Acronyms of Offshore Banking

FATCA = Foreign Account Tax Compliance Act, which takes effect this year.

FBAR = ROFBAFA = Report of Foreign Bank and Financial Accounts.

Asset Protection Trusts, Way Off Shore

The Sunday New York Times takes a lengthy look at asset protection trusts based in the Cook Islands. The Cooks launched their asset-protection initiative, with guidance from an American expert, in 1989.

Asset protection trusts aren't illegal and don't seek to dodge taxes. For doctors facing frivolous lawsuits, such trusts bring welcome peace of mind.

Other users of asset protection trusts may not be so upstanding. As the Times notes, assorted creeps and crooks, including Ponzi prince Allen Stanford, have utilized Cooks trusts.

Lady Joy

Judging from recently leaked data, trust assets are seldom held in the Cook Islands. More likely they consist of European financial accounts and other assets sprinkled around the world. The trust of Denise Rich, former wife of Marc Rich, included her yacht, the Lady Joy.

There’ll Always Be A Tax Haven

Even today, the sun seldom sets on the fragments of the British Empire. See this Telegraph slide show.

The fragments aren't as insignificant as their size suggests. Many have become thriving financial centers, including . . .

Anguilla: a population of fewer than 16,000 and a reputation as a tax haven.

Bermuda: a popular haven for corporations, especially reinsurance companies.

British Virgin Islands: the corporate tax rate is a less than punitive 0%.

Cayman Islands: probably the first locale people think of when they hear “tax haven.”

Gibraltar: where The Girl With the Dragon Tattoo stashed her millions.

Turks and Caicos: about 30% of GDP comes from “financial services.”

Until we get a world government (let's not hurry) tax havens will continue to lure business and spice up the practice of wealth management. Unfortunately, personal visits are seldom necessary.

Turks & Caicos beach

Related Posts:
The Girl With the Family Office
Shelters for Hedgies

The Girl With the Family Office

Stieg Larsson's Millennium Trilogy seemed a promising choice for light summer reading – an escape from offshore tax shelters and the world of wealth management.

Except it wasn't. In The Girl With the Dragon Tattoo, Lisbeth Salander steals a fortune. Using her hacking skills, she moves 2.5 billion Swedish kroner, stashed abroad by a bad guy, into her own offshore accounts.

The Swedish films made from Larsson's stories skip over her subsequent wealth management arrangements. It is the print version of The Girl Who Kicked the Hornet's Nest that tells us about Lisbeth's family office on Queensway Quay, Gibraltar.

Why Some Private Bankers Go To the Ballet

The wink-and-nod aspects of international private banking are going (yuck) public.
The Guardian has published extracts from Treasure Islands: Tax Havens and the Men Who Stole the World by Nicholas Shaxson, In the first installment we learn that really private bankers don't sit around waiting for money to come in seeking shelter:

My bank never once had a client walk through the door. The bankers and their clients go on big-game hunting trips, or to the ballet in Budapest. That is where it happens.

Wikileaks, not content with embarrassing U.S. diplomats and stirring up trouble in Tunesia, now threatens to release details of thousands of offshore accounts. The Swiss bank accounts belonged to more than 2,000 American, European and Asian individuals and multinational companies, according to former Swiss banker Rudolf Elmer. Among the seekers of shelter were politicians, business leaders, celebrities, organized crime leaders and "three major financial institutions."

Will all this unwelcome transparency make global private banking a duller business going forward? Maybe not. Remember the words of John Maynard Keynes:

The avoidance of taxes is the only intellectual pursuit that carries any reward.

Marketing yacht loans and grantor retained annuity trusts doesn't exactly create an adrenalin rush. Sometimes I'm sorry the racy aspects of private banking are off limits.

Where in the World are These Amazing Islands?

These islands have $41 million in bank assets for every resident!

On these islands stands a five-story office building with over 18,000 tenants!

Where are we? The Cayman Islands, subject of Senate Finance Committee hearings regarding tax shelters.

“Finding these tax cheats is a bit like a game of cat and mouse, only the mouse is hiding its cheese offshore.”

– Senator Chuck Grassley

Goodbye to Offshore Tax Shelters?

Now that some Swiss banking secrets have surfaced, indictment season has begun, The New York Times reports.

Sounds like bad news for certain billionaires and their offshore private bankers. Also for the New Haven Trust Company, which turns out to be located more than a stone's throw from the New Haven Green in Lichtenstein, specializing in "tax planning."

The Wall Street Journal comments:

The case provides a rare window into the world of private banking -- the personalized financial services offered to wealthy customers -- where Switzerland's UBS has long dominated. The case could lead to other U.S. clients: The indictment says the two financiers -- former UBS private banker Bradley Birkenfeld and Liechtenstein financial adviser Mario Staggl -- courted rich Americans and helped some of them avoid paying taxes.

The indictments are the latest sign that elaborate tax-evasion schemes available only to the super-rich are teetering toward a collapse.

How Offshore Tax Havens Beat IRS Audits

More middle-class taxpayers face IRS audits:

Since 2000, the tax authorities at the IRS have nearly tripled audits of tax returns filed by people making $25,000 to $100,000. Audits of these middle-class taxpayers rose to nearly 436,000 last year from about 147,000 returns in 2000. For these 61 million individuals and married couples, nearly half of all taxpayers, the odds of being audited rose from one in 377 to one in 140.

High-income taxpayers also face more audits:

Audits of those earning $1million or more increased by 33 percent from 2005 to 2006, the IRS reported. And audits of individuals making more than $100,000 jumped about 18 percent from 219,208 in 2005 to 257,851 in 2006 - the highest number in more than a decade and more than double the amount conducted in 2001, the agency said.

One problem: According to this New York Times dispatch, the really big fish are escaping, thanks to offshore tax havens.

The Internal Revenue Service is curtailing audits of many people who use offshore tax havens, even when agents see signs of tax evasion, because agents fear they cannot meet a three-year deadline for finishing an examination, Congressional investigators have found.

In a report to be released on Thursday, the Government Accountability Office found that I.R.S. agents are so hobbled by “dilatory tactics” by offshore taxpayers and other problems that it takes almost two and a half years to complete a typical audit.

Many I.R.S. agents told the G.A.O., the investigative arm of Congress, that the “safest way” was often to stop an audit prematurely and sometimes to refrain from starting one in the first place.

The I.R.S. reported that almost $300 billion in investment and business income was moved out of the United States in 2003. Analysts at the Joint Committee on Taxation have estimated that the annual outflow has shot to more than $400 billion since then.

Which tax havens might appeal to your clients? To cite only two out of many:

Andorra

Lots of fresh, mountain air, and there ought to be good skiing.

Isle of ManDo business in the City Thursday morning. Stop by your very private Isle of Man bank in the afternoon. Have dinner in Scotland and be ready for an early outing on the links Friday morning.

Thanks to Wikipedia Commons for the maps.