Robin Rathmell is a dual qualified English Barrister and U.S. lawyer, who is a partner at Kobre & Kim directing their International Private Client practice, which focuses on formulating offensive and defensive global litigation strategies for high-net-worth individuals.Topic: Discusses the Biggest Real and Imagined Compliance Risks for Companies Dealing with High Net Worth Individuals. Listen here
Speaker 1: Welcome to the Corporate Counsel Business Journal’s daily podcast, In House Warrior, with host Richard Levick, chairman of LEVICK, a global crisis and litigation communications firm.
Richard Levick: This is Richard Levick and welcome to In House Warrior with the Corporate Counsel Business Journal. I’m Richard Levick, and with me today is Robin Rathmell. Robin is a dual-qualified English barrister and US lawyer. He’s a partner with Kobre & Kim, who directs their international private client practice, which focuses on formulating offensive and defensive global litigation strategies for high-net-worth individuals. Rob, welcome to the show.
Robin Rathmell: Thank you very much.
Levick: Robin, tell us about the biggest real and imagined compliance risks for companies dealing with high-net-worth individuals, and also help us understand what a high-net-worth individual is.
Rathmell: Okay, so I’ll answer the second question first. There’s lots of definitions of a high-net-worth individual. To put it in colloquial speak, it’s a rich person. Usually in today’s world, you’re talking about people who are worth hundreds of millions, and billionaires and people like that. The second question, as in what are the real and imagined compliance risks, basically comes down to the growth, the very salutary and good growth in anti-money laundering legislation and global efforts to combat that. The effect of that is that the way in which very rich people structure their assets is subject to farther-reaching laws, because an unfortunate coincidence is that the way very rich people hold their assets, which is entirely lawful, is also the way very rich criminals try to hide their proceeds of crime. So corporations who are performing due diligence on very rich individuals have to apply the laws that are targeted at very rich criminals. And that throws up all sorts of compliance issues, both for the corporations carrying out the checks and for the lawful, law-abiding rich people who are subject to the checks.
Levick: Do you think there’s an emotional issue with high-net-worth individuals that it’s challenging enough to accumulate the wealth, but then you suddenly find, almost unexpectedly, your reward of your success is to become a target.
Rathmell: Yes, I think that’s definitely fair. You become a target in two ways. Of course, you become a target of opportunistic bad actors who may try and come after you, whether it’s with spurious lawsuits or scams, or even depending on where you’re from in the world, rogue governments might come off to you. But then apropos of this topic, you can feel like a target even when you’re trying to do business with your bank or with a company that suddenly requires you to explain the source of your wealth and the source of your assets as if you are subject to an inquisition. But that’s really not the case. It’s just important that when corporations are performing this due diligence, they message it in the right way to the individuals in question.
Levick: Rob, for a general counsel audience, why is compliance so important and so difficult with dealing with high-net-worth individuals?
Rathmell: It’s so important because I’m sure the audience will be very familiar with how many corporations and financial services providers have got into real legal trouble for failing to carry out proper due diligence checks. And you can get into legal trouble for failing to carry out proper due diligence even if the underlying person is a hundred percent lawful. So of course it’s bad, and the cases you hear about are when companies fail due diligence and a criminal slips through the net, but everyone needs to remember that your compliance obligations exist regardless of whether the client is itself guilty of anything.
Levick: Robin, we’ve got enough time for it looks like one more question. And what are some of the hallmarks of a proper due diligence approach for high-net-worth individuals?
Rathmell: Essentially it comes down to two things. Well, three things. Identity of the individuals in question, source of their wealth and source of the specific funds that the corporation is dealing with. All of those three things are fact-based exercises, and there are many, many pages of regulations governing corporations and what general counsel’s obligations are in the relevant sector in which they’re operating. In my money, it always comes down to this. It’s doing it respectfully and transparently with the high-net-worth individual. It’s explaining to them why the intrusive inquiries need to be made, but also reassuring them that their very private information will be kept safe, will only be used and held for as long as necessary and shared with whoever is necessary to discharge the strict legal obligations, and that this is a product of a legal landscape that is there to protect all of us from criminals and is not there to attack any law-abiding high-net-worth individual.
Levick: Robin, because unfortunately I was never very good at math, we’re going to try and squeeze in one more question here before we go. Where do you see compliance departments making mistakes in relationship to high-net-worth individuals?
Rathmell: In two ways. The first is if they are too desperate for business from a high-net-worth individual and they are too lax in their standards, and they’re willing to accept source-of-wealth information that is not convincing, for example, that is not from an independent third party like an audit firm or a bank. And the second mistake is at the other end of the spectrum, where they’re too strict and they turn away lawful high-net-worth individuals because they can’t perform a check-box exercise. So I’d encourage compliance departments and general counsels working with compliance departments to always be mindful of the requirements of the law, but note that the requirements of the law do not prescribe an exact compliance program for every individual client. It has to be fact-specific and it has to be done in the context of the specific client’s needs and available information.
Levick: Robin, thank you so much. And this is Richard Levick with Robin Rathmell of Kobre & Kim, and this has been In House Warrior with the Corporate Counsel Business Journal. Thanks so much. See you tomorrow.
Speaker 1: You’ve been listening to the Corporate Counsel Business Journal’s In House Warrior with host Richard Levick.