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The transfer of assets offshore rarely receives the attention it deserves. Opening an offshore bank account is just the start; successfully placing your assets offshore is a separate process and it requires careful thought.
Any asset transfer obviously raises a fundamental question regarding privacy. It is obvious that transferring funds from one bank to another leaves a permanent record of the transaction in the sending bank; in terms of privacy, a money transfer effectively ties two bank accounts together.
Transactions that involve an offshore bank on the receiving end deserve careful consideration. Taking shortcuts can compromise not only your privacy, but also the security of your assets.
Those who casually credit their new offshore bank account with a direct transfer from a regular onshore account often later regret their carelessness. The creation of an unguarded and permanent record of the location of their offshore assets is the unwelcome consequence that a surprising number of people do not consider.
In the majority of today's developed countries, confidentiality of banking transactions is virtually non-existent. The days when requests for access to bank information had to be supported by clear evidence of wrongdoing are gone.
In large parts of Europe, for example, tax authorities and others routinely gain access to bank account records, sometimes on a regular (annual) basis. The need for court orders is diminishing as governments try to convince us that if we are doing nothing wrong, we have nothing to hide.
Think twice before sending your assets offshore from any bank that is either directly located in your country of residence, or located within an economic, political or information-sharing block of which your own country is a member -- such as the EU. If privacy is a concern, don't -- onshore bank records are not private; the record of your onshore-to-offshore transfer can slip out of the door before you know it.
But it gets worse.
Your onshore banker himself might volunteer the details of your activity, even before the government asks for it. This can happen if your banker detects what is termed as "unusual or suspicious account activity" -- and the very act of sending money offshore is cause enough for suspicion. The fact that your transaction is legitimate does not matter at this point.
For instance, in 2000, The Financial Services Commission in Jersey -- an offshore haven itself! -- issued an "Anti-Money Laundering Guidance Update" warning its financial institutions to exercise vigilance when dealing with banks in Malta, The Cayman Islands, Antigua and rather predictably Russia. Similarly, the US Treasury has issued warnings to financial institutions regarding transactions with countries on blacklists produced by the FATF -- and that includes just about every well-known offshore tax haven.
Where a few years ago making a straightforward wire transfer to an offshore banking haven would have probably gone unnoticed, doing the same today may generate a Suspicious Transaction Report (STR), forwarded to a national Financial Intelligence Unit for further investigation.
Out of the tens of thousands of reports filed each year by banks in the United States alone, the majority are false alarms -- only a small percentage results in prosecution. "When in doubt, report" is the familiar line taken as bankers realise that the extra administrative effort involved in producing an STR is nothing compared to the effects of negative publicity surrounding a possible money laundering scandal or criticism from regulators.
As a result, many innocent individuals have their banking records exposed to and investigated by the authorities, and end up having a permanent question mark placed over them in government files.
What's more, those in charge of today's developed nations like to keep their citizens in a state of confusion as to what is and what is not legal when it comes to transactions involving offshore havens. This especially applies in cases of legal tax avoidance vs. criminal tax evasion.
Make a simple and fully legitimate transfer of funds offshore, and you may well end up having to "prove" that you were acting within the law. Take a word of warning from the experts:
Peter Howarth, a tax investigations director at Lathams in the UK, recently warned that
".. sending money or assets abroad may be caught by special legislation."
He continued:
“The only legal guidance about what is illegal and what is legitimate came from a judge who said unhelpfully that the difference was 'the thickness of a prison wall'."
Thanks to the vicious assault on financial freedoms, you must act with more stealth today. The fact that you are acting within the law should not discourage you from a little subterfuge.
Fail to use subterfuge, and you may find yourself under investigation while still having acted legally. This Kafkaesque world has been created to deny you financial privacy. You have a right to reclaim it.
The confidential and hassle-free transfer of onshore assets to offshore banking havens is a specialised area where individual circumstances must always be taken into account.
Some of the issues to look at are the banks and jurisdictions involved (and their relationship to your domicile), the size of the transaction(s), the level of confidentiality required, timeframe and others.
An important consideration for many is the possibility of future third-party claims over their assets (arising, for example, from malpractice lawsuits, allegations of professional misconduct, negligence, misrepresentation or improper counsel or perhaps divorce proceedings).
It is virtually impossible to generalise on this subject, let alone suggest a fit-all strategy. However, we can identify some of the trends that have evolved over the past decade or so, and outline a few strategies now routinely used by all those not wishing to leave the metaphorical trail ending at their doorstep.
Moving assets from their onshore home to a protected offshore haven is not as simple as getting from A to B as once was the case. Interposing a neutral intermediary jurisdiction as a shield is central to present-day strategies in confidential asset transfers. Today we have to talk in terms of getting from A to C via B, where B -- a suitable facility in an intermediary, low profile jurisdiction -- provides that important financial stepping stone on your way to offshore freedom.
As all astute offshore practitioners know, keeping a low profile has become more important nowadays than it ever was before. Consequently, the most successful of confidential asset transfer strategies are being modeled around concepts established in international commerce long before the new anti-privacy initiatives first appeared.
The use of intermediaries in commercial transactions is a concept as ancient as commerce itself.
The recent growth of the role of commercial intermediaries and agents can be attributed to the increasing importance of international trade. In what is a truly global economy, companies increasingly employ third-party entities to extend their global reach and access distant markets, increase profits, simplify administration and relieve themselves of some of the credit risks associated with international trade.
 | | | The most successful of confidential asset transfer strategies are being modeled around concepts long established in international commerce. |
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Transfer pricing, for example, involves interposing either a self-owned or third-party intermediary company into a commercial transaction with the intention to accumulate the greatest share of profit in a low-tax environment. Factoring is another example where an intermediary company takes part in the completion of a commercial transaction between two parties -- this time for the purpose of improving cashflow, easing overheads and administration and protection against bad debt losses.
While such trading schemes were once the preserve of the largest multinational conglomerates, they are now accessible to all. Even self-owned insurers -- captives -- that are used to lower insurance spend, are available for a modest fee through “rent-a-captive” arrangements.
What do areas as wide and apparently as unrelated as factoring, transfer pricing or insurance business have to do with financial privacy or the transfer of assets offshore? Seemingly nothing -- that is until you realise that all these practices in some way involve breaking a single financial transaction in two parts. And when you realise that this is an incidental gain and not their primary commercial purpose, it becomes apparent why a suitable intermediary corporation can provide that low profile stepping stone on your way offshore.
The late part of the nineties has seen a noticeable development in the activities of commercial intermediaries via a completely new class of clients -- those seeking to transfer funds in silence.
Transfer pricing companies, factors, collection agents, import/export agents and many other types of international businesses not only exhibit established trading histories, but also a nature of business that by definition results in a continuous pattern of high-volume, high amount and often rapid incoming/outgoing payments. The outward and ostensible appearance makes such companies ideal and discreet vehicles through which to direct international funds transfers in order to gain a privacy advantage.
| | | To answer the specific needs of the privacy market, some offer the possibility of receiving remittances in one jurisdiction, and subsequently making the onward transfer from another entity in a separate jurisdiction altogether. |
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What initially began as a profitable sideline for a handful of transfer-pricing agents has today evolved into a more sophisticated form of a private financial service.
For example, it is now the case that clients can purchase financial privacy for a set fee and no longer solely on a percentage basis. Some transfer-pricing agents have even begun to offer the possibility of receiving client remittances in one jurisdiction, and subsequently making the onward transfer from another entity in a separate jurisdiction altogether. A number of other tactical strategies are being deployed to answer the specific needs of the privacy market.
Outside of what is sometimes termed as "transfer-pricing privacy", many individuals are choosing to use low-risk foreign exchange trades -- and even certain derivative and arbitrage trades -- for the purpose of placing their funds offshore. A money transfer structured via an appropriately selected brokerage house again allows the regaining of a rudimentary level of financial privacy.
A bolder strategy used by some is to form their own intermediary corporation(s), particularly where the size and/or frequency of the intended transactions warrants the extra cost and administration involved. Some go as far as to obtain a class B bank or an insurer, specifically for the purpose of effecting confidential asset transfers.
Whatever form a self-owned intermediary takes, strict attention must be paid to its structure, ownership, domicile and management if any privacy benefits are to be derived from it.
So-called corporate agents also deserve a mention in the context of confidential money transfer strategies. Corporate agents typically take the form of a client-owned onshore corporation that acts as an add-on "front-end", or admin and clearing centre, for the client's primary offshore corporation.
Depending on the beneficial owner's domicile, a corporate agent might be incorporated in say Great Britain or New Zealand solely for the purpose of representing the client's offshore company in return for a small commission.
The concept of corporate agents originally developed in order to provide a more direct access to particular geographical markets, and/or to engage in those trading activities where the direct use of an offshore corporation would be inappropriate. In its simplest form, these arrangements enable a business to operate from a prestigious and convenient onshore location, yet under a near-offshore tax regime -- only the commissions of the corporate agent are taxed onshore, with the majority of the profits accumulating offshore.
These structures have become so widespread and popular that instant, ready-to-trade and often "aged" (established) corporate agents are available for purchase in a variety of jurisdictions via specialised professionals. As special-purpose vehicles whose existence and functioning is well understood within the financial community, they ironically avoid many of the banking problems that other corporations might encounter.
While it was not their original purpose, it is easy enough to see why many now choose to employ such vehicles to help to void the trail connecting their onshore and offshore holdings.
Any intermediary-assisted asset transfer strategy raises issues concerning the neutrality of the intermediary's location. In this context, neutrality means the outward appearance of the proposed intermediary jurisdiction when looked at from the onshore jurisdiction where your money transfer originates.
A good intermediary is a low-key intermediary.
The apparently large numbers of companies willing to receive your business shrinks substantially when you realise that an intermediary corporation based in say Antigua or Panama -- however willing to help you -- is less than ideal if you don't want to be seen as having any dealings with offshore tax havens.
Yes, even using an offshore-based transfer intermediary has its benefits if everything else fails -- at least your local sending bank doesn't learn of the final destination of your funds. But the fact remains that you are still sending money to an obvious offshore tax haven, and so risk having your affairs examined or even being reported.
It is consequential to our discussion that in some European Union nations it is possible to operate tax-free if the corporation is not controlled or owned by residents. As a result, countries such as the United Kingdom, the Netherlands or Denmark -- all popular bases for holding corporations -- host a large numbers of companies whose sole reason for existence is to act as commercial intermediaries of one kind or another.
The issue of the neutrality of the intermediary jurisdiction becomes more complex in cases of self-owned intermediaries. Where a third-party intermediary assists with the completion of funds transfer, your only concern is -- apart from the fees involved, of course -- the suitable location of the intermediary itself from the viewpoint of the originating bank.
When forming a self-owned intermediary, on the other hand, its location has to be chosen with care. Self-owned intermediaries require that you deal with both legs of the financial journey -- the initial remittance received by the intermediary, as well as the subsequent transfer from the intermediary to your chosen offshore haven. To put this another way, you are in need of a jurisdiction and a bank that not only does not cause alarm to the initial remitting bank, but also one where bankers happily send funds on to your chosen offshore haven without a fuss. One without the other defeats the point.
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To conclude, it must be said that an array of options is still available to those who wish to place their assets offshore confidentially -- not only limited to those discussed. New opportunities arise all the time.
Remember though: if the strategy you choose involves professional third party assistance, you may expect to demonstrate bona fides before your business is accepted.
Ask your offshore services provider about facilities to enable confidential transfer of onshore funds offshore. As long as your are not involved in criminal activity -- and remember: tax avoidance is legal -- they have no reason not to help you.
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