Paradise Papers: Secrecy Over Investors In Packer’s Macau Foray Raises Potential ‘Red Flag’ On Money Laundering

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Melco Crown Entertainment, then controlled by the casino businesses of Mr Packer and his partner Hong Kong billionaire Lawrence Ho, was establishing a joint venture with US hedge funds to build the $US3.2 billion Studio City casino in Macau.

It would open in 2015 with a star-studded line-up on the red carpet including Mariah Carey, marking her debut as Mr Packer’s then girlfriend, Martin Scorsese, Leonardo DiCaprio and Robert De Niro.

The casino opening was publicised by a short film The Audition featuring the Hollywood A-listers, with the $US70 million film bankrolled by the casino moguls.

The project’s secret funding sources raised a “red flag” within Appleby but it was given the go-ahead regardless.

Thunderbird is go: Tax haven project takes off

Years before the glittering opening, Melco Crown was pushing hard to set up companies in the tax haven of the British Virgin Islands, in one case dubbing the effort “Project Thunderbird”.

Emails among the 13.4 million documents released in the Paradise Papers leak state Melco Crown threatened to take its business away from Appleby if the law firm did not waive identity checks on the joint venture shareholders.

The emails show the threat was made in 2011 and 2013 after Melco Crown refused to hand Appleby the full list of investors in the new joint venture.

On both occasions secrecy surrounded the two US hedge funds taking a 40 per cent stake in the joint venture, Oaktree Capital and Silver Point Capital, which refused to disclose the names of their investors.

Shareholder identity checks, referred to as “know your client” rules, are a cornerstone of global efforts to stop money laundering and prevent the financing of terrorism.

The checks attempt to ensure law firms know who actually owns the companies they are dealing with, and therefore understand the source of the money being invested.

Deep concerns inside Appleby

In 2013 Melco Crown’s refusal to hand over the names of investors in the hedge funds caused deep concern for Denice Cline, a compliance officer in Appleby’s British Virgin Islands office.

Ms Cline wrote Melco Crown’s refusal “raises a red flag” that could “put our licence to operate at risk”.

She said the know-your-client requirement “dictates that we walk away if we are not able to establish that the client is who they say they are”.

In the same email she forwarded a copy of Appleby’s own policy handbook entitled Anti-Money Laundering and Countering the Financing of Terrorism, “special attention to pages 42-44”.

The handbook stated: “Knowing your client is essential to the fight against money laundering and the financing of terrorism … Appleby is required to see through any corporate veil to the underlying beneficial owner and to obtain identification data and supporting documentation for that individual.”

She also forwarded a summary of the British Virgin Islands anti-money laundering regulations.

Ms Cline wrote: “We are not willing to put Appleby in harm’s way. We have a duty to adhere to BVI regulations and Appleby’s policies and procedures.”

The documents from 2011 and 2013 show that Appleby never received the sought-after information about the hedge funds from Melco Crown, and the companies were incorporated without a fuss.

The documents illustrate how large corporations appear to be able to bend their offshore service providers to their own purposes, even when it comes to essential legal requirements.

The documents also raise further concerns about the ability of offshore global law firms in tax havens to meet necessary standards – a concern documented regularly in the Paradise Papers by compliance breaches and issues raised by Appleby’s regulators.

Four Corners and the International Consortium of Investigative Journalists have examined the database of millions of documents, originally obtained by German newspaper Suddeutsche Zeitung.

Casino giant threatens to drop Appleby

When contacted for this story, Appleby did not comment on the grounds of client confidentiality. It has denied any allegations of wrongdoing on its part or that of its clients.

A spokeswoman for Crown Resorts, which has Mr Packer as its major shareholder, said comment should be sought from the separately-listed Melco Resorts and Entertainment, the successor to Melco Crown.

Comment has been sought from Melco Resorts & Entertainment, the successor of Melco Crown, Oaktree Capital and Silver Point Capital.

Oaktree is a large publicly-listed US fund manager that invests $US100 billion on behalf of a wide range of institutions and high net wealth individuals.

Silver Point Capital is a secretive fund headquartered in the US hedge fund capital of Greenwich, Connecticut.

In 2011, an Appleby staffer relayed the threat made by Melco Crown in an email:

“The client (Melco Crown) requested us to waive any further KYC [know your client] requirements and proceed with the incorporation of the above-named four BVI Companies. We are advised by the client that if we could not have the Companies incorporated by early next week, the client would ask other service providers to do the incorporations for them.”

And again in 2013, working on Project Thunderbird, an Appleby staffer relayed the same threat:

“The client said they would ask other service provider to incorporate the company for them if we insisted on requiring due diligence documents.”

In both cases Appleby was working on incorporating companies for Melco Crown in the tax haven of the British Virgin Islands.

Appleby helped implement a complicated structure that joined the interests of the US-based hedge funds with the publicly-listed, Cayman Islands-registered Melco Crown.

At the time the casino companies of Mr Packer and Mr Ho owned a third of Melco Crown each, although Mr Packer’s Crown Resorts has now sold its stake.

Appleby never received the identities of the ultimate beneficial owners of the hedge fund investments from Melco Crown.

The two Studio City companies flagged as priorities by Melco Crown were incorporated by Appleby within five days of Cline first raising the alarm.

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Author: Stuart Washington and the International Consortium of Investigative Journalists

Source: ABC

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