What are Concealed Assets (CA)?

Publication date 13-05-2019

Concealed Assets is an important subject in relation to the fight against money laundering. Many forms of crime would not be so attractive if the perpetrators could not find ways of keeping the proceeds out of sight of the law (and/or the tax authorities). A wide range of constructions is used for that purpose whereby criminal funds are often diverted abroad. The aim of making money laundering a punishable offence is to combat it on the basis of criminal enforcement. The essence of money laundering is hiding or concealing. The Concealed Assets theme is therefore at the heart of money laundering; these assets are hidden or concealed in order to secure the proceeds of crime. They may be the concealed assets of Dutch people abroad or those of foreigners in the Netherlands [1].

The AMLC defines concealed assets as follows: “assets which are deliberately kept out of sight of the government”. ‘Assets’ is interpreted broadly here, and includes all objects and rights which can be valued in money.

Demarcation / scope of Concealed Assets

What does this theme encompass?

• Assets of Dutch legal and natural persons concealed in the Netherlands.
• Assets of Dutch legal and natural persons concealed abroad.
• Assets of foreign legal and natural persons concealed in the Netherlands.
• Assets of foreign legal and natural persons concealed abroad through the Netherlands (by means of a corporate structure or Dutch bank account for example).

What is not encompassed by this theme?

• Assets of foreigners concealed abroad without any link to the Netherlands.
• Assets concealed in cryptocurrency.[2] In the orientation phase of the Concealed Assets theme, interviews were held with public and private parties who are actively engaged with this theme. On the basis of these interviews and at our own discretion the following individual topics were identified:[1]

Individual topics

1. corporate structures
2. professional enablers
3. property
4. foreign bank accounts
5. bearer shares
6. criminal inheritances
7. crowdfunding
8. shadow banking

1 Corporate structures

Description: Corporate structures is a topic which invariably comes up in Concealed Assets. This topic has also been in the news recently following revelations from the Panama and Paradise Papers. Complex corporate structures, or ‘Christmas trees’, are designed to hide and conceal.[2]Interviewees often asked why we accept such structures. What is the point of them? Nor do a number of the substructures that appear in those Christmas trees, such as limited partnerships and mutual funds, appear to serve any demonstrable economic purpose,.

2 Professional enablers

Description: Professional enablers is also an important individual topic in the Concealed Assets theme is.[3] For assets not concealed in a simple way (not hidden under the mattress for example but involving foreign accounts or corporate structures) professional assistance is needed to come up with the idea of concealment or to make that concealment possible (trust offices for example, which make the corporate structure possible with personnel/foreign substance, or civil-law notaries who execute certain types of notarial deed). Examples of potential professional enablers are: civil-law notaries, trust offices, accountants, tax consultants, administrative firms and bankers.

3 Property

Description: Together with money laundering and Concealed Assets, the topic of property is also invariably referred to. On the one hand because it has been shown to be a good investment in recent years, and on the other because it is attractive for both personal use (enjoyment of a property) and commercial use (yield). Examples in the (immovable) property theme are investments originating from known organised crime in buildings in Amsterdam[7], property held by foreign entities (AMLC project Offshore Companies), property in countries that are attractive to Dutch citizens (the Mediterranean area for example or the Caribbean part of the Kingdom of the Netherlands) and also in stable countries, to which there is a link from the Netherlands but (as yet) no exchange.

4 Foreign bank accounts

Description: Foreign bank accounts is another topic invariably referred to in the Concealed Assets theme. The phenomenon of the diversion of money abroad where it ends up on a foreign bank account for tax and money laundering reasons is a familiar one. In recent years banking secrecy has been under increasing pressure and international data exchange has been created on the basis of (among other things) treaties with multiple countries.

5 Bearer shares

Description: At the start of this year the Council of State considered a legislative proposal for identification of holders of bearer shares. A preliminary draft of the identification of holders of bearer shares law was consulted earlier this year. The change in the law is intended to counteract tax evasion, money laundering and the financing of terrorism means of the identification of all holders of bearer shares. The shares issued by a public limited company are either registered by name or made out to bearer. Bearer shares are freely marketable and the parties can remain anonymous during a transfer. Once the legislative proposal has been accepted and become law, it will only be possible to trade in bearer shares through a securities account held by an intermediary, such as bank or investment firm. The securities account is registered by name to ensure that the anonymous transfer of bearer certificates is no longer possible.

6 Criminal inheritances

Description: Over the last few years the OM has focused more on so-called criminal inheritances, inheritances which contain the proceeds of illegal activities. The heirs and civil-law notary may commit the offence of money laundering on settlement of the inheritance. In such cases the inheritance includes concealed assets, the owner of which can no longer be prosecuted due to decease. The concealed assets continue to exist however and with proper coordination between heirs, tax authorities and the criminal justice system they will ultimately end up in the hands of the state.

7 Crowdfunding

Description: Crowdfunding is a perfect way to conceal (your own) criminal assets and give them seemingly legitimate origins. First you set up a crowdfunding campaign, then you contribute your criminal assets to the crowdfunding project. The project is then ready to start with apparently legal contributions from several different people.

8 Shadow Banking

Description: It was learned from one of the interviews that shadow banking has become a large-scale phenomenon, certainly during the last crisis. At that time it was more difficult to get a loan through the usual channels and people turned to other financers (partly in response to the worsening economic climate).

[1] The subjects Crypto currencies and TBML also arose from the interviews. Although both are related to Concealed Assets, they are not included in this plan because they are designated as a separate theme inside the AMLC.
[2] http://corpnet.uva.nl/wp-content/uploads/IFC-Economic-Report.pdf.
[3] Also referred to as intermediaries, gatekeepers and facilitators.
[4] A recent judgement of the Amsterdam Court is interesting in this regard, whereby the trust office was found liable under civil law for the tax avoidance because it had played such a crucial role and could therefore be blamed for the financial loss suffered by the Belastingdienst, see Amsterdam Court 14 February 2018, ECLI:NL:RBAMS:2018:796.
[5] For more information see: https://www.europol.europa.eu/crime-areas-and-trends/eu-policy-cycle-empact.
[6] A partnership of the five countries Canada, United Kingdom, United States, Australia and the Netherlands, from a tax fraud perspective.
[7] https://www.ad.nl/binnenland/losgeld-heineken-ontvoering-werd-in-bordelen-gestopt~a3c434fa/

[8] See https://www.amsterdam.nl/bestuur-organisatie/organisatie/ruimte-economie/economie/evenementen/flying-money/.

Footnotes:
[1] In this memorandum ‘the Netherlands’ is understood to be the Kingdom of the Netherlands.
[2] This is dealt with under the theme New Payment Methods (NPM) of the AMLC.