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Many times I have been asked, ‘Why would anyone want an offshore account?’
My answer has always been simple, ‘Why would you not want an offshore account? They are more relevant in the globally connected and transparent world of today than ever before ’
Why do I say this? Well, with the OECD’s tax drive directed at offshore financial centres and the international flow of capital through the introduction of the CRS (Common Reporting Standard) or US style FATCA, (Foreign Account Tax Compliance Agreement) an offshore account will provide a comparative advantage to a wealthy individual or family seeking privacy, security and estate planning in a compliant manner.
The Media and industry practitioners have focused on the consolidation and retreat of global brand name banks and financial institutions from offshore (and onshore) jurisdictions due to increased headline risk, solvency rules, self imposed operational mandates and compliance cost as a result of CRS and FATCA. There is a counter intuitive argument that these common reporting initiatives will lead to increased activity and development in properly regulated offshore centres. Drastic changes in global regulation have created a chaotic environment for international business and wealth. As the full extent of changes become clear, HNWI, family offices and wealth funds have begun to restructure with a greater emphasis on offshore operations.
Yes, information will be automatically filed with the relevant onshore tax authority based on the individual citizenship or home domicile. For this reason it will become more important than ever to not only have the correct compliant offshore structure but also have your assets and investment dealings provided by an offshore institution.
Mistakenly, many HNWI today have an offshore structure but have placed the assets with an onshore bank or investment house making it a far more susceptible target of civil litigation especially with the implementation of CRS. Information that was previously unavailable that can now be gleaned from the introduction of government mandated reporting regimes effectively making them available in the public sphere.
Governments have been notoriously bad at securing private information, some have even been implicit in the purchase of ill gotten information, making it a probability that information will become available to those looking to launch nuisance civil cases or for more nefarious reasons, such as extortion and kidnapping of family members.
The ultimate planning tool for some wealthy families, that have the means to do so, is to relocate to safer jurisdictions such as Bermuda, Bahamas, Cayman or Singapore to protect their families, wealth and generational viability of their estate structure.
Many financial services companies located in offshore jurisdictions are only able to offer a conduit or introductory arrangement effectively placing account and asset directly onshore which will circumvent and weaken the planned structure. It is critical for beneficiaries (clients), Trustees and industry practitioners to recognise the difference. In reality there are only a handful of financial institutions that are positioned to offer full custody services and a global investing platform; these investment houses will thrive in this new environment.
Trusts and holding companies (IBCs) will continue to be used as legitimate long term planning tools and under the various information exchange agreements it will be even more critical to not only have the correct structure but work directly with institutions that can provide an international offshore account. The regulatory landscape of today’s world will make it even more important to have the assets in a compliant offshore account. The foundations of offshore planning and business will continue to provide a comparative advantage – flexibility, stability, security, privacy.
The information contained in this article is for information purposes only, and represent the views of the author. It is not intended as specific investment or financial advice, or a recommendation or solicitation to buy or sell any security. Any investments or strategies listed in this article may not be suitable for all investors. Past performance is not indicative of future performance, and as with any investment, prices may fluctuate. It is recommended that advice is sought from a qualified investment professional prior to implementing any financial plan. LOM has made every effort to ensure that the contents herein have been compiled from sources believed reliable, however LOM does not warrant the accuracy, adequacy, timeliness, or completeness of this information expressly disclaims liability for errors or omissions in this information.
