For many years, I've advocated keeping valuable items in private vaults, rather than safety deposit boxes. A raid June 2 on three private vaults in London has led me to change my mind.
In a meticulously orchestrated operation, more than 300 heavily armed police simultaneously raided the vaults, all owned by Safe Deposit Centres Ltd. Subsequently, police arrested two of the South-African born owners of the company on suspicion of money laundering and related charges.
In the most unprecedented example of wholesale confiscation I can recall in a "civilized" country, U.K. police seized every one of the more than 7,000 safety deposit boxes in the vaults. According to a spokesman from the London police, “Each box will be treated as a crime scene in its own right.”
The raid made headlines throughout Britain, and continues to do so, as police selectively reveal what they've found inside the boxes. The bounty—which will be forfeited to the Crown unless the owners mount a successful action to reclaim their property—includes the equivalent of US$100 million in cash, six suitcases full of gold dust, along with an assortment of drugs, guns, and child pornography.
Police claim that 90% of the boxes contain criminal assets. Indeed, police have linked the box-holders to organized crime syndicates dealing in drugs, child pornography, human trafficking, prostitution, and the catchall crime of money laundering.
That's quite an assortment of criminality. But step back for a moment and consider your own safety deposit box or a private vault. At least in the United Kingdom, police believe there's a 90% probability that it contains "criminal assets." They have the right to seize the contents of your box, then make you prove that everything you keep there is not "criminal assets" in order to get it back.
Let's assume for a moment that police decide to raid the bank or private vault where you keep your valuables, and seize the contents of your box. How would you prove that everything you have in your box is legitimate?
First, you can forget about any currency you keep in it. In the London raids, police used sniffer dogs to identify drug residues on currency. Tainted currency is presumed to represent the proceeds of drug trafficking. It doesn't matter that drug residues taint more than 95% of circulating currency.
Second, you can probably forget about any gold or other precious metals you keep in it. If you can produce an invoice that police can tie to a specific bar or coin, you might get that specific item back. But, if you've simply stored away gold coins that you purchased with cash, without an invoice, you're out of luck.
You might fare better with any jewelry you keep in the box. Naturally, you'll need to produce the original invoice, with sufficient detail on it to identify a specific piece of jewelry or precious stone. Otherwise, it now belongs to the government.
Don't forget the taxman. If there's even a scintilla of evidence that you purchased valuables found in your box with untaxed funds, you can probably kiss them goodbye. And, you can look forward to a tax investigation.
If you keep important papers in your safety deposit box, police and tax authorities will copy them before you receive them back. If those papers show evidence of anything illegal—or untaxed income—once again, you can look forward to an investigation.
My recommendation is to close out any safekeeping relationship you have with a bank or private vault, anywhere in the world. The London raids demonstrate that as soon as you deposit property there, you've essentially given up all legal rights to it.
Remove your valuables and store them in a floor safe in your home. If the vault is in a foreign country, and it's not practical to relocate your valuables to your home, make certain that you can prove beyond a reasonable doubt that you legally own every item in the box. You should have a receipt describing the property in detail, along with a record of how you paid for it. Ideally, you should also have records proving that you used legally-earned, after-tax funds to pay for the items in the box.
Don't delay. The "success" of the London operation, and the fawning media attention accompanying it, will surely spur similar efforts in other countries. Time is not on your side.
Copyright © 2008 by Mark Nestmann
Comments