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22 March 2009
Asset protection, bearer shares and anonymity Time moves on, manners turn, so business customs should do the same. However,
even in full swing of the global financial crisis, when tax authorities are
aggressive towards probable tax evaders as never before, and super-confidential
tax havens are quick to backwater, there are always smart providers advocating
bullet proof asset protection schemes based on bearer shares and complete anonymity.
It's not always that good as it is positioned.
First of all, what is it that the anonymity of an offshore structure is based
on? Bearer shares and/or formal non-existence of the owner. Any of these concepts
is doing great for the purposes of mere confidentiality, when you quietly do
your business and don't upset anybody's interests, including those of the state
and its tax department. As soon as you cross the line, all these high secrecy
tricks might not be working. Behind the sophisticated paperwork, there always
exists the real owner which is you. And it's getting more and more difficult
for modern tax havens to hide you. If something goes wrong, in particular inferring
a criminal tax investigation, and your home country inquires your tax haven,
chances are your identity and true membership will be disclosed.
There are still a number of indeed un-cooperative countries, which will be
protecting your privacy rights to the last breath, and the information about
the real owner of the assets in question will never be divulged. Does it mean
you and your assets are really safe? Below are a couple of situations for your
consideration.
Situation one: identifying the owner. There exist judicial
precedents of so-called «presumption of owner». If your offshore
company happened to be a party to legal proceedings, and the court cannot identify
the owner, the judge tends to presume that the defendant is the owner of the
company. Now it becomes your burden to find the owner and/or prove that you
are not the one.
Another example is even worse and easier, with no involvement of the judge-made
law. When under certain circumstances the country's authorities cannot identify
the owner of some property, this property may be recognized abandoned and subject
to forfeiture to the state budget. Now you can go to law to prove that seizure
was illegal because you are the owner, if you ever planned to do this.
As a matter of practical comment, apparently, it's safer to have someone identifiable
as the holder of your shares, than just nobody. Even a mere nominee person would
serve better than bearer shares.
Situation two: bearer shares and taxation. In many countries
transfer of bearer shares falls into the gift category and is subject to the
according tax. It means, you can accept and transfer bearer shares as many times
as you want, but as soon as you are «caught» and all transfers have
been proved retrospectively, all involved persons are in trouble for tax evasion.
Add here non-reporting of foreign transactions, where applicable.
Actually, because of the known wide uses of bearer shares for money laundering
and tax evasion, many jurisdictions have abolished bearer shares or restricted
their free circulation. Nominee shareholding still plays nearly same role, and
brings same challenges, if you mean to use it only to preserve anonymity. Nominee
person is a nominee person, which can hardly appear before the court and claim
to be the real owner of the assets in question.
Notwithstanding the aforesaid, we do not campaign against anonymous offshore
structures. It is a tool that can serve its purposes. You are welcome to utilize
it, but compare its net out to discern for yourself if that one is for you in
advance. If you go for it, bear in mind the downside.
You have been
reading an entry on the following blog:
Offshore Advisor Mary Cleo of Offshore Advisor - all about business off shore Mary is a consultant and blogger at Offshore Advisor - free online consultancy on offshore services covering asset protection, offshore banking, second citizenship and more. Contact Mary via mary@isla-offshore.com.
Other recent
entries in this blog:
22 September 2008 Scam Busters: Second Citizenship and Passport You need a second passport? Internet has a plenty of inviting information. Too
many offers that are too good to be true. You need a cheaper passport, but definitely
have no intention to loose your money being conned. How to spot the scammers?
The only official economic citizenship programs in existence are those of Dominica,
St.Kitts & Nevis and Austria. The cheapest one will cost you somewhere close
to US$ 100,000. There are also countries that do support a kind of economic
citizenship programs, quite formal and legal, but they don't speak loud about
this sensitive issue wishing to avoid disapproval by the world's community.
Such silence creates a mystery giving the ground to innumerable scams and making
it very difficult to find a real promoting agency. Below are some advices to
those seeking on their own.
So you found a website promoting second citizenship and passport programs in
one or several countries. Start with analysis of the offer itself and have in
mind that at least:
There are no "instant" passport programs taking 1-15 days. Any
country is supposed to thoroughly vet your application and facts from your
past, which takes at least a month, and happens quicker in lucky cases.
There are no too cheap options. More or less real prices start with US$
30,000 and that will be a citizenship of one of the Central or South American
countries for that price.
You can hardly find a real program with "no need to travel". The
only exception known to me is St.Kitts & Nevis program, but the absence
of such requirement is being compensated by very strict verification and due
diligence procedures. There's an option in Dominica citizenship program to
arrange a personal interview in the country of your residence for an extra
fee. I don't know other reliable programs with no need to visit the country
in person at least once.
There are no programs granting "passports to everyone no matter of
your current nationality or citizenship; just pay money and you get it".
Your current citizenship's country may fall into lists of countries where
it's impossible to check your background, so your application can be rejected.
If everything sounds nice, go further:
Google the company's name including its domain name and any specific names
appearing on the website to see if there are any negative comments left on their
service by their former clients. Absence of bad information is a good sign but
far not a proof.
Check the website's history at http://web.archive.com
if any. If the website is freshly baked, or has no history at all, be careful.
Earlier versions of the website may help you to recognize the hidden agendas.
However, you should have in mind that some scam websites are still able to
exist long enough and have stable history and background. A simple reason is
that not every victim is willing and able to tell the world that he or she got
scammed, and this is indeed so stupid sometimes. Besides, the scammers' gains
in each particular case are not substantial to develop into an international
scandal or involve Interpol into investigation. The hiding scammer is difficult
to find and punish. The scam site is alive and thriving.
Phone the company to speak in live. In most cases you even don't get through
or reach their voicemail.
Contact them by email with interest about a specific program. In most cases
you will be requested to pay first, which is actually quite a normal practice
among second citizenship promoting agents both real and fraudulent. With invoice
you get more information to examine and possibly find a trace on the Internet.
Some frauds are not smart enough, or sometimes simply not able, to create a
new underlying legal entity with a new bank account. It might happen you'll
find interesting facts about that company's past performances.
Still looks good and reliable? Ask for legal basis details, other than just
"by means of naturalization if you fit the criteria". What are the
criteria?
Some frauds will furnish you with a legally looking document, which is sometimes
worse than not giving anything. You risk to get a passport of a defunct person
with just replaced photos in it, or a passport printed on a canceled blank subject
to be destroyed, or the one simply stolen. No need to tell about inescapable
problems at the first border you try to cross with that passport.
Those "criteria" are a very sensitive part of the process and only
a local licensed legal firm in the country where you want your second citizenship
is able to handle it within the letter of the law.
The climactic moment is payment of money. After you did it you may never hear
from those people again.
The best recommended way to arrange the deal is to take a vacation, travel
to the country, meet those people in person, have a lawyer to go with you everywhere,
see the immigration offices and the whole application process with your own
eyes. Even so, unlike with those official economic citizenship programs, there's
no guarantee that the passport will not get withdrawn in future, but at least
you reduce risks to a possible minimum. You don't do this often, probably once
upon a life. You can afford such travel. You better do.
05 September 2008 Offshore Banking: Failure to Open a Bank Account You decided to join the club and enjoy the benefits of offshore banking. You incorporated an offshore company as recommended by your advisor, chose a sound and reliable bank, prepared the requested documents and submitted your application, but unexpectedly the bank didn't approve it and denied to open you an account. Why would a bank that spent so much time, money and efforts to attract more customers reject some applications?
Unfortunately any bank has the right to refuse with no comments. Let's see what could be the reasons.
Generally, this might obviously happen because the bank is not interested in you as a client. You don't fit the current appetite of the bank. You are expected to become a new investor while you are looking for a current trading account for your business; or the bank is oriented to clients with a significantly bigger account turnover than you anticipate.
Another problem is that the bank may be afraid of having you as a client because you fall into the category of undesirable customers. None of the well-established banks with good international reputation would ever wish to provide service to a criminal. Every bank has its own perception of troublesome business and relevant technical procedures assisting its managers to detect potentially unreliable clients. It might happen that the country of your citizenship, residence or domicile, jurisdiction of incorporation of your company or type of your business are black-listed by that bank.
Some clients fail to provide the bank with the right image of their business in general. You may simply be inaccurate and make a typo here and there, in the telephone number or address details, and that's it, you look suspect to the bank's compliance manager. Sometimes the reason lies deeper. You overdo trying to keep your privacy. You tend to tell the bank as less as possible. The result is the bank doesn't get a sufficient picture to be sure no problems will follow you. Most banks prefer to brush aside any suspicious client rather than engage in investigation because in case of mistake they might easily get more troubles than benefits. To avoid this situation do your best to make your business reality transparent enough for the bank to make a positive decision.
All these and other issues of that type can normally be avoided should you have a quality preliminary consultation with a professional independent advisor.
Penelope Wise
Penny Wise but not Pound Foolish! But remember: I am not offering investment advice. My comments are just for your general information; I do not recommend investments, and you should take professional advice before entering any investment contract.
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