$8.5 million seizure threatens offshore sector
The recently created Financial Intelligence Unit (FIU) has embarked on a case that has the potential of seriously disrupting the prospects of the off-shore financial sector. Off-shore practitioners believe the handling is a blunder that may have serious consequences. The FIU has not yet revealed why it has have chosen to take the controversial actions but the case has raised doubts that it has the competence to handle the responsibilities that it has been given.
According to documents submitted to the Supreme Court in the case, the FIU ordered Barclays Bank Ltd. to freeze US$8,555,895 in an account held in the name of a company called LXE Solar Inc., owned by an American citizen, Dr. Georges Xiao.
Dr. Xiao came to Seychelles on June 15, 2009 to inquire into the reasons for the action and to seek the release of the funds. He met by officials of the FIU, led by Liam Hogan, an Irishman who holds the rank of Chief Superintendent in the Seychelles Police Force and who is reportedly leading the FIU investigations.
In his statements, Dr. Xiao has said that he explained that the funds were consultancy fees paid to him by a client company which had been deposited in the Seychelles Bank via a US Bank.
Meetings with the officials of the FIU appears not to have had any result. On June 18, the FIU officials appeared at the Hilton Hotel with an order to seize Dr. Xiao’s laptop computer. Dr. Xiao alleges that the behaviour of the FIU officials was intimidating and they threatened to arrest his lawyer, who was accompanying him.
No reasons have surfaced yet for the actions of the FIU. This unit has been given wide and unprecedented powers to seize assets in the conduct of investigations into drugtrafficking, money-laundering or other serious crimes. It goes without saying that they have to be very sure of what they do. Mishandling these powers will be very dangerous. In this case, the actions pose a serious threat to the security of offshore investments which can have important consequences. The conduct of any investigation will also determine confidence in the capability of the unit.
In this case, there is already evidence that the FIU is prone to bungling. On Friday, the officials appeared in court to state that the laptop computer seized from Dr. Xiao had been damaged while in their possession. The FIU had brought a supposed computer expert all the way from Ireland to examine the laptop for evidence and the first result was that he damaged it. Mr. Hogan, the computer expert and a third Irish official appeared in court to ask Judge Bernardin Renaud to authorise the computer expert to take the laptop to Ireland for examination. The facilities to do this in Seychelles did not exist, they said. Attorney-General Ronnie Govinden and the Irish FIU officials tied themselves in knots trying to explain what had happened to the computer and whether it could be restored to its former state.
The request met with strong objections from Lawyer Phillipe Boullé, representing Dr. Xiao. He pointed out that the action of the FIU had already caused serious harm to his client and that the handling of the computer had been proof of incompetence. The consequences of taking the laptop to a foreign country could be even more serious. He pointed out that there would be no one liable if information from the client’s computer was leaked.
Judge Bernardin Renaud found that there was no legal basis for taking what could be potentially crucial evidence out of the Seychelles jurisdiction since it would then be outside the control of Seychelles law. He has given the FIU an additional week to do what they could with the computer in Seychelles.
The handing of the computer throws serious doubt on the capability of the FIU to handle its responsibilities competently. But by far the larger question remains the reasons for seizing the asset of the investor. It is not known yet what suspicions were held in this case. But unless it can demonstrate that the actions were justified, the FIU will have a lot to answer for.
Source: Regar 7-17-09