As I hope is clear from this blog, I work with clients from all over the regulated sector – although I will admit that I have very few law firms (because lawyers like to be trained by other lawyers) and very few estate agents (because, well, they’re estate agents and just can’t accept that they have to do all this AML stuff). But the proportions of my client base do change: sometimes I will have more fiduciary firms, and then the banks get interested, and in the past three or four years I have taken on more clients in the gambling sector. And one area of strong recent growth for me is family offices.
When I first heard the term, I had images of “Dallas” and JR, wheelin’ and dealin’, darlin’. But turning to industry dictionary Investopedia, we learn that a “family offices are private wealth management advisory firms that serve ultra-high-net-worth (UHNW) investors – they are different from traditional wealth management shops in that they offer a total outsourced solution to managing the financial and investment side of an affluent individual or family”. And I have noticed that in their elegant offices they tend to have rather superior biscuits, no doubt intended for the UHNWIs but gratefully snarfed by me. But all is not well in the rarefied world of the family office, for money launderers – the little devils – have realised their potential.
It could be argued that we AMLers are not helping the cause: as AML obligations around PEPs (politically exposed persons) and other high-risk clients are increased, the more familiar, larger institutions may come to the conclusion that it’s all too much trouble, and decline to take them on as clients. They then turn to more boutique firms, who need the business and might be willing to be that little bit more… accommodating when it comes to CDD. We can’t say too much at the moment, for obvious reasons, but it seems that Jahangir Hajijev of Azerbaijan and his family (including his wife, of UWO fame) made extensive use of the family office services of Werner Capital in Belgravia – I bet their biccies are top-notch. Although family offices could – quite rightly – say that they know their clients really well, it must be remembered that their clients will generally be really complicated, with – to put it simply – lots of money all over the place. Checking source of wealth and source of funds for such people will be a full-time job. Keeping track of their close associates will not be an easy task. And then we have the age-old problem of client capture: if your entire livelihood depends on one client, how likely are you to rock the boat by reporting a suspicion about that client?
In the US there is an organisation called the Family Office Association, which offers guidance, training and networking to its members, and that seems a good idea – but a search on the word “laundering” on their website brings up no matches at all, which suggests that it is not on their radar. This will not have escaped the notice of money launderers.