Headline June 04, 2016/ ''' THIS VERY ' DIRTY MONEY ' LANDSCAPE ''



MANY, MANY  -just so many, question the economic benefits of freeports, arguing that they generate very few jobs  [an expected  50-100 in Luxembourg's case]  and just so modest a  tax revenue.

There is a cultural advantage, however: items can be imported temporarily into the host country without invalidating the tax exemption, encouraging collectors to lend pieces to local museums.

*Apart from these legal tax benefits, some hope to use physical storage as a way to continue illegally evading tax owed on past earnings. As Swiss banks come under pressure to shop tax-dodgers, for instance, some are said to have been recommending clients to move money-

From bank accounts to vaults, in the form of either cash or bought objects, since these are not covered by  information-exchange pacts with other countries*.

A sign that this practice maybe on the increase is the voracious demand for  SFr1,000  ($1,100)  notes  -the largest denomination   -which now account for 60% of the value of Swiss-issued paper cash in circulation.

Andreas Hensch of   Swiss Data Safe  says demand for its mountain vaults has been accelerating over the past year. The firm is not required to investigate the provenance of stuff stored there.

In 2013, according to reports, some Swiss banks are running short of safe-deposit boxes and imposing stricter conditions for renting them  -for instance, that the client also has at least  $ 3 million in a deposit or investment account. [$1 million used to be ample]. 

Some disappointed clients are instead renting boxes in hotels. Others are traipsing down to freeports. In July  2013, an employee at Geneva's freeport told a reporter from  Der Spigel-

That  ''scared customers''  were moving many from banks to the city's warehouses, and that as a result all the  freeport  had left to offer was a 10-square-metre- room [108 square feet] for SFr 22,000 a year.  

Mr Arendt says the Luxembourg freeport is considering offering safe-deposit boxes, which have become  ''a hassle''  for banks. 

These would need to be in a discrete area of the building with its own entrance, as such boxes are not subject to the same (albeit relaxed) customs regime as goods in freeports.

Western countries have started to clamp down on those who try to use such repositories to keep undeclared assets in the shadows. 

America has led the way. Under a bilateral accord, Swiss banks will have to deliver information on the transfer of funds from accounts, including cash withdrawls.

Tax authorities are growing more interested in the contents of the vaults. Americans with  untaxed  offshore wealth who sign on to an  IRS voluntary-disclosure programme are  required to list foreign holdings of art, says Bruce Zagaris of Berliner, Corcoran & Rowe, a law firm.

Tax-evaders are one thong, drug traffickers and kleptocrats another. In many ways the art market is custom-made for money laundering: it is unregulated, opaque,  (buyers and sellers are often listed as  ''private collection'' )  and many transactions are settled in cash or in kind.

Investigators say it has become more widely used as a vehicle for ill-gotten gains since the  1980s., even when it proved a hit with Latin American drug cartels.  

This makes freeports  '' a very, very  interesting  ''   part of the  dirty-money landscape, though also  ''a black hole'' , says the head of one European country's  financial-intelligence  agency.

In a report in 2010,  the Financial Action Task Force, which sets global anti-money laundering standards, fretted that free trade zones [of which freeports are a subset] were  ''a unique money-laundering and terrorist financing threat'' because-

They were  ''areas where certain administrative and oversight procedures are reduced or eliminated.''

Freeporters claim that the vast majority of their users are above board. A desire for safe, discreet storage should not be confused with wrongdoing, they forcefully argue.

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