GGI is ranked #1 on AccountancyAge 2015 Top 20 Associations and Alliances

The 2015 AccountancyAge survey results reveal that GGI Geneva Group International maintains its #1 position among the world’s Top 20 Associations and Alliances. We are so proud to share this great distinction with our amazing members around the globe.

Read the article here –

Acountancy Age Rankings

GGI adds 3 new members in the United States

JTaylor – Fort Worth, Texas

JTaylor was founded in 1999 as a CPA firm that focused largely on tax services and business consulting. For the past 16 years the firm has built a reputation for its superior strategic capabilities and high-end technical skills, and for attracting talented and dedicated professionals.

The firm assists clients in a variety of industries including healthcare, manufacturing, technology, energy, professional services and consumer products. They also offer assurance services and business services to their clients.  Assurance services would include audits, compilations, reviews, and agreed upon procedures and other attestation related engagements. Business services would include assistance in the development and maintenance of financial records and reporting, mainly for small-to-middle market businesses.

JTaylor is based in Fort Worth, Texas, and have a multilingual, multidisciplinary professional staff of 47 governed by 10 partners. The main office languages are English and Spanish.

Michael Malloy

Michael S. Malloy
Fort Worth, Texas
United States
P: +1 817 924 5900
F: +1 817 924 5915

Buckley Law P.C. – Portland, Oregon

Buckley Law P.C. is a law firm based in Portland, the largest city in the state of Oregon. Founded in 1984 in the “City of Roses”, they have steadily developed over the past 30 years to become one of the most prominent legal firms in the region.

The firm provides a broad range of specialised services in Business and Commercial Law, Employment and Labor Law, Real Estate and Land Use, Civil Litigation, Intellectual Property, Taxation, Family and Elder Law, and Estate Planning, Probate and Trust Administration.

Buckley Law P.C. is led by 12 partners and a multidiscipline team of 22 professional staff members. The main operating company language is English.

Charlie Harrell

Charles Harrell
Portland, Oregon
United States

Gordon, Fournaris & Mammarella, P.A. – Wilmington, Delaware

Established in 1994, Gordon, Fournaris & Mammarella, P.A. is a law firm located in the historic Delaware Academy of Medicine building in Wilmington, Delaware.

The firm’s major areas of practice include, Trusts and Estate Planning, Captive Insurance, Fiduciary Litigation, Business Planning and Transactions, Commercial Real Estate, Land Use, Zoning, Corporate and Commercial Litigation, Civil Litigation, Taxation and Alternative Dispute Resolution (ADR).

Gordon, Fournaris & Mammarella, P.A have a professional staff of 33 supervised by 13 partners, and a primary operating language of English.

Robert Harra

Robert V.A. Harra III
Wilmington, Delaware
United States
P: +1 302 652 2900
F: +1 302 652 1142


GGI adds members in its Asia-Pacific and European Regions

Komandoor & Co., Chartered Accountants – India

KOMANDOOR & Co. was established early in 1989 in Hyderabad, to date it now has a presence in the majority of Indian metros. The firm consists of 15 qualified chartered accountants as partners with proven track record and ability to understand, evaluate, assess and draw up short term and long term business solutions for its clients.

KOMANDOOR & Co. have a wide client base, offering services such as Assistance for Tax, Due Diligence, Valuation and Internal Audit. This ranges through the corporate sector, public sector undertakings, banks, charitable institutions, small and medium level firms and individuals. They assist clients by providing quality services in the form of audit and assurance services, matters relating to taxation, undertaking financial, legal and accounting reviews.

The company have PAN India presence and have plans to expand in the future with two overseas branches, one in Europe and one in Middle East which will work as a catalyst in bringing FDI & PE Funding to Indian Sub Continent.


Mohan Komandoor Acharya
Ameerpet, India
T:   +91 402 375 130 0
F:   +91 402 374 538 1

MBMG Group – Thailand

MBMG Group, was founded in Bangkok in 1996 by Paul Gambles and Graham Macdonald, and has steadily grown over the last 19 years. As a strong believer in active dialogue with clients and the community, MBMG Update – an email and blog commentary which has readership of almost 50,000 – enables the company to communicate with its clients and the community via social media and various local publications.

MBMG Group has 28 qualified professionals across its 3 main divisions – Auditing & Accounting, Tax & Legal and Advisory & Corporate Finance; this includes Business & Commercial Agreements Drafting, Offshore Company and Trust Incorporation, Tax Planning, Mergers & Acquisitions, Regulatory Guidance and General Legal Consulting.

Each of the 3 divisions is run by an acknowledged leading expert, Janjira Sumanus, Usa Suwanchatree and Peter Emblin. Its principal linguistic capabilities are Thai, English, Spanish, French, German, Mandarin and Filipino.


Usa Suwanchatree
Bangkok, Thailand
T:  +66 266 525 349
F:  +66 266 529 96

Franken-Treuhand – Germany

Founded in 1977, Franken-Treuhand are an Auditing & Accounting and Tax Firm. The firm is a result of a merger between three long-established and well-known consulting firms: an auditing and tax consulting firm in Nuremberg, a tax consulting firm in Forchheim and the spin-off of the tax and business consultancy activities from a law firm in Würzburg.

Based in Würzburg, Germany, Franken-Treuhand serve their clients in a multitude of disciplines including Auditing, Tax, Business Consulting, Legal Support and Advice and Fiduciary Management.

With a multilingual, multidiscipline staff of 25 governed by five partners, Franken-Treuhand have the ability to serve their clients in German, Russian, English and French.


Ellen Stellwagen
Würzburg, Germany
P: +49 931 908 300
F: +49 931 908 309 0


GGI welcomes firms in Europe and USA.

Carr McClellan – Burlingame

Carr McClellan, GGI’s newest addition on the San Francisco Peninsula was founded in 1945. Over the past 70 years they have grown steadily, becoming one of the leading boutique law firms in the San Francisco Bay Area. An additional office in San Francisco allows them to provide services both domestically and internationally.

Originally tied to light industry, agriculture and ancillary businesses, the company developed largely in the 1970s and 1980s by growing their corporate and tax, real estate, litigation and estate-planning practices.

Carr McClellan serves clients over a wide range of businesses including manufacturers, food distributors and retailers, construction and real estate development companies, nonprofit and governmental entities, software and computer companies, investment and consulting firms, and professional service providers, amongst others.

Carr McClellan continues to grow its international practice with an emphasis on inbound U.S. investment and outbound tax planning.  It also has a robust U.S. international tax compliance practice representing U.S. taxpayers and businesses before the Internal Revenue Service.  The firm has 45 professional staff based between both offices of the company.

Brendan Lund

Brendan Lund

Burlingame, United States
T:   +1 650 696 2546
F:  +1 650 342 7685

Dr. Böhmer, Bethmann & Partner mbB – Germany

Originating over 65 years ago in Hameln, Germany. Dr. Böhmer, Bethmann & Partner mbB, is one of the oldest member firms of GGI, and one of the newest. The company that originated in 1948, started out as an accountancy firm, and for many years was the only accountancy firm in Hameln.

Dr. Böhmer, Bethmann & Partner mbB has grown steadily and now has a range of services such as Tax, Audit, Business Consulting, Fiduciary Activities, Investment Counselling, Accounting and Payroll Accounting.

With a professional staff of 18 overseen by two partners, they are a bilingual firm, serving clients, both domestically and internationally.

Andreas Bethmann

Andreas Bethmann

Hameln, Germany
T:  +49 51 51 95 07 0
F:  +49 51 51 95 07 77

ADLEX – Lithuania

The Professional Law Partnership “ADLEX“ is a Vilnius based Law Firm, founded in 2007 by Linas Jakas and Reda Kurlavičienė. They focus predominantly on providing commercial law legal advice services to Lithuanian and international clients.

The team of Law Partnership “ADLEX“ advise in all legal areas, including Corporate and M&A, Conflict Management, Finance and Tax, Real Estate and Construction, Competition and Intellectual Property, Public-Private Partnership, Insurance, Health Care. They have had successful and great experience in dispute resolution, representing clients in any court, international arbitration or any governmental institutions.

The firm aims to provide flexible solutions and agile responses to meet the varying demands of its clients. 18 committed professionals of ADLEX provide services in Lithuanian, English and Russian.

Reda Kurlavičienė

Reda Kurlavičienė

Vilnius, Lithuania
T:   +370 5 204 5554
F:  +370 5 204 5500

Absolute Value: What Really Influences Customers in the Age of (Nearly) Perfect Information

Absolute Value

Going against conventional marketing wisdom, Absolute Value reveals what really influences customers today and offers a new framework—the Influence Mix, a totally new way of thinking about consumer decision making and marketing, and about developing more effective business strategies.

How people buy things has changed profoundly—yet the fundamental thinking about consumer decision-making and marketing has not. Most marketers still believe that they can shape consumers’ perception and drive their behavior. In this provocative book, Stanford professor Itamar Simonson and bestselling author Emanuel Rosen show why current mantras are losing their relevance. When consumers base their decisions on reviews from other users, easily accessed expert opinions, price comparison apps, and other emerging technologies, everything changes.

Absolute Value answers the pressing questions of how to influence customers in this new age. Simonson and Rosen point out the old-school marketing concepts that need to change and explain how a company should design its communication strategy, market research program, and segmentation strategy in the new environment. Filled with deep analysis, case studies, and cutting-edge research, this forward-looking book provides a totally new way of thinking about marketing.

Hardcover: 256 pages

ISBN-10: 0062215671


Taxation of trusts and estates in Mexico

estate planning

By Sergio Guerrero Rosas

There have been various changes to tax planning and the use of offshore entities over the last few years in Mexico following a wave of new rules and regulations. Nonetheless, there are a number of benefits to a carefully implemented trusts strategy.

By understanding a few of the key principles at work in Mexican estate planning and fideicomisos (trusts), families can successfully protect their wealth as they pass assets on from one generation to the next, helping them to properly achieve tax efficiency, compliance and confidentiality.

Taxation of trusts

Trusts in Mexico may be considered taxpayers or non-taxpayers according to whether or not they are created for business purposes.

For example, if a property in a restricted zone (areas close to borders and coastlines around Mexico where direct foreign ownership of real property is prohibited and where a Mexican trust is therefore established as a way for foreigners to make property investments in that region) is rented out and generates an income, it would be taxable. However, where a trust is set up to maintain the assets of approved funds, there is no recognised income, and therefore no tax obligation.

Taxation of the fideicomisario (beneficiary)

Crucially, trust income will not be taxed twice, so where income tax is paid on a trust established for business purposes (i.e. one set up for leasing or for a quick sale), the beneficiary will not be subject to tax on the income that they receive.

Conversely, any income generated from assets held in a trust that has not been set up for business purposes will be considered as taxable to the beneficiaries.

Nevertheless, any losses accrued from a Mexican trust cannot be passed over to the beneficiaries until liquidation of that trust occurs.

The fiduciario (trustee) and comité técnico (technical committee)

In the case of trusts set up for business purposes, the fiduciario (trustee) will be responsible for filing tax returns, advance payments of income tax for those income-generating activities three times each year, in May, September and January, set at 10% of the gross rental income collected during the preceding four months, and determining the utilidad fiscal (annual adjusted taxable income), which is done in line with the methods required of corporations.

Furthermore, Mexican legislation allows for a technical committee, which can consist of just the fideicomitente (grantor), and whose specific duties are stipulated in and only limited to what is written in the trust agreement.

This affords the option to transfer some of the trustee responsibilities to the grantor, and while the grantor cannot replace the trustee, they can nevertheless attain a greater degree of the decision-making powers as a result of this addition of a fourth party to the trust structure.

Irrevocable trusts and the grantor

For property that is rented out, income belongs to the grantor unless the transfer of title is irrevocable (where the grantor has no right to reacquire the property), in which case the income will belong to the beneficiaries.

The transfer of assets to an irrevocable trust is generally recognised as a sale and therefore taxable to the grantor unless the trustee maintains the right to reacquire the assets. Tax from rent on a property in an irrevocable trust is also attributed to the grantor.

But in all cases, the trustee is responsible for making those three advance payments of income tax over the course of the year.

Tax incentives for Mexican Real Estate Investment Trusts (REITs)

There are also a number of tax incentives to Mexican trusts set up for business purposes. For example, trustees and beneficiaries are exempt from advance payments of income tax on the income generated from Mexican REITs, their tax contributions being deferred until the sale of their REIT certificates.

Additionally, if the grantor is also a trust beneficiary or if the trust is revocable (where the grantor retains the right to reacquire the property), the transfer of real estate is not viewed as a sale by the authorities and is therefore tax-free.


Besides the tax incentives, another potentially attractive feature of Mexican trusts is the very strict secrecy laws that protect the anonymity of trust parties.

Receipts of tax payment are not traceable and, in the past, courts have even proved unsuccessful in their attempts to reveal the identities of trust members.

Furthermore, in cases where beneficiaries have sued a trustee, only the courts have been able to view the individuals’ identities, the court proceedings not being subject to public review.

The benefits and uses of a Mexican trust

Trusts may be formed for a number of reasons, mostly being done so in Mexico for family and estate planning.

Mexican trusts are fiercely protective of individuals’ confidentiality and, where established with careful observation of Mexican legislation and the incentives it offers, represent excellent potential to the foreign investor, guaranteeing a number of tax advantages while enabling the safeguarding of assets in financially beneficial conditions.

Moreover, they allow for a controlled and tax-conscious probate, removing property from the reach of creditors, and safely into the possession of the desired heirs.


Sergio Guerrero Rosas

Guerrero Santana

Auditing & Accounting, Tax, Law Firm, Advisory, Corporate Finance

Tijuana, Baja California, Mexico

Sergio Guerrero Rosas



Tagged ,

Where are we all heading economically?

World Economy

By Prof Robert Anthony

Quantitative easing has clearly created employment, albeit sometimes at low salaries. Whereas in the late 1980s hyperinflation was considered to be a way of creating demand, since the crisis of 2007 we have seen a different strategy. Initially there was speculation in safe commodities such as gold, but the price has now dropped from its previous high levels. Several advisors regarded it as undervalued and predicted it would continue to rise. As markets settled, despite the problems not being over, gold stabilised at a lower level. As we come out of slow growth, what effect will this have? Many think European equity markets are still undervalued. We have seen recent speculative selling, but markets have been volatile for a while.

Over the last eight years, many companies have restructured to concentrate on their core business. There have been demergers where conflicts were identified within groups and mergers where it was considered useful to the core business. However, this is a generalisation, as some mergers were not entirely sensible. Government protectionism has sometimes impeded international monopolies or foreign investments.

Looking to the future, the question arises as to political influence on the markets. How will they be affected by the UK general election? The financial centre in the UK is being threatened by the socialists discussing the scrapping of non-domiciled status. This status has attracted top financial brains to the UK. They create hundreds of jobs. Could this ill-advised move signal the end of London as the European financial hub of Europe? The consequences may result in the leading skilled professionals moving to Ireland, Malta, Luxembourg or New York. How short sighted are short-term political gains? Please note that I intentionally omitted Switzerland due to the current instability in its political financial administration.

The election result in the UK will direct future UK policies. What security does this now give to an investor intending to invest in the UK? The world has always opened new doors as old ones close. India is emerging as an exciting investment proposition with its relatively new government placing major international orders. China is currently also looking at quantitative easing. What is clear from all of this is that wealth is generated from the creation of jobs away from the meddling of governments. Long-established economic theories still apply. Fundamentals have not changed despite the technological revolution, although it is worth noting that systematic issues confuse the overall scene. The issue is can the effect of employment sufficiently succeed to overcome the explosion of additional liquidity injected into the capital marketplaces and its consequences.

Germany and the USA are leading the world out of its crisis, but India is joining as a driving force. Whilst having achieved a reduction in unemployment, the UK clearly still needs to address its overall debt issues as well as its membership of the EU. If a social government destroys international confidence this could have a disastrous effect. French Prime Minister Manuel Valls noted that taxation of the population had been too high, while government had not been adequately cutting public spending. The Greek government wants to increase spending unrealistically in order to fulfil its election promises. Now they have an issue as to how to respect the unrealistic election pledges and at the same time satisfy the EU. These many uncertainties are causing quite a dilemma. Stock picking is extremely important as are real assets such as property and forestry. It is essential to buy wisely by carefully choosing well managed investments with growth potential.

The tax push of governments has left certain sectors with problems. Green energy has been hit hard by government cuts and lack of bank lending. New sources of investments are growing by way of crowd funding and investment funds. The restructuring of the banking industry has created new businesses and opportunities. The world is not short of money but of visionaries. Needless to say there are entrepreneurs, but the financial sector is suffocated by analysts with no real business experience playing with financial instruments and backtesting theories. These have a heavy impact on the market and market prices.


It is about time politicians and banks come to terms with the real world. Perhaps it should be an obligation for financial analysts and bankers to have at least two years in commerce or industry before assuming such roles to ensure they understand how the other half lives. So to, politicians should have two years apprenticeship work experience in industry or commerce in a decision-making role before they can become a member of parliament. As a result, they would hopefully understand more clearly the effect of inappropriate legislation.

As the world achieves economic growth, the slow performing European economies will be pulled along. It is not to the credit of domestic governments, but a global push towards demand. As this materialises, the stranglehold of taxation can be eased thereby unblocking the arteries so in need of lifeblood to survive. Let’s just hope that future politicians do not make the same mistakes of the past by stopping the circulation.

In conclusion, it is a brave person that dares to predict tomorrow. The fluctuation of currencies makes this even harder, as is evident from the growth slowdown in the USA due to the strengthening of the dollar. A solution could be hedging by direct investment into international commodities that are in constant demand, in this way mitigating the risk attributable to foreign exchange. Although this may not be very exciting, it at least ensures living on to fight another day and also reflect on the past.


Prof Robert Anthony
Anthony & Cie
Fiduciary & Estate Planning, Tax
Sophia Antipolis, France
Prof. Robert Anthony


The New Italian Patent Box Regime

Italian Patent Box

(art.1 paragraph 36 to 45 of Law no.190 of 2014)

By Dr Massimiliano Russo

After a recent debate as to the possible introduction of new tax tools and incentives to attract foreign investments in Italy as well as a long period in which we have seen measures increasing the tax burden for both companies and individuals, this newly introduced legislation on the Patent Box Regime as a tax incentive is most welcome (in the following also referred to as the “incentive”).

Unfortunately, as with most the newly introduced legislation in Italy, some aspects have not yet been committed and will be further regulated in future ministerial decrees. The interpretation of the newly introduced rule by tax authorities is also still awaited.

However, it is already possible to evaluate the regime as it is now drafted under the Law in force and raise a few questions that domestic or foreign investors would possibly ask based on the current information available. Before analysing the Patent Box Regime and its key elements, it is useful to briefly look at the current tax environment for company business in Italy.

Under current Italian tax legislation, resident corporations are taxed on their worldwide income. A company is considered to be resident in Italy when its registered office, its place of effective management or its main business operations are located in Italy for the greater part of the year. Resident companies are currently subject to Corporate Income Tax (IRES) at a flat rate of 27.5% and to Local Income Tax (IRAP) at a 3.9% rate (a 1% increase to IRAP is allowed on a regional basis).

From a general tax standpoint, all income earned by a resident company or commercial entity qualifies as business income. Revenues, expenses and other positive and negative items of income shall be included in the taxable base of the tax period to which they relate. The taxable business income is determined under the accrual principle, with certain exceptions, such as dividends and social security contributions. Interest and royalty income earned by resident companies are taxed as ordinary business income.

The subjective scope of the law

The incentive generally applies to business income earned by individuals or companies resident in Italy according to principles summarised above. The Patent Box Regime recently introduced in Italy aims to create a competitive tax regime similar to those for Italian resident companies developing intangibles and deciding to opt for such incentive that are already applicable in Luxembourg, the Netherlands, Portugal and the UK. Non-resident companies with a permanent establishment in Italy will benefit from the same incentive, provided they are resident in countries that have double tax conventions (DTC) with an exchange of information clause with Italy and opt for the incentive.

The objective scope of the law

Those who conform to the subjective scope of the legislation may select a five-year period for the incentive, provided that the business income is derived from the use of intangibles, such as payments received as a consideration for the use of or the right to use any patent, trademark, design or models or information concerning industrial, commercial or scientific equipment.

International ruling procedure with tax authorities may apply in a domestic context in order to determine the cost attributable to the intangible’s development. This is the first time Italian tax legislation has adopted and created a procedure for cross-border transactions such as intra-group policy pricing (for example, transfer pricing purposes), applying to a purely domestic scenario where a higher degree of discretion may be exercised by the tax authorities.

The measure of the tax incentive

Since 1 January 2015, taxpayers may opt for the Patent Box Regime with the purpose of excluding from the taxable income for both IRES and IRAP purposes, 50% of the revenues derived from the use or right to use directly or indirectly the intangibles, patents, trademarks, secret formulas process and information concerning industrial, commercial or scientific experience.

The incentive is also extended to capital gains arising from the sale of the intangibles. Capital gains would be 100% exempt provided that 90% of the gains are again invested in development and or maintenance of intangibles in the two years following the sale. However, the amount of the gain realised that can benefit from the exemption is to be determined with a shared procedure with Italian tax authorities.

Limitation of the incentive

The legislation on the Patent Box Regime introduces a significant taxable income cut for companies that develop intangibles.

However, to determine the reduced taxable income, net of the “revenues exclusion allowed” each taxpayer will have to go through a more detailed calculation each year for the duration of the option that takes into account a ratio between the cost of research and development and the overall costs, and multiply this ratio for the taxable income. The outcome will be the figure to which the 50% reduction can apply.

Example: R&D expenses: EUR 350,000; overall cost: EUR 1,000,000; royalties from licensing agreements: EUR 5,000,000.

350,000 : 1,000,000 x 5,000,000 = taxable income that benefits from the incentive, so only 35% of EUR 5 million royalties could be reduced by 50% and excluded from the ordinary income tax levy (i.e. EUR 1.75 million in this example).

Furthermore, the 50% exclusion applies progressively as only 30% and 40% of the taxable income reduction apply in the first and second year of the option. Consequently, if a taxpayer opts for the incentive starting from 2015, they will only benefit from the 50% reduction for financial year 2017.

Preliminary comments

The Patent Box Regime in Italy is a welcome measure, especially in the European arena where similar measures have already been introduced.

The rule already applies, but some aspects will be further defined in the anticipated ministerial decrees as delegated by the current legislator.

At this stage, it is still unclear whether, once a taxpayer opts for application of the incentive, it can be used for all intangibles or whether a single election applies for each intangible of a single entity. Furthermore, it should be clarified if the benefit of the regime is just for the beneficial owner of the intangible or if it would also be available for a group company that acts as licensing company receiving the royalty payments. A last question might be raised with respect to the procedure, where tax authorities should provide greater clarity on which cost are included and excluded from the previously mentioned ration as well as the steps of the international ruling procedure, especially for small and medium-sized start-up companies that might find it cumbrous and more expensive to run the overall Italian procedure to benefit from a more favourable tax regime for their ideas compared with other countries.


Dr Massimiliano Russo

Studio Signori – Professionisti Associati

Auditing & Accounting, Tax, Corporate Finance, Fiduciary & Estate Planning

Rome, Italy

Dr Massimiliano Russo



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Worldwide transactions using funds from illicit sources

money Laundering

By Dr Jorge Marcos García Landa

What constitutes the offence of transactions using funds from illicit sources (known as money laundering)?

The most accepted definition is the one approved by the 1988 United Nations Convention Against Illicit Worldwide Traffic in Narcotic Drugs and Psychotropic Substances (Vienna Convention):

– The conversion or transfer of assets, knowing that such assets are derived from an offence or offences of drug trafficking (or other offences), or from an act of participation in such offence or offences, for the purpose of concealing or disguising the illicit origin of the assets or of assisting any persons involved in the commission of such offence or offences to evade the legal consequences of their actions;

The concealment or disguise of the true nature, source, location, disposition, movement, rights with respect to, or ownership of assets, knowing that such assets are derived from an offence or offences or from an act of participation in such offence or offences; the acquisition, possession or use of assets in the knowledge that, at the time of receipt, such assets were derived from an offence or offences or from an act of participation in such offence or offences.

Is drug trafficking the only predicate offence to the offence of transactions using funds from illicit sources?

No, with regard to the predicate offences to transactions using funds from illicit sources, the Mexican legal framework has not drawn up a list detailing such offences and, therefore, a predicate offence can be considered to be any offence which generates illicit earnings (funds, rights or property of any kind) as a result of its commission. As stated in the 2008 Mutual Evaluation Report drawn up and approved by the Financial Action Task Force on Money Laundering (FATF) and the Financial Action Task Force in South America, Mexican legislation provides for all the categories of offences designated as predicate offences included in the FATF Recommendations.

Furthermore, in accordance with the international commitments resulting from the treaties entered into by Mexico, offences committed outside of Mexico are also considered to be predicate offences to the offence of transactions using funds from illicit sources.

How does money laundering affect the economy?

In accordance with the Reference Guide to Anti-Money Laundering and Combating the Financing of Terrorism, published by the World Bank and the IMF, the introduction of illicit funds to the formal economy distorts free competition between the various persons and companies operating within it. For example, it is known that money launderers use companies which appear to be legitimate and which take part in legal transactions, but which are controlled by criminals. These criminals use such companies as a way of mixing illicit funds with lawful funds in order to conceal their illicit earnings.

Access by such companies to illicit funds enables them to alter the prices of the products they buy or sell below or above the value of identical or similar goods. Consequently, it is very difficult for legitimate companies to compete with these companies whose objective is not to make a profit, as a normal business’s objective would be, but rather to conceal its illicit funds with the resulting loss of productive projects that create jobs and boost economic growth.

How does money laundering affect the integrity of the financial system?

The Reference Guide to Anti-Money Laundering and Combating the Financing of Terrorism, published by the World Bank and the IMF, warns that money laundering can undermine the financial system’s main asset, which is trust.

The loss of trust in financial institutions represents a risk to reputation, an operating risk and a legal risk, among others. If such risks become reality, the upshot is specific costs such as the loss of profitable businesses, liquidity problems caused by the massive withdrawal of funds, investigation costs and penalties, etc…

How many models of Financial Intelligence Units are there worldwide?

There are four:

1.- The Administrative Model: agencies established within the Ministries of Finance or Central Banks. They act as intermediaries between the financial system, other agencies and bodies and the law enforcement authorities.

2.- The Law Enforcement Model: an agency established within police forces with investigative powers.

3.- The Judicial Model: an agency established within the competent prosecuting authorities (Attorney Generals’ Offices, Public Prosecutors’ Offices, etc.).

4.- Hybrid Model: combines elements from at least 2 models, usually the Administrative Model and at least one of the other models mentioned.

What is the FATF?

The FATF (Financial Action Task Force on Money Laundering) is an intergovernmental body established by the G-7 Summit in 1989. Its main activities include the issuing of legal, regulatory and operating measures to combat money laundering and terrorist financing as well as other threats to the international financial system. The standards it issues are known as the “40 Recommendations”.

Mexico has been a member of the FATF since 2000, assuming the presidency of the Group for the period from July 2010 to June 2011.

In addition to issuing the 40 Recommendations, the FATF implements assessment and monitoring procedures to verify the level of compliance with the Recommendations among its members. Using these procedures, it makes observations on the way in which a standard could be more effectively implemented.

In its recommendations, the FATF stipulates that DNFBPs (Designated Non-Financial Businesses and Professions) must comply with the requirements relating to customer due diligence, the sending of reports on suspicious transactions, observance of confidentiality measures by their employees and the implementation of internal controls, in the following situations:

    a) Casinos (including online casinos): When customers engage in financial transactions equal to or above 3,000 US dollars or euros.
    b) Estate agents: When they are involved in transactions for clients regarding the buying and selling of real estate. This means that estate agents must comply with this requirement with respect to both the purchasers and vendors of property.
    c) Dealers in precious metals and gemstones: When they engage in any cash transaction with a customer equal to or above 15,000 US dollars or euros. This limit applies to one or more combined transactions.
    d) Lawyers, notaries, other independent legal professionals and accountants: When they prepare and carry out transactions for clients relating to the following activities:
    e) Trust and company service providers: When they prepare and carry out transactions for clients relating to the following activities:

The FATF also stipulates that DNFBPs must be subject to regulatory and supervisory measures and that member countries must ensure that other categories of non-financial businesses and professions are subject to effective systems for monitoring and ensuring their compliance with the requirements to combat money laundering and terrorist financing, which must be carried out on the risk-sensitive basis for the country concerned.


Dr Jorge Marcos García Landa

Corporativo García Landa SC, Contadores Públicos y Abogados

Auditing & Accounting, Tax, Law Firm, Advisory

Mexico City, Mexico

Dr Jorge Marcos García Landa



[1] The author of the document does not go on to list any activities.

[2] Once again, the author of the document does not go on to list any activities.

Corporate Restructuring in Malaysia

Corporate Restructure

“Corporate restructuring is an effective tool to resurrect distressed companies with a view of giving them a new lease of life, therefore enabling them to positively contribute to the nation’s future social and economic development…”

Many companies in an economic downturn are making losses and may find themselves in a position of insolvency, meaning that they are unable to pay their debts as and when they fall due. Being trapped in such position is precarious, as there is a risk of the company being wound up, causing undue hardship to employees, creditors and shareholders alike. In addition, creditors will rush to enforce their debts, which is usually a disastrous state of affairs. This may eventually lead to the end of a company following a harsh liquidation process, which is costly, less efficient and time consuming. However, there are revival mechanisms in place to address such issues, depending on the root cause.

A state of insolvency can generally be categorised as one of two types: (i) there are insufficient assets to settle all debts, or (ii) there are sufficient assets to settle all debts with surplus available for distribution, but it may take time to realise such assets into cash. In the first scenario, the question is whether the company is realistically able to strike a compromise with its creditors and turn the situation around. Such companies will usually require an injection of fresh capital and/or new viable businesses from “white knights”. In the second scenario, it is like that a compromise regarding the company debt could be agreed without the need for any further form of aid. The decision-makers of the distressed company would therefore have to carefully consider whether winding up the company or a form of corporate resuscitation would be in the best interests of the company.

Although there is no voluntary administration procedure in Malaysia for the restructuring of a company enduring a period of financial distress, the compromise and scheme of arrangement mechanism as provided in Section 176 of the Companies Act, 1965 (the Act) (similar to Sections 411 to 413 of the Australian Corporations Act, 2001; Para. 26 of the UK Companies Act, 2006), is still operational and provides a solution to companies for which a financial revival is a viable option. Among other things, this mechanism allows a company to propose a compromise with its creditors in an orderly manner. The compromise may entail a combination of seeking a haircut to total debt, freezing of further interest charges and deferment of the repayment schedule.

The advantage of this procedure is that as an integral part of the scheme of arrangement, the company can propose a compromise to its creditors as a group or on a global basis, instead of having to deal with each creditor individually. It would be almost impossible to seek a compromise with each creditor as the terms of compromise will not be same with some variations for each creditor class. Additionally, it is even doubtful that there would be sufficient time to negotiate with each creditor individually. The acceptance or rejection of the compromise proposal is determined by the creditors at their respective meetings.

Before a proposal for compromise and scheme of arrangement can be brought to creditors for their consideration, the company must first make an application to the high court for an order to convene a meeting of creditors. Creditors must be grouped into their respective classes, as there are different types of creditors for the respective amount of debts. This would enable them to vote at their respective meetings, whereas the rights, benefits and obligations of all creditors in that particular class have to be just and equitable. All information required by the creditors to take decisions regarding the proposed compromise together with the scheme of arrangement which may involve the interests of equity and preference shareholders as well as the white knights must be furnished to them in the form of an explanatory statement.

A meeting convened pursuant to the high court order under Section 176 has the advantage that if a sufficient majority of creditors are in favour of the proposal for the compromise and scheme of arrangement, despite the presence of some dissenting creditors, the scheme can still be considered approved and endorsed by creditors. For the majority to be regarded as sufficient, it must equate to at least 75% of the value of the creditors’ debts and a simple majority in number for those creditors attending and having voted in the respective meetings. Where there are few classes of creditors, separate meetings for each class are required. Whether the proposal for a scheme will succeed or not depends on how the proposal is structured and the relative appeal of the compromise. Some proposals are structured in such a way that in order for the scheme to be approved and implemented, the approval of all classes of creditors is a prerequisite condition and that any one class rejecting the proposal may spell the end of the entire restructuring effort.

It is common to submit an application requesting a moratorium period of two to three years which aims to restrict legal proceedings against the company at the same time as making an application for an order to convene the creditors’ meetings. Protection for legal proceedings against the company is required as this will give the time required for the company to table the proposal for compromise and to obtain the necessary approval for the scheme from its creditors.

If the creditors vote in favour of the proposal in the court-convened meetings, the company will then have to make another application to get the high court to sanction the scheme as approved by the creditors. At this stage, creditors can still object, but in order for the proposed scheme to be rejected, they must be able to unequivocally justify why it should not be sanctioned, despite having received prior approval from the requisite majority in terms of value and number of respective creditors.

In short, as highlighted by Ramanujam (2000): “Corporate restructuring is designed with a view that a productive unit is to be saved and brought back to life. The anxiety underlining this objective is that if a productive unit dies, it will cause incalculable harm to the society, to the economy, to the shareholders and stakeholders including creditors, suppliers, employees and bankers alike who are serving the public by extending credits to the industry. If the industry thrives, the customers would get more supplies, the employees would get employment and the government would get more revenue and the augmented funds could be used for national building purposes.”

Given the current unfavourable economic condition in Malaysia and the ASEAN region as a whole, it is anticipated that more distressed companies are expected to resort to the compromise and scheme of arrangement mechanism as provided in Section 176 of the Act in the near future. This is intended to provide rehabilitation to distressed companies with a view to giving them a new lease of life. If these companies can be revived, they will contribute positively to the nation’s future social and economic development.


KC Chia

KC Chia & Noor, Chartered Accountants

Auditing & Accounting, Tax, Advisory, Corporate Finance

Kuala Lumpur, Melaka, Kluang, Johor Darul Takzim, Malaysia

KC Chia



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