Authors: Arnaldur Indridason
‘Would you two like some coffee?’
She noticed immediately that the atmosphere in the room was tense.
‘What is it?’ she asked anxiously.
Knútur’s eyes filled.
‘What’s happened?’ she asked. ‘What’s the matter?’
She went over to her husband who, struggling to hold back his tears, clasped her to him as if she were the last refuge in a storm.
‘What?’ she asked again. ‘What is it, darling? Has somebody died?’
Knútur buried his face in his wife’s chest and she stared at Sigurdur Óli, her eyes suddenly wide with surprise and concern.
‘What’s happening, Knútur? Who is this man?’ She tore herself from his embrace. ‘What’s going on, Knútur?’
‘Oh God!’ he gasped. ‘I can’t do this any more.’
The woman turned to Sigurdur Óli.
‘Who are you?’
Sigurdur Óli looked at Knútur. He had come intending to apply the thumbscrews but had not anticipated a reaction like this. Knútur was at the end of his tether.
‘I’m from the police,’ he replied. ‘I’m afraid he’ll have to come with me, though you can accompany him to the station if you like. I imagine he’ll be staying in overnight.’
She seemed unable to grasp what he was saying. She could understand the words but could not connect them. Observing her incomprehension, Sigurdur Óli hoped that Knútur would come to his aid, but he did not react.
‘What does he mean, Knútur?’ asked the woman. ‘Answer me. Answer me, Knútur! Say something!’
Their little boy had come to the door of the office and was regarding Sigurdur Óli, his eyes still full of mistrust. His parents had not noticed him.
‘Say something!’ shouted the woman. ‘Don’t just sit there like a lemon! Is it true? Is it true what he’s saying?’
‘Mummy,’ said the little boy.
The woman did not hear him.
‘What for? What have you done?’
Knútur eyed his wife dumbly.
‘What have you done?’
‘He’s trying to talk to you,’ interrupted Sigurdur Óli. ‘Your little boy.’
‘Mummy,’ repeated the boy. ‘Mummy!’
At last she noticed him.
‘What? What is it, darling?’ she asked, trying to sound calm.
The little boy glared accusingly at Sigurdur Óli who had destroyed his evening.
‘The cake’s ready, Mummy.’
47
THEY HAD STAYED
, courtesy of the bank, at an expensive hotel near Piccadilly where the rooms were so large that they were almost suites, with their own office areas and two bathrooms apiece. Everything they ordered, everything they did, was charged to their expense accounts, even their trip to
The Mousetrap
which Sverrir had always wanted to see, and another West End play starring a famous Hollywood actress. He had enjoyed the theatre. Since both Sverrir and Arnar were of the opinion that British food was inedible, they ate at expensive oriental restaurants, including their particular favourite, Mr Chow, a Chinese place near Harrods, where they were accustomed to eating whenever they came to London on bank business, letting the waiter select their dishes for them.
The two conferences they attended, along with several dozen other middle managers and senior executives of international finance firms, were devoted to the risks and potential profit of trading derivatives in minor currencies, though two of the lectures were on tax havens. Sverrir and Arnar were especially interested as they had been involved in providing information about these to the bank’s
wealthier
clients. The process was perfectly straightforward and had many benefits. By registering a holding company in the British Virgin Islands, for example, and paying income into the account, it was possible to avoid paying tax, such as capital gains tax, in the country of origin. Many of the bank’s clients had taken advantage of this service.
At the end of the second lecture, Alain Sörensen had approached them and greeted them with handshakes. Sverrir knew him well, partly from other conferences of this kind but mostly because they had been in regular communication about the administration of Icelandic holding companies in tax havens. Sörensen had been employed by the bank as an expert in the field. Sverrir had caught up with him the day before at the conference and now introduced him to Arnar, telling him that Sörensen worked for an old, established bank in Luxembourg and took a keen interest in Iceland and its business sector.
Alain Sörensen asked if he could invite them out for some sushi.
Sverrir and Arnar exchanged glances. They had intended to eat at Mr Chow but sushi would be great.
‘OK,’ said Sverrir. ‘Sure.’
He took them first to a popular watering hole nearby where they drank gin and tonic and discussed everything except banking. Later in the evening they took a table at a Japanese restaurant recommended by Sörensen, although the Icelanders were suspicious of anything advertising itself as fresh fish in the centre of London. The waiters greeted Sörensen as if he were an old friend. After a pleasant chat about Iceland, during which Sörensen claimed he had always wanted to go there, he got down to business, specifically Iceland’s nominal interest rate.
He was extraordinarily well informed on the subject, so much so that they were rather taken aback by the depth of his knowledge of the Icelandic market, particularly the fact that Icelandic savers could
achieve
much higher interest rates than savers elsewhere in Europe. Interest on deposit accounts could rise to well over 10 per cent and the accounts moreover were pegged to the Icelandic inflation rate.
‘Absolutely,’ said Sverrir. ‘If inflation rises, the interest rate rises accordingly, and if the economy continues to expand, as it seems set to carry on doing, interest rates will rocket.’
‘I don’t understand why the Icelandic banks don’t take advantage of this wide margin by launching deposit accounts in Europe. They could offer much higher interest rates than anyone else.’
‘Actually, I think they’re already looking into it,’ said Arnar with a smile.
Then they came to the purpose of the meeting, which turned out to be a seriously tempting proposition. Alain Sörensen had his hands on forty-five million euros. Where the money came from was immaterial, he said, but it was deposited in an account on Tortola, the largest of the British Virgin Islands, one of the world’s most popular tax havens. He could lend them the money at very low interest via his bank in Luxembourg, opening an account that only they would know about. They could use this forty-five million to buy index-linked securities, such as government bonds, in Iceland, which would pay a high rate of interest. The interest would be paid to Sörensen, who would subsequently divide it up between them. Given the high yield in Iceland, the profit from such a sum would be substantial. And their share would be paid to a shell company registered by them in Tortola.
His speech was greeted by silence.
‘Where does this money come from?’ asked Sverrir eventually.
Sörensen smiled.
‘Are you talking about black money?’ asked Arnar.
‘I’m saying that you needn’t have any worries on that score,’ replied Sörensen. ‘I, or rather the bank I work for, will lend you this money as if it’s just an ordinary transaction, which it is, of course.
The
best return would be to convert it into Japanese yen and increase the interest margin still further.’
They had finished their meal and downed glasses of saki, before moving on to the sports bar next door. It was a Wednesday evening and there was live coverage of the Champions League. Alain Sörensen took a table by a screen showing the Arsenal game.
‘It’s a lot of money,’ remarked Sverrir.
‘I imagine you’ll find a way to transfer it to special accounts in your own names,’ said Sörensen.
‘Why us?’ asked Sverrir.
‘Iceland is an intriguing prospect,’ said Alain Sörensen. ‘We predict that Icelandic interest rates will continue to rise and net us a good return. All those construction projects in the interior coupled with the expansion in the banking sector and the high-risk investment using cheap borrowing will result in inflation to a level over and above the present high interest rates. I’ve done the sums for you, based on the present situation, and the figures aren’t bad, in Icelandic kronur. My bank will take care of setting up a holding company for you and could take care of its administration too, if you like.’
He removed a sheet of paper from his pocket and passed it across the table. Sverrir took it, read the figures, and handed it to Arnar.
‘You won’t be breaking any laws,’ continued Sörensen. ‘You’ll simply be taking a loan from my bank, investing the money in Iceland and then transferring the profit to Tortola. None of this is illegal.’
‘Basically you’re looking to invest in Iceland, using money that you want to put into circulation, and we get to keep the profit?’ said Sverrir.
‘That’s right, a simple carry trade,’ agreed Sörensen.
‘Are we talking about money laundering here?’ asked Arnar, who was prepared to be blunt as he did not know Sörensen.
The Luxembourg banker looked at them in turn.
‘If you want to think about it, that’s fine,’ he said. ‘If you need to discuss it with other colleagues, spread the loan further so as not to arouse suspicion, then that’s OK too – it’s a lot of money, even for bank employees.’
‘Why do you need a middleman?’ asked Sverrir. ‘Why don’t you plough this money into Iceland yourself? Take advantage of the interest rates?’
‘Of course I could do if I wanted,’ said Sörensen. ‘But my borrowing has – how shall I put it? – peaked for the moment. I’m not a major player, just an ordinary bank employee like you guys – though hopefully that will change. I’m interested in investing in Iceland further down the road, possibly in renewable energy. I gather there are opportunities in that area, in hydroelectric and geothermal power. That’s where the investors will be looking in future. And I hope you’ll be there to help me when the time comes.’ His lips stretched in a smile.
‘So, what you’re saying is that you’re interested in profiting from Iceland’s interest-rate policy?’ said Sverrir.
‘Not just me,’ replied Sörensen. ‘Your economic miracle is attracting interest from investors everywhere with their eyes on the interest margin. Your glacier bonds have been selling well.’
‘The glacier bonds are selling like crazy,’ agreed Arnar, nodding.
At this point Sörensen glanced at his watch and said that regrettably he would have to be leaving.
‘Let me know what you decide,’ he said. ‘If you find you need more than forty-five million, it can be arranged.’
‘It’s a lot of money,’ said Sverrir.
‘Carve it up into three or four parts, if there’s anyone you trust to get in on the act with you. Like I said, it would probably make sense to spread the money. I can ensure a low interest rate and no repayments for the first year; after that we can split the profit between us.’
Sverrir and Arnar took a taxi back to the hotel and sat up half the night in the bar, discussing Sörensen’s proposition. Based on his predictions, the trade should deliver them a handsome profit. Neither was instinctively opposed to the idea; both thought it worth taking a closer look. The loan they would be taking from Sörensen’s bank would be like any other; it was not their concern where the money came from, though Sörensen had been decent enough to give them a hint. They knew from their own experience that Icelandic entrepreneurs and banking clients used tax havens and shell companies as a matter of course.
‘It’s a hell of a gamble,’ said Arnar.
‘I reckon it could work,’ countered Sverrir.
‘You know him, do you?’
‘Yes, I’ve got to know him pretty well. He’s been pumping me about the situation in Iceland. And as you can see, he knows what he’s on about.’
‘Sure does,’ said Arnar with a smile.
They discussed every angle of the proposition, all the pros and cons. Alain Sörensen’s bank was a venerable, highly trust-worthy institution, but the question of the money’s provenance was more troublesome. They went over these two aspects again and again.
‘Shall we look into it?’ said Sverrir at last, when the night was half over and they were the only souls left in the bar.
‘I was thinking about Thorfinnur,’ said Arnar. ‘He started at the same time as me and I know he’s interested in making money.’
‘Yeah, it would probably be sensible to spread it out a bit. Not too much, though; we don’t want word getting out.’
‘No, we’ll keep it to ourselves,’ said Arnar. ‘If we decide to go for it, of course. No one, absolutely no one, must know.’
‘Not because there’s anything irregular about it,’ interjected Sverrir.
‘No, it would just be simpler to keep it under the radar,’ said Arnar.
‘Not a bad return,’ said Sverrir, studying the breakdown Sörensen had given them.
‘Unbelievable interest rates,’ said Arnar, smiling again. ‘For those with the means to exploit them.’
Knútur was sitting in Sigurdur Óli’s office, telling him and Finnur the story of how their dealings with Alain Sörensen had begun. He had allowed Sigurdur Óli to escort him to the station and had declined the services of a lawyer.
‘Maybe later,’ he had said, hanging his head. ‘I just want to tell it like it happened.’
Sigurdur Óli had given Finnur the salient facts over the phone. The matter would be handed over to the fraud squad the following morning.
Knútur had been visibly crushed as he tried to explain to his wife why, out of the blue, on an ordinary autumn evening, they had received a visit from the police. Sigurdur Óli had left the room while this was going on, asking them to leave the door open. About ten minutes later they came out, along with the little boy. The woman immediately accosted Sigurdur Óli, a grim expression on her face.
‘Couldn’t you have found another way?’ she snapped at him accusingly. Gone was the gentle wife.
‘Perhaps you should ask Knútur the same thing,’ he replied, unmoved.
Now Knútur was sitting before them, explaining how they had originally got involved with the Luxembourg banker and how Sverrir and Arnar had decided to accept Sörensen’s offer almost the very same night. Both took home decent salaries but no more than that. Like the rest of the staff, they had a few shares in the bank but were not otherwise active players of the market. They had no share option
like
the senior executives, who also borrowed from the bank to buy call options in the bank’s shares. They were just employees, there to serve clients.