Last week fashion designers Domenico Dolce and Stefano Gabbana were sentenced to 18 months in jail in Italy for evading up to 200 million euros in tax, by using a holding company in Luxembourg called Gado.
The headline in Luxembourg’s wort.lu is “Dolce and Gabbana get 18 months in jail over Luxembourg shell company”.
Strangely, neither Luxembourg nor international media look into the possible support of local enablers – lawyers, accountants, notaries – in setting up the shell company. In fact, a quick google search leads to official Gado documents on a Luxembourg government website, which include the names of notaries and lawyers who were present when Gado was established and at various other moments such as when the statutes were modified.
There is no implication here that any of these lawyers or notaries were complicit in the tax evasion, just in case. However, it is worth noting that international standards against money-laundering – the FATF recommendations – state that not just banks but also other professions and businesses such as lawyers and accountants should file suspicious transaction reports (STRs) if they suspect illicit activity of their clients.
The most recent FATF country evaluation report for Luxembourg in 2010 found that “the obligation to report suspicious transactions is not effectively implemented, in light of the very low number of STRs filed.”