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Why laundering rules are waste of time and money

Mr Smith is a successful and wealthy career criminal. By dint of

clever manoeuvring, he has managed to salt away considerable sums of

money in a variety of quasi-legitimate bank accounts.

But he has too much cash on deposit and wants to diversify. A friend

suggests investment bonds and unit trust investments, so he contacts

an IFA who visits him at his home, compiles a fact-find and, after

due consideration, recommends an investment bond for the £50,000

Mr Smith says he wishes to invest.

The application form is completed, the cheque is written and Mr Smith

happily produces his passport as proof of identity for the anti-money

laundering form. No problemo.

Mr Smith then contacts another IFA and through her invests another

£50,000, this time with a different insurance company. The same

follows with a variety of other IFAs.

For each new fact-find, Mr Smith says he either already has

£10,000 with those companies previously recommended and wants to

diversify or that he has had a bad experience with one of them and

wants to avoid them for the future. Or something else to ensure a

different company is recommended.

Thus, each IFA to visit Mr Smith recommends a different insurance

company from those in which Mr Smith has already invested. After

investing in half a dozen different investment bonds, Mr Smith moves

on to unit trusts, then on to structured products and then, for good

measure, adds a few offshore investments.

To avoid arousing suspicion, he provides each IFA with different and

limited data for each new fact-find until eventually he has managed

to build up a very varied portfolio without any one IFA being aware

of the extent of Mr Smith&#39s other investments. Easy peasy.

On each occasion, Mr Smith provides the required documentation for

the anti-money laundering form, so each IFA believes he is following

the required procedure and none of the institutions concerned are in

any way aware of Mr Smith&#39s investments with any of their competitors.

How could they be? Even if Mr Smith was asked to declare his other

investments, all he has to do is tell a few simple lies. Who&#39s to

know any different?

So what is the practical value and effectiveness of anti-money

laundering forms? Search me, John – I really have no idea at all.

Just a waste of time and paper and money that accomplishes nothing

what-soever. Or am I overlooking something fundamental here?

Julian Stevens

WDS Independent Financial Advisers,

Kingswood,

Bristol

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