From South Dakota to the high seas, the world gets less transparent
SOUTH DAKOTA (AGAIN)
Thanks to a friend for forwarding me an email sent from South Dakota’s Division of Banking to the state’s trust companies after the $1.5 million fine imposed on Kingdom Trust by FinCEN (about which I wrote last week). It sets out a long list of actions that all state-chartered trust companies must now perform: identify high-risk “customers and business lines,” evaluate if trust companies have the procedures and personnel to comply with financial regulations, check whether they have been filing an adequate number of Suspicious Activity Reports, identify occasions when a bank has closed accounts held by the trust company and describe why that happened, check up on any business relationship with third parties that refer customers to them.
An initial assessment must be completed within 30 days, then remedial actions must be finished within 90 days, as well as various other bits/bobs, which are all very good/necessary, while also being too little/late.
I now look forward to statements from the state’s Division of Agriculture advising South Dakotan horse owners on the correct mechanism for closing stable doors and any remedial action to be taken on occasions when the horse has already bolted. If it’s following the lead from the Division of Banking, however, it won’t worry itself too much with attempting to recover any runaway horses. There is no mention in the statement of follow-up investigative work to prosecute dishonest clients who have put illicit funds into the state’s trust structures, to confiscate any illicit funds that are found or indeed to investigate any dishonest trust providers.
Of course, thanks to the delights of South Dakota’s trust legislation, were any of the trusts to be found to have been created fraudulently, any creditors would need to bring a case at a criminal standard of proof (unlike in many other states) and to do so within two years. There is potentially very rich irony in South Dakota’s desire to attract trust business and consequent campaign to pass more generous trust legislation, preventing the state from cleaning up that same trust business. Though that does rely on the state actually wanting to clean up the trust business, which isn’t a given.