Posts Categorized: Money laundering
January 23 2020
One of the saddest aspects of the One Coin scam perpetrated by the now missing Dr Ruja Ignatova is how unsophisticated (and, indeed, poor) savers in African countries were specifically targeted using the claim that this wonderful new cryptocurrency technology would bring easy finance (and all its many advantages) to the unbanked. OneCoin was presented as practically a social service and a revolution in finance which would transform the prospects of those whom traditional finance providers had ignored.
All too good to be true?
Of course. And what this meant in practice for those believing these claims can be heard here in the BBC’s radio documentary – The Missing Cryptoqueen. What it also meant for those involved in handling the money she made was rather more traditional – convictions for fraud and money-laundering.
Investors believed what they hoped was true and failed to ask some basic and obvious questions. If there was no blockchain how could this new currency really be a cryptocurrency? And what was the track record of the person behind it? If they had, they might have learnt that there was no blockchain and that Dr Ignatova had form, having received in 2016 a suspended sentence and fine from a German court for her role in relation to a German metallurgical factory taken over by her, asset stripped and then left to go bankrupt in 2009.
Past performance can sometimes be a guide to the future, it seems.
So what might an investor make of an opportunity to invest in a new venture which will:-
- Package new and existing mortgages into securities to be sold to investors
- The mortgages to be sold to people who have a low uptake of these products, preferring to use their savings to buy land and build property
- In a country – Ghana – with high interest rates and a very recent banking crisis, which resulted in 7 Ghanaian banks collapsing
- On the basis of a study, whose authors have not been revealed, which apparently states that there are plenty of people able to afford a $50,000 mortgage among the 9 million Ghanaians earning more than $11 a day (a munificent annual income of $4,015)
- Promoted by a convicted fraudster (responsible for the UK’s biggest fraud). Yes, Kweku Adoboli is back (though this time it is the economy of Ghana he plans to grow and the balance sheets of (presumably) the remaining Ghanaian banks he wants to expand)
- Who declines to say who his business partners are
- But expects banks to be shareholders in the new venture (assuming actual and potential conflicts of interest can be properly managed)
- And who is still being economical with the actualité of the reasons why he was convicted and imprisoned.
But it is good to see that he has developed a sense of humour – if this quote is genuine: “The day when I deliver my first profit to someone, that will be a good day.”
The injunction “Let the buyer beware” is as sound as ever.
The Art of Reputation
June 2 2018
As this fascinating programme shows, the art market and finance have much in common, well illustrated by the story of Salvator Mundi, painted by Leonardo and sold for an eye watering $400 million last year.
This painting disappeared from view after Charles 1’s collection was dispersed following his execution. No-one knows what happened to it. It reappears out of obscurity in 1958 described as a painting by a follower of Leonardo and is sold – for the not very princely sum of £45. It is only when it was eventually acquired by some art dealers and attributed to Leonardo himself that its value shot up. How clever of those dealers to spot that it was by the master himself and not some unknown follower.
And even cleverer of yet another dealer to acquire it for $80 million and almost immediately resell it to a Russian for $120 million. (Though perhaps that part of the story has not had a happy ending, the Russian client now suing the dealer for the difference between what he paid for his art collection and the price the dealer acquired the paintings for. How very remiss of them not to agree whether the dealer was acting as agent for the buyer or as principal.)
Still, it is amazing what an attribution to a well-known artist, one moreover who did not produce very many paintings, can do. Much like a AAA-rated credit rating applied to an obscure credit product. Still, unlike CDOs, Leonardo paintings cannot be reproduced. And so its price went on its merry way into the stratosphere. It is now in storage, unseen by anyone other than its guards one imagines, until it reappears as the star exhibit at a Middle East museum to bestow its blessings on its owners and mesmerised visitors.
At least it will be seen. It has been estimated that 80% of the world’s art is in storage, much of it in freeports, from where it is both untaxed and can easily be transported from country to country with no-one, let alone the authorities, knowing anything. It is art as a store of value, a prettier version of bitcoin. And like all these alternatives to ordinary money, the authorities are now taking an interest in who is buying, who is selling, how they are paying and where the money to pay comes from. As the representative from the US Attorney’s office points out, the secrecy surrounding the players in the art market, the ease with which art can move from country to country and the inexact or even irrational science of art valuation and pricing shows “how easy it is to use art to launder money”.
At around the time when banks were becoming ever more heavily regulated in response to their own difficulties, key art market players did consider adopting guidelines to manage the reputational and legal risks of their industry, guidelines drawn up by the Basel Institute on Governance. They did not do so. Why? As the appropriately named Dr Thomas Christ has pointed out, the art market was perhaps more afraid of losing sales than of losing its reputation.
Unlike banks. For now.