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(Part 1 of 7)
The lack of professionalism and hypocrisy of much of the traditional offshore industry is nowhere more evident than in the intrusive levels of scrutiny clients are subjected to before being allowed to incorporate a tax haven company or open an offshore bank account.
Many in the offshore industry will now ask for a copy of your passport, together with two reference letters attesting to your good character. Some will go as far as to seek to confirm your actual residential address and ask to see a household utility bill in your name. Why? To fulfil due diligence procedures, they claim, and yet anyone determined and cunning enough can easily circumvent such requirements.
So-called due diligence procedures do not deter the determined wrongdoer -- but they do infringe on our privacy.
Those offshore incorporators that cite intrusive documentary requirements as a precondition for doing business are acting in the nervous hope of not offending their new masters. They hope that their procedures will not be found wanting when judged against the insatiable desire for data, as promoted by supra-national organisations such as the FATF and the OECD. They hope to satisfy the casual inquisitiveness of their local regulators who may wish to drop by to review the files.
In short, they hope to save their businesses by dancing to the will of the tax-cartel governments. Due diligence has little to do with it.
The actions of the incorporators mirrors the activity of most common law banking jurisdictions where banks will not even entertain the prospect of you as a client without references from other reputable banks, plus a whole range of additional supporting documents.
A brief glance at some of the corporate brochures soliciting for offshore business reveals the challenges awaiting those wishing to bank offshore today.
To illustrate the dramatic changes in attitude, below is an actual example -- from a Panama-based offshore incorporator:
Panama recognises its responsibilities in support of the international concerns in this new century regarding drug trafficking, money laundering and other illicit funds activity. Stringent monitoring and vetting procedures have been introduced and ... we are required to comply ... Accordingly, the following information and documentation should be given...
-Clear copy of the beneficial owner/s passport/s. (Photograph, signature, personal information and used visa pages). The same information will be required for any signatories added to the bank account.
-Two bank reference letters for each beneficial owner and account signatory which should confirm the satisfactory conduct of the accounts and that the relationships have been of at least two years duration. Depending on the choice of bank reference letters may need to be addressed to the local bank where the new bank account is to be opened.
-Brief details of the applicant/s business. This is reviewed by every local bank's Compliance Officer who is required to vet all new account applications in accordance with the monitoring procedures laid down.
The information needed is:
-The nature/line of the company's business, or intended business, and the approximate annual volume of business which the company does or will do.
-The location/s of the business.
-The origin / source of funds to be deposited in the new bank account.
-The reason for opening the bank account in Panama.
-The approximate annual volume of funds which will pass through the new bank account.
In some cases, additional information / documentation may be required, but we will always use our best endeavours and attempt to have the new account opened as quickly as possible.
They stop short of asking your mother's maiden name and the ethnic origin of your grandparents, but only just!
While seen as insulting by many would-be offshore clients, similar diatribes of threats and challenges are now commonplace -- they serve to "prove" that the incorporator and jurisdiction in question is in tune with the latest "international concerns" and is therefore responsible.
Intrusive questions will not stop a dedicated, professional money laundering operation. There already exists a growing trade in illicit banking passports that are provided together with apparently respectable bank reference letters from major institutions in the Far East. (Ironically, Panama itself is the home of the instant second passport, with prices starting at a mere $25,000.) Money launders are experts at providing plausible explanations and documentation relating to the source of funds -- the extra scrutiny creates little hindrance for them.
The only people possibly deterred by these "monitoring procedures" are amateur crooks and private individuals who might wish to use the offshore environment for asset protection and privacy.
The latter group are the bread and butter of any offshore jurisdiction -- and they now have to either accept intrusion (which, as intended, strips the last vestiges of privacy from their offshore activities), or take their business to more welcoming jurisdictions and providers.
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