When criminal funds pass through a trust account

A Zug law firm is alleged to have helped a criminal organisation from Belgium set up a fraud scheme and launder millions of euros.
 

The fraud company was founded in the canton of Zug in 2018. It issued a virtual currency and ran a website that resembled a conventional social media platform. Members could recruit new members and apparently “make substantial profits.” The members invested real money, which was transferred to a personal “wallet” – but, according to Belgian investigators, this was only for show, as the money ended up with the Zug-based Fraud AG.

This description can be found in a new ruling by the Federal Criminal Court (Bundesstrafgericht) in Bellinzona. It refers to a major case of fraud, allegedly committed by a criminal organisation from Belgium, with money trails leading to Switzerland.

Enabling and promotion of criminal activity
According to the Belgian judiciary, a Zug law firm (Kanzlei) provided the gang with fiduciary structures “to enable and promote criminal activities.” Among other things, these fiduciary structures were deliberately used to create “opacity.”

This Zug law firm was willing to do a lot. When the fraudulent corporation was founded, the actual founders were not named, but the registered shares later went to Belgian members of the criminal organisation.

Because the fraudulent corporation was unable to obtain a bank account when it was founded, the funds were transferred via the trust account of another company.

Money laundering via a law firm in Zug? Belgium investigates      Photo: Walter Schwager
 

According to the ruling of the Federal Criminal Court, the head of the law firm himself worked for the Belgian gangsters, as did one of his employees. The trust account was used to “receive and transfer assets of criminal origin.”

We are talking here about sums in the millions of euros. Payments from clients in Bermuda, the British Virgin Islands and Ireland were received by the law firm's account in April 2021. The law firm immediately transferred most of the three payments, totalling a good 31 million euro, to a notary in the Netherlands. A Swiss limited liability company allegedly wanted to use the money to buy a Dutch company.

Hiding behind attorney-client privilege
Among other things, the Zug-based law firm attempted to hide behind attorney-client privilege (Anwaltsgeheimnis), but this was rejected by the Federal Criminal Court.

According to the court, there was evidence of “structuring of money transfers via the law firm's account, which contributed to anonymising the origin of the money.” This transfer activity was, at most, a legal business activity, but more likely a fiduciary transaction. Neither activity “is covered by attorney-client privilege,” as the Appeals Chamber (Beschwerdekammer) found.

The Federal Criminal Court rejected appeals by the Zug law firm and a downstream company, which had opposed, among other things, the disclosure of evidence by the Office of the Attorney General (Bundesanwaltschaft) to its partner authorities in Belgium. The decision can be appealed to the Federal Supreme Court.

The Belgian judiciary is investigating a number of individuals and companies, including the law firm. The charges relate to fraud, money laundering, and the formation of a criminal organisation. The presumption of innocence thereby applies.