Scheme to hide millions through secret Boca Raton firm – Dominic DaCosta Set to be jailed for four months and have four years of probation. Photograph: Handout
As the Globe and Mail reported, Dominic DaCosta was involved in developing hundreds of offshore companies that could be transferred between foreign locations and used for legal purposes such as laundering money and moving investments. Prosecutors said DaCosta’s clientele included high-profile individuals from at least 10 countries including Brazil, Cyprus, Ukraine, the United Arab Emirates, China, Russia, Jamaica, South Africa, India, Mexico and Switzerland.
The offshore company was a satellite company to his firm of the same name in Boca Raton, Florida. A research project conducted by the British Overseas Territories Institute and the Overseas Territories Caribbean Peer Review Group has stated that DaCosta operated at least 266 offshore companies in the British Virgin Islands, with total worth of up to $100m (£76m).
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The time period in which some of these offshore companies were created – between 1998 and 2004 – was a period during which there was a significant improvement in the international efforts to combat financial crime. The companies he created were not to only assist a client’s legal activities but also to acquire property, property with underwater mortgages, securities with financial liabilities and to fund gambling.
The global anti-money laundering regime, which allows local authorities the ability to obtain information from financial institutions, is extremely rigid. A director of an offshore company can, for example, sign letters to a local financial authority to transfer funds into an offshore company located in a specific location. This ability is called foreign bank account and financial institution reporting (FBAR) requirements, which allow financial institutions to keep an eye on accounts by requiring reports to be made upon the creation of, or change of control of a foreign account.
However, BBV’s FBAR system only works if the financial institution that is responsible for reporting a suspicious transaction makes the first move. If the account was not reported, the banking authority has no way of knowing what is going on.
It is therefore extremely difficult for authorities to detect such behaviour. In order to detect and act on suspicious activity, an authority typically needs to physically inspect one of these accounts. However, the efforts to impose continuous and substantial monitoring of offshore accounts and regulatory action is weak and virtually non-existent in some territories.
“It is therefore extremely difficult for authorities to detect and act on suspicious activity” Photograph: Bernd Mur/AP
Even more concerning is the fact that for some jurisdictions, particularly the British Overseas Territories, offshore accounts are perceived as a legal industry that brings tax revenues and jobs to the territory. This leads to a low tolerance for the kinds of rules that help combat money laundering and tax evasion.
It is therefore not surprising that legislation on offshore account reporting has to be set very narrowly and later watered down further to avoid attracting the negative attention of the international community.
At this point, we have a very real risk of these practices sweeping into the jurisdiction of offshore banking centres in the foreseeable future.
The UK, the US and other jurisdictions should develop monitoring and reporting systems that allow countries such as South Africa, Norway and Switzerland to be transparent about offshore account opening and record keeping on a regular basis. By doing so, we can gain knowledge on existing activities that could be used to undermine financial stability.
We cannot accept that centralised enforcement of intelligence and foreign accounts reporting is too difficult for local authorities, nor that this information cannot be transmitted to national financial regulators to make sure those who own, control or control offshore accounts are not abusing financial secrecy in the countries in which they operate.
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