Private Banks Spend Millions Every Year To Weed Out Criminals, Tax Cheats

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* Wealth managers' profit growth suffers as costs soar

* As much as 100 hours of due diligence commonplace

* Number of client rejections on the rise

By Sinead Cruise and Chris Vellacott

LONDON, July 22 (Reuters) - Private banks managing the financial affairs of the world's wealthy face spending millions of dollars every year on vetting new clients, as regulators get tough on banks that harbour tax cheats and money launderers.

While the world's rich are getting wealthier and putting more money into private banks, a growing proportion of the cash is from geo-political troublespots in the Middle East and Asia.

That is leading the banks, mostly based in Europe and the United States, to spend hundreds of hours on costly checks aimed at meeting regulators' demands to root out bad clients, eating into their profit margins.

Paul Kearney, head of Kleinwort Benson's private investment office, said his team incurs between 5,000 and 25,000 pounds ($7,600-$37,800) of costs in vetting each new client, depending on the background intelligence required and the jurisdiction in which the research is undertaken.

"Currently the international client base is the faster growing so we would expect our costs to increase in the next 12-24 months," he said, adding costs could equate to up to 10 percent of the first year's earnings from that account.

Some in the industry question whether all the effort will make much difference.

One London-based lawyer specialising in super rich clients, whose firm rejected one customer who turned out to be selling restored Soviet military hardware in the Middle East, said sophisticated criminals would always be hard to identify.

"If someone wants to get through the process and they are an inappropriate person, they will almost certainly have the necessary documentation and a front to get themselves through," he said, speaking on condition of anonymity.

But with regulators cracking down on banks, and plans to prosecute individuals as well as their employers currently being discussed in some countries, more money managers feel they have to invest some of their profits in trying to reduce their risks.

"It is expensive, that is true, but you cannot think of it as it once was, because you cannot go back in time," said George King, head of portfolio strategy at Royal Bank of Canada's private banking arm, of the tougher vetting process.

"The burden for not doing it well or incorrectly, in terms of reputational risk or fines is both enormous and growing."

Top banks, including HSBC, have paid huge fines to U.S. lawmakers to make amends for unwittingly laundering Mexican drug money, while Britain's Financial Conduct Authority has fined three banks, including RBS's Coutts, for lax money laundering controls since its crackdown gathered pace in 2012.

FINANCIAL STRAIN

Increased vetting costs come on top of rising administrative and regulatory expenses that have already made the competitive business of wealth management much less lucrative for banks.

Data from the 2013 World Wealth Report compiled by RBC Wealth Management and Capgemini shows the investable wealth of the world's so-called "high net worth" individuals rose by 10 percent to a record $46.2 trillion in 2012, after dropping 1.7 percent in 2011.

The flow of money into the $18.5 trillion global wealth management sector increased 23.7 percent in 2012, reversing a 27.9 percent outflow in 2011. However, average pretax profit growth was 5.3 percent in 2012, down from 12.3 percent in 2011, with high costs blamed for the dip, consultancy Scorpio Partnership said.

The cost of complying with regulation will continue to rise, according to PwC's annual Global Private Banking and Wealth Management Survey, published last month.

Respondents said they expected risk and regulatory compliance expenses to account for seven percent of annual revenue in two years, up from five percent today. Participants from the Americas are bracing for even higher costs - roughly equivalent to nine percent of revenues in the next two years.

"The ability to understand and manage the avalanche of regulatory and risk issues ... will likely require private banks to continue investing heavily," said Justin Ong, Asia Pacific leader in PwC's global private banking arm.

Some banks have even resorted to rejecting accounts that are too small, risky or labour-intensive to turn a profit from.

"It is worth noting that the costs of the enhanced due diligence process may be incurred with the end result being a decision not to engage with the prospective client," Kleinwort Benson's Kearney said.

For some in the industry, though, the battle against criminals comes down to a mix of experience and instinct.

"You have to be very confident of the origins of the funds you are dealing with. If not, it's very simple, you have to walk away," said Rupert Robinson, CEO of Signia Private Wealth.

"You can do due diligence on a prospect to the 'n'th degree and you might be able to find evidence of some bad behaviour but it is almost impossible to uncover things like fraud. If you have any doubt, you just have to say no."

Also on HuffPost:

No, Making Banks Hold More Capital Is Not Going To Wreck Lending Or The Economy

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UH-oh, todo el mundo: los banqueros advierten que la economía estadounidense podría estar en serios problemas. No porque los banqueros destrozados lo otra vez, como ese tiempo pasado, sino porque estamos siendo media a los banqueros.

Afortunadamente, estos bancos son probablemente equivocados.

Como ellos, Banco criticones han apresurado para advertir que el mayor capital de Banco requisitos propuso el martes por la Reserva Federal, oficina de la Contraloría de la moneda y la Federal Deposit Insurance Corporation se ralentizará préstamos y el crecimiento económico, hacer menos competitiva frente a competidores europeos de los bancos norteamericanos y ser cruel con los cachorros y gatitos.

La primera cita en la historia de Wall Street Journal del miércoles (sólo suscripción) sobre las nuevas reglas de la capitales, de hecho, es esa una advertencia de un representante de la banca:

"Requisitos cada vez mayores de capitales, mientras que un elemento crucial de la seguridad y solidez, pueden ser prohibitivos y llevar a la reducida capacidad para prestar", Rob Nichols, Presidente del Foro de servicios financieros, un grupo de presión para el conjunto demasiado grande para fallar, dice el WSJ.

La tercera cita en esa misma historia (después de una cita de ex FDIC jefe Sheila Bair, equilibrio) viene de flak otra banca--ex gobernador de Minnesota Tim Pawlenty, ahora presidente de la mesa redonda de servicios financieros, otro banco, presión de grupo, que advierte que los bancos estadounidenses se "pondría en una situación de desventaja competitiva global" si tienen que tener más capital que otros bancos.

Estos son sus argumentos de banquero repetitivo contra el Reglamento, hecho más frecuente y famoso por JPMorgan Chase CEO Jamie Dimon en respuesta a la amenaza de mayores requerimientos de capitales y restricciones más severas en la toma de riesgos de banco a raíz de la crisis financiera.

De hecho, estas respuestas son tan deprimente predecibles que Stanford financiar profesor Anat Admati y Martin Hellwig del Instituto Max Planck, autores del libro reciente, ropa nueva de los banqueros: ¿Qué está mal con Banca y qué a hacer sobre él, han reunido una refutación punto por punto de estos y varios otros tales argumentos. Ver reclamos 9 y 10, 22 y 23, para empezar.

"Muchos bancos, incluyendo la mayor parte de los grandes bancos en Estados Unidos, no incluso utilizan todos los fondos que obtienen de los depositantes para conceder préstamos," escritura Admati y Hellwig. "Si los bancos no hacen préstamos, por lo tanto, el problema no es la falta de fondos ni una incapacidad para recaudar más fondos para préstamos rentables, pero más bien opciones de los bancos para centrarse en otras inversiones en su lugar."

En otras palabras, requisitos de capital bancario no afectan el deseo de los bancos de prestar dinero casi tanto como la calidad de los prestatarios, el clima económico y otros factores. Se hace eco de los resultados de un estudio de 2010 por los economistas de la Reserva Federal Jose M. Berrospide y Rochelle M. Edge, quien escribió (cursivas en el original):

Mientras que nuestros resultados empíricos sugieren relativamente modesto e fectos de déficits de capital y el crecimiento de las colocaciones, los coeficientes de capital encontrar papeles más importantes de otros factores como la actividad económica y mayor percepción de riesgo por los bancos. Una interpretación de este resultado es que los bancos... dan relativamente poca consideración a su posición de capital al momento de decidir si se va a prestar y por el contrario permitir que otros factores tales como préstamos demanda y riesgo para guiar sus decisiones.

Más importante aún, si los bancos tienen más capital, será más probable que prestar en la próxima crisis e hipercompetitivo. Sin duda serán menos probabilidades de necesitar rescates masivos contribuyente, por lo menos--que es el punto de este ejercicio conjunto capitalización.

En cualquier caso, la capital de estos bancos tendrán que levantar bajo estas nuevas normas seguirá siendo bastante modesta--$89 billones más o menos, dividido entre ocho de los mayores bancos del mundo, durante un período de cinco años. Asciende a $2,25 billones por Banco, en promedio, al año.

"Estos son los bancos que en promedio tienen ganancias que superan los $4 billones por trimestre, o $16 billones por año," Notas de Dennis Kelleher, CEO de mejores mercados, un grupo de defensa de la reforma financiera en Washington. "A lo sumo, afectaría beneficios menos del 10 por ciento por año para cada uno de los próximos cinco años. Así que la exigencia de capital es risiblemente baja."

Eso $89 billones es también un loogie en el Pacífico en comparación con el estimado $12,8 trillones la crisis financiera cuestan a la economía de Estados Unidos, según un estudio de mercados mejor.

"Cuando dicen reforma financiera diseñada para proteger al pueblo estadounidense y evitar otra crisis duele el crecimiento o el empleo, totalmente ignoran que el último colapso financiero y la próxima haremos más daño al crecimiento, el empleo y el nivel de vida de todos los estadounidenses que cualquier regla o reglamento o la totalidad de las normas o reglamentos," dice Kelleher. "Nunca mencionan".

En cuanto al tema de si los bancos estadounidenses perderán su ventaja competitiva si tienen más capital, que es ridículo en su cara--bancos mensurable más saludables deben tener un tiempo más fácil recaudar fondos y atraer a clientes. Los criticones Banco parecen querer es para que los bancos poder asumir riesgos más grandes para mayor rentabilidad a corto plazo, que no es comportamiento que exactamente queremos fomentar, ¿es?

"Si algunos países permiten tontamente sus bancos establecer estrategias muy arriesgadas y a endeudarse excesivamente," Admati y Hellwig escribir, "esto no es una razón por qué otros países deben hacer lo mismo".

También en HuffPost:

Iain Banks given: the Scottish author dead at 59

By Belinda Goldsmith

London, June 9 (Reuters) - the novelist Iain Banks, which had lively Scottish literature for three decades with his black humor, has died in just a few days of cancer before the publication of his novel 27 and end "The quarry".

Banks announced that he was suffering from the disease in April and said that he had asked his partner, author Adele Hartley, "she makes me the honour of becoming my widow" - macabre humor, explained, helped to cope with their impending death.

The announcement triggered tributes of his army of fans who have followed the prolific writer since he made his literary debut in 1984 with "The WaSP factory".

Announcing his death at the age of 59, Publisher Little Brown told banks it was irreplaceable part of the literary world.

"It makes just three weeks was presented with finished copies of his latest novel,"The quarry"and enjoy celebration parties with old friends and fans in the publishing world," said the editorial in a statement.

Banks began to write the book when he was diagnosed with bladder cancer in March.

The novel, to be published on June 20, describes the last few weeks in the life of a man in his forties, battling terminal cancer which cares for his son's 18-year-old Kit.

Instinct of the first such banks to fierce black and biting humor comments dialogue remained as sharp as ever.

POLITICS AND PASSIONS

Banks was born in Fife, only child in a home filled with books. Parents encouraged to develop a life of fantasy.

He knew from an early age that he wanted to be a writer, completing his first unpublished novel at the age of 16.

After the success of 'The WaSP factory', the banks began to write full-time full and in accordance with your editor to try to produce a year's book, making two runs of writing - and Iain Banks current fiction writer Iain M. Banks, the science fiction writer that emerged with "Consider Phlébas" in 1987.

The first Iain made more money from his books, which included "The Crow road" and "Complicity" and received the greatest literary praise. The second Iain with a M., was more political and loyal cult track.

Banks, a character more than life carrying its politics and passions on her sleeve, once joked that he had considered adding a few pseudonyms to the list by writing Westerns as Iain Z. Banks and eroticism as Iain Banks X...

Proud of his Scottish heritage, banks delighted in his love of whisky de Malta, even in what is the subject of a book "Raw spirit" that took him through Scotland.

But after hitting 50 and with the collapse of his first marriage in 2006 he took stock of his life and changes.

The man who once ran by the rector of the University of Edinburgh in the name of hijos de puta drunk party cut their consumption and also abandoned recreational drugs after years of use of marijuana, LSD and cocaine.

"Always called the line in heroin, which is simply stupid," banks told the Australian in 2008.

In an attempt to reduce their carbon footprint, decided to avoid long-haul flights and traded in his beloved sports cars - Jaguar, Porches, BMW and a Land Rover - something greener.

"I miss the car lot. I finally cracked and bought a soft hood Mini because it is green and has the smallest engine, ", he said.

For several years that had problems to travel because he broke his passport in protest of Iraq war in 2007, refuse to apply for a new one until Prime Minister Tony Blair left office.

Fans of the author wrote his condolences on Sunday.

"Rest in peace, Iain Banks. So sad news, "writing cyclist Chris today, most successful Olympic of Great Britain. (Additional reporting by Andrew Osborn; Edited by Andrew Heavens)

Tony Parker Shot: Spurs Guard Banks In Ridiculous Bucket To Seal Game 1 Win Over Heat (VIDEO)

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Tony Parker spent the majority of the most important possession of Game 1 of the 2013 NBA Finals nearly losing the ball. First, he almost lost his handle while trying to split Chris Bosh and Dwyane Wade. He then nearly stumbled into LeBron James before awkwardly spinning away. Off the spin, Parker lost his footing, going to the ground. After that, the play really got dramatic.

"It was so crazy, that play, that after a while I was just trying to get a shot up," Parker told Stuart Scott of ESPN after the game. "I lost the ball like three times. It didn't work out like I wanted to but at the end it was a big shot. And it's like that in the Finals. You need a little bit of luck and we had it tonight."

With the San Antonio Spurs clinging to a 90-88 lead and game clock ticking under 10 seconds, Parker lost his footing but kept his dribble. The 31-year-old point guard then rose up only to have to duck under James' outstretched arm. Just before the shot clock expired, Parker loosed his improbable double clutch shot. It caromed off the backboard, bounced up off the rim ... once ... twice ... and then dropped through the net, stretching the Spurs lead to 92-88 with just 5.2 seconds to play. The officials reviewed the play to see if the shot did beat the shot clock. It did, barely. Right?

WATCH VIDEO ABOVE

"Tony did everything wrong and then he did everything right in the same possession. He stumbled two or three times. He fell over. When he fell over, I was like 'OK, well I'm about to try and tie this ball up.' And he got up and went under my arm. I got a great contest and he even double pumped it and barely got it off," James told reporters after game, recounting Parker's shot. "I mean that was the longest twenty four seconds that I've been a part of."

The remaining 5.2 seconds came and went too quickly for the Heat, who had no answer to Parker's ridiculous circus make. That unlikely basket capped a 10-point fourth quarter for Parker. The Spurs outscored the Heat 23-16 in the final quarter and held on for the 92-88 win in Game 1 of the 2013 NBA Finals.

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