed country with subsidiaries spread out in countries with low or no tax regimes. This web allows for intra-group pricing arrangements which are '.'sometimes used to shift profits from high taxing countries to low-tax or no-tax countries.103 This is transfer pricing and it is "achieved by under or over pricing goods and services supplied or acquired; and/or adopting an arbitrary basis for the allocation of expenses" between countries.104 Thus large sums of profits irrespective of its source, is transferred through this pricing mechanism from one country to another. In the cycle, offshore finance centers facilitate the transfer with its attractions of taxation and foreign exchange exemptions, exploited by these non-resident companies to their advantage.

This practice is not illegal and is of no concern of the Inland Revenue Commission in Western Samoa as offshore users enjoy total tax exemptions under the offshore banking legislation. Nevertheless, the practice of transfer pricing provides a perfect avenue for proceeds of criminal activities to filter into the Off-Shore Finance without detection or suspicion. This is a concern which is difficult to regulate through any Transfer Pricing Legislation 105, but one which the Central Bank of Western Samoa should consider carefully and find ways to monitor such activities as it could be used as a mechanism of achieving the 'placement' and 'layering' processes of money laundering.

Overall the roles of companies within the Center is to provide financial services for "people seeking to reduce withholding taxes" or taxes on dividends in order to make large profits, companies involved in international trade; "families settling aside assets for generations."106 At the same time, it inadvertently and covertly facilitates the 'Placement' and 'layering' stages of money laundering. So far as vetting clients107 is concerned, it is ineffective, as the offshore banking legislation does not mandate the disclosure of the "source of funds and the identity of the beneficiary."108 As the Acts do not prohibit these incidental roles of companies, it can be seen that playing the facilitator role to money laundering activities is not illegal. This analysis has identified areas, which the current offshore banking legislation does not address due either to inadvertence or to the desire to provide services without much restriction.

 

Chapter 6

Regulation and Control Measures

Introduction

This chapter analyses the regulations and control measures provided by offshore banking legislation to minimize and deter illegal activities such as money laundering from occurring. It discusses the difficulty of enforcing domestic statutory regulations and the dilemma encountered by offshore centers when required to enact and impose strict domestic offshore banking legislation, which could result in losing its market share in international investments. The opportunity cost is capital flight from the jurisdiction with strict domestic offshore banking legislation. Future safeguards are recommended in the course of the discussions.

 

Domestic regulatory and control measures

There are some but limited control measures provided by the offshore banking legislation. The main internal self regulatory provisions are the requirements to keep accounting records and to carry out annual auditing. This chapter suggests that the offshore banking legislation adopt the `knowing your customer' approach as part of its internal regulations.

 

Accounting Records and Auditing

To establish an "efficient and effective audit trail, the financial institutions must keep and maintain comprehensive transaction records."109 All the offshore banking legislation, require that offshore users keep proper accounting records of transactions for internal auditing purposes. Accounting records must be comprehensive to track down the real source of income and business of the applicant. This is an important weapon in efforts to counter money laundering"110 as the records will provide useful information on the people and organisations using the offshore banking services and those involved in money laundering schemes.

All licensed offshore banks111 are required to maintain proper accounting records and made them available during business inspection and for audit purposes. Such accounting records like profit and loss accounts, balance sheets, directors' reports, notes of directors, that will ''explain the methods and calculations by which accounts of the company are made up."112Those records should "correctly record and explain the offshore banking transactions and financial position" of the company's business.113 That is, to provide records from which 'true and fair accounts of the offshore banking business" can be prepared for proper auditing purposes.114

Annual auditing of licensees' accounts and balance sheets by an approved auditor is mandated with a report to be sent to the Minister and to its shareholders.115 Section 19 116 requires all offshore licensees to "submit to the Minister through the Central Bank within 6 months of the end of its financial year, audited accounts." An independent competent auditor who is approved by the Minister carries out the auditing. The independent auditor, ensures unbiased auditing. The authorities117, also keep fight scrutiny over the licensee's banking operations with its own customers.

Further under section 20,118 the offshore banking licensee must submit statements of assets and liabilities" and 'a return providing an analysis of customers' liabilities to the bank in respect of loans, advances, and other assets of the bank." All this information will enable authorities to examine the nature of all transactions and equip them with a device to detect whether or not the placement and layering stages of money laundering take place.

Section 21 gives the Central Bank the right to inspect the licensee's register of shares, record of transactions. and any other records including its premises "where the licensee carries on his offshore banking business." The Minister can also direct the licensee to supply any information relating to its offshore banking business but not in respect of the affairs of an individual customer.119 This provision recognises the bank-customer confidential relationship. Nevertheless, under an official examination, the "books and affairs of any licensee" can be examined "under conditions of secrecy."120 This will only occur if the licensee himself suspends payment or it is believed that his offshore banking business is detrimental to the interest of its depositors and creditors.

Sections 13 to 19 International Insurance Act 1988 requires registered international insurers to keep proper transactions records and accounts for auditing purposes. Such business records as insurance policies, claims records, the profit and loss accounts and the balance sheets. 121 Such records and accounts should show a correct record of transactions and financial position, so that a true and fair view of the accounts are prepared and provided for auditing. Profit and loss account and balance sheet, are required to be submitted annually. 122

Similarly, trustee companies are required to submit to the Registrar123 such 'information, data and returns as may be prescribed at such times as may be prescribed." Annual audited accounts and financial reports submitted to shareholders and to the Registrar, are a must.124 It is the Registrar's duty to "maintain a general review of the activities of trustee companies" for the purposes of ensuring that the "provisions of the Act are being complied with and that the trustee company is in a sound financial position"125 Thus the operations of a trustee company is continuously under scrutiny by the Registrar who is entitled at all reasonable times, to have "access to the books, records, vouchers, documents, cash and securities of any trustee company. "126 Section 25 allows any person other than the Registrar, to examine the books and accounts of a trustee company. But that person must show interest in that trust to the satisfaction of the Supreme court and is objecting to "an act or decision of the trustee company on the basis that there was some irregularity or impropriety."

Also, international companies are to keep proper accounts and records of transactions for auditing purposes. 127 These statutory requirements imposed on companies and business to keep proper accounting records and carry out annual auditing, provide an effective internal measure for scrutinizing transactions and activities of these offshore users.

 

Know your customer

Money launderers are most vulnerable to detection as attempts are made to get rid of large sums of illegally obtained money, through deposits and transfers into numbered accounts. Likewise offshore banks are vulnerable to being exploited for the purpose of providing security and legal protection to illegal proceeds. Hence efforts to detect and minimize the placement process of money laundering should concentrate on the procedures adopted by deposit-takers. 128

The solution adopted is known as `know your customer'. This technique requires that the offshore banking legislation and policies, mandate the disclosure of information relating to the identity of the customers, their financial standing, names of shareholders and their shareholding, the nature of the customer's business, the source of funds and profit margins. The basis of this technique is for the deposit taking institutions, to take control and responsibility by knowing all about their customers.129 This approach was adopted in The Bahamas Offshore Banking Center where offshore banks licensees were "directed to identify their customers and to obtain proper references before opening an account. Even when it involves a third party acting on a Power of Attorney, the bank must know the identity of the person concerned. The directive to `know your customer' is of course, "the first step toward dispelling anonymity required by persons seeking to carry out criminal activity." 130

The 'know your customer' approach should be adopted by the regulators of the Western Samoa Off-Shore Finance Center, as the identity of the customer is still protected by the confidentiality duty between offshore banks and their customers. The Minister of Finance has wide discretion to enquire about any information from the companies and licensees of the Center. If this discretion is not wisely exercised, it will defeat the purpose of the 'know your customer' technique and render it ineffective as a means of detecting and minimizing the 'placement process' of money laundering. Perhaps the offshore banking legislation should mandate the disclosure certain information relating to the identity of the customers and the nature its business, source of funds and the ultimate beneficiaries and shareholders.

In addition, this technique places the burden on the offshore banks to disclose and report suspicious transactions, which their customers are involved in or associated with. Thus trustee companies who act as middle men, should be required to disclose the necessary information and report any suspicious transactions its clients are involved.

For an effective adoption of 'know your customer' technique, considerable effort should be placed on staff training and awareness programmes as to ways of obtaining information about customers, and emphasize the importance of reporting suspicious transactions.131 Banks '`should make reasonable efforts to determine the customer's true identity, and have effective procedures for verifying the bona fides to and that a service is not provided where there is good reason to suppose that transactions are associated with laundering activities. "132 The success of the Off-Shore Finance Center and the confidence of its users and depositors in its services, will be undermined where offshore banks expose themselves to direct exploitation by money launderers which may be possible through "failure to identify undesirable customers."133 Even inadvertent association with illegal activities "can result in an adverse publicity that undermines customer confidence" 134 in that offshore center.

This inadvertent behaviour could be remedied by not only criminalising the activities of the money laundering customers but bank officials who assist through an act or omission to report the matter. An offence to this effect was passed in the Bahamas under its Tracing and Forfeiture of Proceeds of Drug Trafficking Act of 1987 That is, the "laundering of the proceeds from drug trafficking is a criminal offence not only for the trafficker but also for those who have allowed themselves to become involved as accessories before or after the fact."135 This includes offshore bank officers, trustee companies and other users. Protection though must be given to the 'whistle blower' by maintaining secrecy over the name and identity of that person or company. This will provide for a working relationship between the offshore users and the Central Bank.

While offshore banks are vulnerable to exploitation by money launderers through its deposit-taking services, if the placement process is deterred earlier, then the vulnerability of other financial services such as insurance, reinsurance and international trusts, to exploitation at the layering and integration stages, is reduced. Internal regulatory measures such as the `know your customer' technique will assist in identifying the occurrence of the placement process, so that it could be dealt with before money laundering activities blend into the system. Thus responsibility should be placed on trustee companies to be well informed about the customers and their business.

 

Money laundering as a criminal offence in Western Samoa

Another internal regulatory measure, which is not present but is recommended, is to make money laundering and related activities, criminal offences. This can be done under the Western Samoa Crimes Act 1961 or through amendments the offshore banking legislation. For example, in the United Kingdom, "laundering the proceeds of drug trafficking or facilitating the retention or control of terrorists funds are criminal offences."136 Alternatively, to enact an independent Act for that purpose such as the Bahamas Tracing and Forfeiture of Proceeds of Drug Trafficking Act 1987 This will enable the Supreme Court to deal with money laundering activities.

Whatever the enactment taken, the Government of Western Samoa should also consider implementing an independent body specializing in policing and dealing with these types of offences. For instance a Security and Investment Commission or a Financial Services Commission. That specialized body should have the special knowledge and techniques in detecting money laundering and related offences. Thus it should comprise of lawyers, auditors, accountants, finance and banking consultants. The specialized body's task is to investigate any suspicious transactions and activities and should be given the power to prosecute matters in court. The Criminal Investigation Division of the Police Department will not be able to carry out the prosecutions due to their lack of the special knowledge needed to detect money laundering activities. Besides, the offenders will be persons of specialized knowledge working for the companies using the services of the Off-Shore Finance Center.

If Western Samoa decide to criminalise money laundering and related activities, it should go all the way and implement a special body to police such activities. However, there is the difficulty of investigating and prosecuting such an international activity as money laundering with the use of domestic legislation with limited policing facilities. Western Samoa also should consider endorsing and ratifying international conventions aimed at combating money laundering. But there is the dichotomy between having restrictive domestic offshore banking legislation that could result in loss of market share of international investments, and having liberal offshore legislation that is vulnerable to exploitation by money launders.

 

International Initiatives to Counter Money Laundering

The international components of offshore banking and money laundering have complicates the task for domestic offshore banking legislation, to monitor these operations. These are difficult processes to monitor because of the ease with which money whether legal or illegal, are transferred and deposited anywhere in the world at any time. The increasing integration of the world's financial systems has enable money launderers to place their criminally derived cash proceeds into the financial system and move their assets rapidly between international jurisdictions. Thus, '.the need for close international cooperation in countering money laundering has been recognised by many governments"137 and a number of legal and financial measures have been implemented.

The question is, does the Western Samoa offshore banking legislation reciprocate and endorse these international conventions and treaties? Clearly as a young contender in the arena of offshore banking, Western Samoa has not endorsed any such international conventions or treaties such as;

1.The UN Convention against Illicit Traffic in Narcotic Drugs and Psychotropic Substances, (the Vienna Convention) 1988,

2.European Convention on Mutual legal Assistance 1990,

3.Council of Europe Convention on Laundering, Search, Seizure and Confiscation of the Proceeds from Crime 1992.138

These International Conventions have acted as legal measures to combat money laundering and related activities. The significant agreement is the UN Convention against Illicit Traffic in Narcotic Drugs and Psychotropic Substances, (the Vienna Convention) 1988. All countries that ratify it were committed to introduce a comprehensive criminal law against the laundering drug trafficking proceeds and to implement measures to identify, trace, and freeze or seize such proceeds.139 The other two other international conventions provided further measures to counter money laundering. Such as those adopted by the Bahamas in its Mutual legal Assistance Treaty with the US, which allowed for the exchange of information in relation to this offence and a special protection clause was adopted which exempts officials from responsibility for breaching restrictions on the disclosure of particulars regarding an account, given the funds derive from any activity constituting an offence under terms of this Agreement. As a result of these international initiatives, the "Bahamas is no longer regarded as an attractive place for laundering the proceeds of drug trafficking" and is", no longer listed among the 18 major world money laundering centers." 140

Therefore, Mutual Legal Assistance Treaties aim for cooperation at the international level, to ensure that proceeds from drug trafficking [and other criminal activities] do not find a safe haven."141 The very ability of money launderers "to change their routes at will demands cooperative efforts between all countries, whether they are supply, transit or demand states. It is this international dimension of the narcotics trade which makes cooperative initiatives at the international level so very essential."142

Financially, the "Committee on Banking Regulations and Supervisory Practices issued the Basle Statement of Principles on the prevention of criminal use of the banking system for the purpose of money laundering in December 1988." 143 The principles laid down include; `know your customer', compliance with the law, co-operation with law enforcement agencies and policies, procedures and training of bank staff. 144 The emphasis is on the financial institutions themselves to be aware and take initiatives to prevent the occurrences of money laundering through the services they offer. Internal management and procedures of identifying their customers and the nature of their businesses is crucial for security purposes and for maintaining reputation as a sound and secure offshore banking center.

Together, the "framework established by the Vienna Convention and the Basle Statement of Principles" 145 are now the main international forums for combating money laundering. These forums together seek cooperation from all offshore banking centers and tax havens ''to prevent the utilisation of the banking system and financial institutions for the purpose of money laundering, and to consider additional preventative efforts." It is recommended that Western Samoa needs to ratify these internal conventions and adopt the financial policies, if it is to provide a secure and sound Off-Shore Finance Center to service the world.

Therefore, Western Samoa should consider adopting regulatory measures at both the national and international levels and enact anti-money laundering legislation to minimise the risk of its Off-Shore Finance Center being abused for money laundering. It should not deny such risks, but it must recognise it and take a preventive stand against it.

 

Conclusion

This project has produced the following findings on the two propositions, which compose the thesis.

Primarily, that whilst an offshore banking center provides for international banking, it may also serve the purpose of money laundering, either covertly or overtly. This is demonstrated by reference to the three stages of money laundering, placement, layering and integration, each of which can seen to be facilitated through the licensing and registration procedures, the services offered by the Center and the roles that the companies play. The ease of registration and licensing and the large capital requirements provide an avenue for the placement stage of money laundering to start. The various financial services and the roles of companies provide a legal link between the underground economy and the legal offshore center economy. Both of these methods facilitate the layering and eventual integration stages of money laundering. Thus the risks of the Off-shore Finance Center being abused for money laundering are too great to ignore or discarded without taking initiatives to combat it.

Having identified that it is possible for offshore finance centers to be used as legal fabrications for money laundering processes, the project then examined the current offshore banking legislation to determine whether it provides the necessary precautions. It was found that the offshore banking legislation fails to recognise money laundering as an offence. Western Samoa has not ratified any of the International Conventions on countering money laundering. It therefore, does not have access to the international forum of Mutual legal Assistance. The only internal safeguard against any illegal and fraudulent activities is the mandate for accounts and records to be properly maintained for auditing purposes. Otherwise, the Western Samoa offshore banking legislation is not foolproof against the risks of money laundering.

 

Recommendations

It is recommended that Western Samoa demonstrate that it is serious about doing all it can to detect and deflect money laundering, while at the same time guaranteeing confidentiality and privacy to those wishing to undertake legitimate business. The offshore banking legislation should be amended to include moneylaundering offences or separate anti-money laundering legislation should be passed. It should be noted though that all the legislation can do is minimize the risk and increase the difficulty and cost for money launders but it can not totally wipe it out.

The anti-money laundering legislation should then be supplemented by the adoption by offshore banks of a comprehensive, 'know-your-customer' self-regulatory policy, endorsing the Basle Principles on money laundering. Western Samoa should also ensure participation in Mutual legal Assistance and Information Exchanges, which will provide for cooperation in deterring international criminal activities such as money laundering. Further, the Central Bank of Western Samoa and the trustee companies should exercise due diligence over vetting customers.

Western Samoa needs "to prevent any compromise to the integrity"146 of its Off Shoe[sic] Finance Center as no type of financial institution is immune from money laundering. Thus the Government of Western Samoa should not be complacent and should take a preventive role and implement both legal and financial initiatives to minimize the risks of its Center being used for money laundering activities.

Appendix

1.Copy of registration fees provided in `Government Information on the Off-Shore Finance Center

2.List of Western Samoa trust companies

 

APPENDIX 1

SUMMARY OF MAIN FEES

  APPLICATION

US$

ISSUE OF LICENCE US$ RENEWAL US$
International company 300.00

300.00
Long Term company which registers for a long term period of-

5 years

10 years

20 years

 

1,000.00

1,500.00

2,000.00

   

1,000.00

1,500.00

2,000.00

Limited life international company 300.00   300.00
Redomiciled company 300.00

300.00
Foreign company 300.00

300.00
Approval in principle to redomicile a company NIL

Registered company auditor 200.00

200.00
Reservation of company name (for 3 months) 10.00

Registration of change of name and/or issue of replacement certificate 50.00

"A" class bank licence 5,000.00

"B" s. 7 (1) (a) class bank licence:-

(i) with one currency

(ii) with two to five currency

(iii) with more than five currencies

2,500.00

2,500.00

2,500.00

2,000.00

3,500.00

5,000.00

4,500.00

6,000.00

7,500.00

"B" s. 7 (1) (b) class bank licence 1,000.00 2,000.00 3,000.00
Trustee company licence 2,500.00 10,000.00 2,500.00
International trust 150.00

150.00
Registered insurer:-

(i) captive insurance business only

(ii) reinsurance business only

(iii) general and/or long term insurance business

(iv) all categories insurance business

500.00

500.00

1,000.0

1,000.00

500.00

1,000.00

1,500.00

2,000.00

1,000.00

1,500.00

2,500.00

3,000.00

Registered insurance Manager 100.00 250.00 250.00

 

TRUSTEE COMPANIES

APPENDIX 2

WESTERN SAMOA INTERNATIONAL TRUST COMPANY LIMITED
Level 2, Lotemau Centre
Beach Road P.O. Box 3271
Apia

WESTERN SAMOA
Telephone No.: (685) 24 550 24 584
Telex No. SAMTRUST 2958SX
Fax No.(685) 21 837

This company has associated offices in Hong Kong, Singapore, Sydney, Melbourne, Cook Islands and Vanuatu.

INTETRUST LIMITED
Level 5, Central Bank Building
Beach Road
PO Box 2033
Apia

WESTERN SAMOA
Telephone No.(685)20 776
Fax No (685) 20 777

This company has associates in New Zealand, Holland, and in Hong Kong.

INTERNATIONAL BUSINESS TRUST LIMITED
Chandra House, Convent Street
PO Box 757
Apia

 

WESTERN SAMOA
Telephone No.:(685) 24 280
Fax No...(685) 24 370

BERMUDA TRUST (WESTERN SAMOA) LIMITED
Level 5, Central Bank Building
Beach Road
PO Box 3707
Apia

 

WESTERN SAMOA
Telephone: (685) 20 224
Fax ..(685) 20 225

This company is part of the Bank of Bermuda Group which has an international network with offices in eight regions including the Americas and Europe.

 

OFFSHORE INCORPORATIONS (WESTERN SAMOA) LIMITED
The Office of Stevenson, Nelson & Mitchell
1/F NPF Building,
Beach Road, Apia

 

WESTERN SAMOA
Telephone No.:(685) 21 751
Fax No.:(685) 24 166

 

This company provides the largest incorporations service in Asia, and has offices In Singapore and Hong Kong.

 

Bibliography

Texts

Australian Commentaries on Halsburyls Laws of England, (4th ed., Butterworths, Sydney, 1976) chpt. 12, Banking

Bell, Doing Your Research Project, 2 . Edition, Open University Press, London, 1993

Campbell E, York, 1 P and Toher, legal Research: Materials and Method, 4th edition, Sydney, LBC, 1994

Campbell, E, Gisson, E J, York 1 P, Legal Research Materials and Methods, 3rd edition, Sydney, The Law Book Co. Ltd., 1988

Corrin Care J, Citation and Style Guide, Vanuatu, School of law USP, 1996

Cox, D.W., Offshore banking chapter 31, Money laundering chapter 25, The auditor's responsibility with regard to fraud and money laundering in chapter 6, in Banking and Finance.. Accounts, Audit and Practice, Butterworths, London, 1993

Elliot, J C, Pacific Law Bibliography, Canberra, legal Division Commonwealth Secretariat, 1988

Holburn G, Legal Research Guide, London, Butterworths, 1993

Kwaw, E.M.A., The law and practice of offshore banking and finance, 1996

MacQueen, H L, (editor) Money Laundering, Hume Papers on Public Policy: vol. 2, No. 2, London, Edinburgh University Press, 1993

New South Wales Offshore Banking Committee, Report of the Committee established by the Premier of New South Wales to report on the steps taken on Offshore Banking, 1984

Penn, G A, Shea, A M & Arora, A, The Law and Practice of International Banking Banking Law, Vol. 2 London,, Sweet & Maxwell, 1987

Stott D. Legal Research, London, Cavendish, 1994

Swan, E J, The Development of the Law of Financial Services, London, Cavendish Publishing, 1993

Walsh, A.C., Getting on Top of Your Thesis: The Essential Research Skills, Suva, Amokura Publications, 1995

Watt, R, Concise legal Research, Sydney, The Federation Press, 1993

Words and Phrases L Legally Defined, 3rd edition Vols. 1-4, London, Butterworths, 1988-89

 

Journal Articles & Papers

'Avoidance of "sexist" language in legislation', (1985) 11 CLB 590-593
'Malta International Business Activities Bill 1988, Malta Offshore Trusts Bill 1988', (1989) Jan. 1 CLB 17-19
Money Laundering: Switzerland Legislates to curb Money Laundering', (1990) Oct. 16 CLB 647
More ways to write in sex-neutral language', (1985) 11 CLB 1102-1103
`Western Samoa Off-Shore Banking Center', (1989) CLB 720
Bromby, R, 'Finance, Banking and Insurance', Pacific Island Monthly, (November 1988, vol. 59, No. 11), 4-27/29
Carmichael, T, `Banking Law and Practice in the Caribbean region: Regulation and Supervision', (July 1987, vol. 13, No. 3), CLB, Commonwealth Secretariat, London, 1054-1062
Corrin J C, `South Pacific Law Materials in Brisbane', (1985) QUTLR, Brisbane, 163 186
Granston, R, 'Banking Law; extraterritorial orders', (1989) 63 ALJ 691
Holgate, G, 'Bank and Building Society Robberies: The Implication for Staff, (1994) 15 Bus.L.Rev. 40-45
Kriz, J G, `International Co-operation to Combat Money laundering: The Nature and Role of Mutual legal Assistance Treaties', (1992) 18 CLB 723-735
Levi, M., `Regulating money laundering: the death of bank secrecy in the UK', British Journal of Criminology, vol. 13, No. 2, Spring 1991, 109
Marriott, C & Forrester, M, A nation in transition, Western Samoa, ASIAMONEY, (1995, September supplement edition, Euromoney Publications, Hong Kong
Mclean, D, `Mutual Assistance in criminal matters: the Commonwealth initiative', (1988) April 14 CLB 841-853
North D, Wave of Financial 'Scams' strikes Island countries', PIM, Suva, Fiji Times, 66 (September 1996, No. 9)
North, D S, 'Mexican stand off as law takes its course', Pacific Island Monthly, (April 1987, vol. 58, No. 4),18-19
Price, B 'Money Laundering - The New Regime', (1994) 15 Bus.L.Rev. 214-217
Rodgers, P E J, 'international Initiatives to Combat Drug Trafficking: The Bahamian Experience', (1991) Oct. 17 CLB 1376-1383
Wren, T, 'The Enforcement of Confiscation law in Great Britain', (1991) Oct. 17 CLB 1412-1416
Wydick, R C, 'Plain English for lawyers', (1978) 66 CLR 72 7-756

Information for persons who wish to form an International Company or register a foreign company or trust or who wish to obtain an Off-Shore Banking Licence or register as an Off-Shore Insurance company in Western Samoa, Government of Western Samoa Information Service, Apia, 1990
Exchange Control Manual, Central Bank of Western Samoa, Apia, Central Bank of Samoa, July 1995 reprint.
ASIACITIC TRUST Group Ltd., International Fiduciary Services & Western Samoa
Off-Shore Finance Center, New Zealand, 1996
Offshore Trust Year Book 1996, International Money Marketing, London, 1996

Resource Materials

Primary Sources

• Legislation and Subsidiary legislation

1. Companies Act (1955) (NZ) Western Samoa

2. Currency and Exchange Control Ordinance (1961), The Exchange Control Regulations (1961), The Exchange Control Regulations (Amendment) 196, The Exchange Control Regulations (Amendment) 1966, The Exchange Control (Authorised Dealers and Depositaries) (Amendment) Order 1978

3. Income Tax Act (1974), Income Tax (Amendment) Act 1977, Income Tax (Amendment) Act 1978, Income Tax Administration Act (1974) International Companies Act (1987), International Companies (Amendment) Act 1988, International Companies (Amendment) Act, 1991

5. International Insurance Act (1988)

6. International Trusts Act (1987), International Trusts (Amendment) Act 1988.

7. Off-Shore Banking Act (1987), Off-Shore Banking (Amendment) Act 1988, Off Shore Banking (Amendment) Act 1992/3, Off-Shore Banking (Amendment) Act 1996

8. The Insurance Act (1976), (1920-1977) Vol. 3 Statutes Reprint Western Samoa

9. Trustee Companies Act (1987), Trustee Companies (Amendment) Act 1988.

10. Valued Added Goods and Services Tax Act (1992/3), effective 1 Jan 1994.

 

• Case-Law

1. Barclays Bank Plc v Taylor [1989] 1 W L R 1066

2. Tournier v National Provincial and Union Bank of England [1942] 1 KB 461

 

• Parliamentary Papers

Some of the parliamentary loose leaf papers on the discussion and debates by the Legislative Assembly of Western Samoa on the Off-Shore Banking legislation and amendments, have been made available.

1. Debates on the First Reading in Parliament of the Off-Shore Banking Bill, 3 February 1987

2. Debates on the 1988 Amendment Bill to the Off-Shore Banking Act 1987,19 February 1988

3. Debates on the Off-Shore Banking Bill for Amendment, 9 February 1989

 

Secondary Sources

Halsbury's laws of England, (4th ed., Butterworths, London, 1989) vol. 3(1), Banking paras 149, 240, 244 & 289

 

Computer Diskettes

1. Diskette 1 on Discover Off-Shore Banking Center in Western Samoa, legislation, Apia, Central Bank of Western Samoa, 1997

2. Diskette 2 on Discover Off-Shore Banking Center in Western Samoa - general information, Apia, Central Bank of Western Samoa, 1997.

 

END NOTES:

1 A, Courtenay 'The good, the bad and the Ugly' in Offshore Review (1996) 9-11, at 9
2 European Union Bank, 'Offshore.Banking', INTERNET 16/04/1997,10:26:11 AM, Port Vila, VANUATU.
3 G J Kriz, 'International Co-operation to Combat Money Laundering: The Nature and Role of Mutual Assistance Treaties' (1992) CLB 723 at 724
4. H.L., MacQueen, Money Laundering Hume Papers on Public Policy, (1993) i
5. See Primary Resource Materials for a list of all other relevant legislation, as attached to the Bibliography.
6 The Offshore Banking Bill was assented to by the Head of States of Western Samoa on 17 February 1988 and came into force as the Off-Shore Banking Act 1987 on the same date.
7 Emphasis added.
8 Off-Shore Banking Act 1987 section 2
9 Off-Shore Banking Act 1987 section 2
10 Emphasis added
11 off-shore Banking Act 1987
12 C.Moor, (General Manager), Information from Intetrust Ltd. Western Samoa(1997)1
13. D.W.Cox, 'offshore Banking' chapter 31, Banking and Finance: Accounts Audits and Practice, (1993) 590
14. Ibid.591
15. Ibid.
16 D. W. Cox, 'Offshore Banking' Chapter 3 1, Banking and Finance: Accounts, Audit and Practice, (1993) 590, at 591
17 Government of Western Samoa, Information on the Western Samoa Off-Shore Finance Center (1987) 1.0
18Ibid.
19 See Appendix 1 for a list of fees to be paid upon registration.
20 G.W. Briggs, 'An Overview of the Western Samoa Off-Shore Finance Center' in Offshore Review. Year Book
1996;(1996) 147
21 Government of Western Samoa, Information on the Western Samoa Off-Shore Finance Center (1987) 1.5
22 H.L. MacQueen, Money Laundering, Hume Papers on Public Policy, vol. 1, No. 2, foreword, 1
23 W.C. Gilmore, 'Money Laundering: The International Aspect' in H.L. MacQueen, Money Laundering, Hume Papas on Public Policy, vol. 1, No.2, 1 -11
24 Ibid.
25 Ibid.
26 ibid.
27 Ibid.
28 B. Price, 'Money Laundering - The New Regime' (1994) 15 BLR 214-217
29 Ibid. 214
30 Ibid.
31 Ibid. 214-5
32 H.L., MacQueen, Money Laundering, Hume Papers on Public Policy, vol. 1, No. 2, foreword, 1
33 Ibid.
34 J. Drage, 'Countering Money Laundering: The Response of the Financial Sector' in M.L. Queen, Money Laundering, Hume Papers on Public Policy, Vol. 1, No.2, (1993) 60
35 Ibid.
36 Ibid.
37 Ibid. 61
38 Ibid.
39 Ibid.
40 J. Drage, 'Countering Money Laundering: The Response of the Financial Sector' in M.L. Queen, Money Laundering, Hume Papers on Public Policy, Vol. 1, No.2, (1993) 60
41 B.Price, 'Money Laundering - The New Regime' (1994) 15 Bus. L.Rev. 214-217
42 Ibid.
43 Ibid.
44 G.J. Kriz, 'International Co-operation to Combat Money Laundering: The Nature and Role of Mutual Legal Assistance Treaties' (1992) CLB 723 at 724
45 Off-Shore Banking Act 198 7 No. 4 section 5
46 Ibid. section 8
47 Ibid., section 8(1)(d)
48 Ibid., section 6
49 In this case, a corporation or company in accordance with section 4 Off-Shore Banking Act 1987, No. 4
50 Ibid., section 6(6)
51 Off-Shore Banking Act 1987 No.4 section 6(2)(a)
52 Duly registered under the Trustee Companies Act 1987
53 Section 6(2)(b) Off-Shore Banking Act 1987, No. 4
54 Ibid., section 7(5)
55 Ibid.
56 Off-Shore Banking Act 1987, No.4 section 7(1)(b)
57 Ibid., section 7(1)(b)
58 ibid., section 7(1)(b)(iv)
59 Ibid., section 9(4)
60 Wednesbury Corporation & Others v Ministry of Housing and Local Government [1965] 1 WLR 261
61 'Creating the right environment' in A nation in transition Western Samoa - ASIAMONEY, Sept. supplement (1995) 10
62 Trustee Companies Act 1988, No.8 section 5
63 G.W., Briggs, 'An Overview - Western Samoa' in Offshore Trust Year Book (1996) 147
64 The International Companies Act 1987 "was enacted in early 1988, revised in January 1989 substantially amended in 1991, changed in February 1993 and most recently in March 1996 to increase its attractiveness to potential users."
65 Government of Western Samoa, Information on Offshore Banking in Western Samoa (1987) 2
66 'Creating the right environment' in A nation in transition Western Samoa - AISAMONEY, Sept. supplement (1995) 10
67 International Insurance Act 1988, No. 43 section 6(a)
68 Ibid., section 8
69 G.W. Briggs, 'An Overview - Western Samoa' in Offshore Trust Year Book (1996) 147
70 Off-Shore Banking Act 1987, International Trusts Act 1987 & Intemational Insurance Act 1987.
71 C. Moore (Managing Director) Information on the Role of Intetrust Ltd. Western Samoa (1997) 2
72 G.W, Briggs, 'An Overview - Western Samoa' in Offshore Review Year Book 1996, (1996) 147 at 148
73 Section 2(m) Off-Shore Banking Act 1987, as amended by the Off-Shore Banking Amendment Act 1988
74 Robertson v Canadian Imperial Bank of Commerce, High Court of Justice, 22 March 1990 No. 340 in 'Banking -
Bank's disclosure of customer's account' (1990) 16 CLB 1150-1152
75 [1923] 1 KB 461
76 Section 25 (2) Off-Shore Banking Act 1987, as amended by the Off-Shore Banking Amendment Act 1988
77 Off-Shore Banking Act 1987 No.4 as amended by the Off-Shore Banking Amendment Act 1988 No.6
78 Ibid., section 26(6)
79 Ibid., section 26(1)(b)
80 Ibid.
81 Ibid.
82 Ibid., sections 21 & 22, "authorises the Central Bank to inspect records of licensees and allow the Minister to enquire about any information relating to the banking business of the licensee and any individual customer."
83 Ibid., section 26(3)(f)
84 Government of Western Samoa, Information on Offshore banking in Western Samoa (1987) 2.1
85 Ibid.
86 Government of Western Samoa, Information on Offshore banking in Western Samoa (1987) 6.0
87 G. W. Briggs, 'An Overview - Western Samoa' in Offshore Review Year Book 1996 (1996) 147 & 148
88 G.W. Briggs, 'An Overview - Western Samoa' in Offshore Review Year Book 1996 (1996) 147, at 148
89 Government of Western Samoa, Information on Offshore Banking in Western Samoa, (1987) 1.3
90 Ibid.
91 'European Union Bank: Offshore Banking', INTERNET 16/04/1997, 10:26:11 AM, Port Vila, VANUATU.
92 International Trusts Act 1987
93 Government of Western Samoa, Information on Offshore Banking in Western Samoa (1987) 1.3
94 A. Courtney, ' World of Possibilities' in Offshore Review 1996 (1996) 16-18, at 17
95 Ibid.
96 T, Sherman, 'International Efforts to Combat Money Laundering: The Role of the Financial Action Task Force' in Money
Laundering
: Hume Papers on Public Policy, (1993) Vol. 15. No. 2, 14-33, at 15
97 M. Ntumy, The Legal Systems of the South Pacific (1993) 413
98 Section 2(f) Trustee Companies Act 1988, No 2
99 C, Moore (General Manager) Intetrust Ltd. Information (1997) 2
100 Government of Western Samoa, Information on Offshore banking in Western Samoa (1987) 2
101 A. Courtenay, 'World of Possibilities', in The European Offshore Review (1996) 16-18, at 18
102.Section 20 Trustee Companies Act 1988,No.2
103 J., Kado, 'Tax Talk: Transfer Pricing: A growing concern', in The Fiji Business Review, June (1996) 45
104 Ibid.
105 Currently proposed to be implemented in Fiji.
106 A, Courtenay, 'World of Possibilities' in Offshore Review 1996, (1996) 16-18, at 18 107 As required under section 244
International Companies Act 1987, No. 47
108 Ibid.
109 J. Drage, 'Countering Money Laundering: The Response of the Financial Sector' in Money Laundering: Hume Papers on Public Policy, (1993) Vol. 15. No. 2, 60 at 61
110 Ibid.
111 Off-Shore Banking Act 1988 Part Ill sections 18-24
112 Ibid. section 18
113 Ibid. section 18(2)(a)
114 Off-Shore Banking Act 1988 No 6 section 18(2)(b) & (c)
115 Ibid., section 24
116 Ibid.
117 That is, the Central Bank of Western Samoa and the Minister of Finance.
118 Offshore Banking Act 1988 No. 6
119 Ibid. section 22
120 Ibid., section 23
121 International Insurance Act 1988 section 13
112 Ibid., section 14
123 Section 2 Trustee Companies Act 1988, No 8 "the Registrar of International and Foreign Companies appointed pursuant to the provisions of the International Companies Act 1987."
124 Ibid. section 8(2) and (3)
125 Ibid., section 8(4)(b)
126 Ibid., section 8(5)(a)
127 AS required by the International Companies Act 1987 and 1991 amendments, sections 113-126
128 J. Drage, 'Countering Money Laundering: The Response of the Financial Sector' in Money Laundering: Hume Papers on Public Policy, (1993) Vol. 15. No. 2, 60 at 61
129 Ibid.
130 J. Drage, 'Countering Money Laundering: The Response of the Financial Sector' in Money Laundering: Hume Papers on Public Policy, (1993) Vol. 15. No. 2, 60 at 61
131 J. Drage, 'Countering Money Laundering: The Response of the Financial Sector' in Money Laundering: Hume Papers on Public Policy, (1993) vol. 15, No.2 60 at 61
132 Ibid.
133 Ibid., at 62
134 Ibid.
135 P.E.J. Rodgers, 'International Initiatives to Combat Drug Trafficking: The Bahamian Experience' (1991) Oct. 17 CLB 1376-1383, at 1382
136 J. Drage, 'Countering Money Laundering: The Response of the Financial Sector' in Money Laundering: Hume Papers on Public Policy, (1993) Vol. 15. No. 2,60 at 61
137 J. Drage, 'Countering Money Laundering: The Response of the Financial Sector' in Money Laundering: Hume Papers on Public Policy, (1993) Vol. 15. No. 2, 60 at 64
138 ibid.
139 Ibid. "To date over fifty countries, including the United Kingdom, have ratified the Vienna Convention."
140 P.E.J. Rodgers, 'International Initiatives to Combat Drug Trafficking: The Bahamian Experience' (1991) Oct. 17 CLB 1376-1383, at 1383
141 W.C. Gilmore, 'Money Laundering: The International Aspect' in Money Laundering. Hume Papers on Public Policy, (1993) Vol. 15. No. 2, 1-11, at 6
142 ibid.
143 J. Drage, 'Countering Money Laundering: The Response of the Financial Sector' in Money Laundering: Hume Papers on Public Policy, (1993) Vol. 15. No. 2, 60 at 64-65
144 Ibid., at 65 on the Basle Statement of Principles
145 Ibid., at 65
146 P.E.J Rodgers 'International Initiatives to Combat Drug Trafficking: The Bahamian Experience' (1991) CLB 1376-1383