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Written by Thomas Azzara
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Tuesday, 06 March 2007 |
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Word Count: 850 Offshore Bank Secrecy Acts and Confidentiality Ordinances
The Cayman Islands government soon followed the Bahamas Bank Secrecy
Act, with almost identical legislation a year later. The growth of the Cayman
Islands into the top offshore banking center was spurred on originally by their
Secrecy Act.
Today, all the tax havens have Secrecy or Confidentiality Ordinances. One
exception is Bermuda, which never officially adopted a secrecy act – as
Bermuda’s “common law” and isolated “jurisdiction” had always served it well.
As it turned out, the Secrecy/Confidentiality Acts and Ordinances were a boost
to offshore businesses for the Caribbean and Pacific tax havens, and for the
most part, they still are.
While the original idea of Banking Secrecy was a good one for the offshore
havens, it was not (and never will) well received by the US Treasury Department
and their enforcement agency – the IRS.
While no one would argue that these countries have every right to adopt and
promote their bank secrecy, it has caused problems, including attracting a
criminal element; drug money laundering issues, and tax evasion issues for
citizens from Industrial nations like the US, UK, Canada and Australia.
Bank Secrecy alone has worked well for the end users for over forty years, but
under US law (and the laws of other industrialized nations – Japan, UK, Canada,
Australia) it is income tax evasion (a felony) just having an offshore bank
account and not reporting the income on one’s tax return. In the U.S., the mere
existence of the bank and security accounts are reportable on a Form TD 90-22.1.
Few Americans want to report.
http://www.ustax.ch/pdf/2005_f9022-1.pdf
But Secrecy and Confidentiality Ordinances offer protection against creditors
and “others”; and where taxes alone are not the issue, bank secrecy along with
“jurisdiction” add up to “asset protection’, privacy and more.
Privacy: One author writes: “People can't find your offshore assets.” The Bank
Secrecy Acts in the Bahamas (Cayman, Anguilla and the BVI) are said to
impenetrable.
Exception: All these countries have Mutual Legal Assistance Treaties with the
United States and other nations which allow for cooperation in criminal matters
(i.e., other than tax issues).
A crime such as embezzlement of assets from the coffers of a US company to
“hidden bank accounts” offshore is going to end up in conviction and sentencing
– most of the time.
The MLATs are applicable on the “Federal level” through the US Attorney’s office
(i.e., located in Miami, Atlanta, New York, L.A.). However, there is no
“cooperation” available to private investigations under the MLAT –except through
the use of local (Bahamian, Anguillian, Cayman) attorneys and the local courts
of those countries. When such “investigations are pursued, they are often
expensive and futile – as the tax havens have a reputation to protect, and here
again – bank secrecy becomes an issue even in the courts.
U.S. Judgments are not recognized offshore: “The Supreme Court of the Bahamas
does not recognize U.S. court judgments against a company incorporated in their
jurisdiction.” The same can be said for the other Caribbean havens – including
Cayman, the British Virgin Islands, Anguilla, Nevis and St. Kitts. Federal
Courts have no jurisdiction: “U.S. Federal Court judges have no power or
authority outside the U.S. borders. IRS liens are not recognized offshore.
Seizure Warrants from the U.S. Customs service are not recognized offshore.” –
basically, the author of this statement is correct.
Another interesting protection you’ll find offshore is American and foreign
lawyers cannot practice law in these places. For example, here in the Bahamas
you have to be a citizen of the Bahamas to become an attorney and practice in
the Bahamian courts. Even the largest American law firm would need to hire a
Bahamian law firm to pursue its litigation or claims
Notwithstanding all of the above, there is no “integration” between US tax law
and the law of any foreign nation – excepting where there is an “income tax
treaty”.
Yet, the US Treasury Department has had a sympathetic “ear’ and attitude to the
offshore financial community’s well being; but this too, has varied from
“threats” to “bullying”, to acceptance of their rights to exist and impose no
taxes.
Disclaimer: Pursuant to Internal Revenue Service guidance, be advised that any
federal tax advice in this communication, including any attachments or
enclosures, was not intended or written to be used, and it cannot be used, by
any person or entity for the purpose of avoiding penalties imposed under the
Internal Revenue Code.
Since 1990 I've formed a total of over 1,300 International Business Companies
here in Nassau and in the no tax jurisdiction of Anguilla (a UK "Overseas
Territory like Cayman and BVI) - 1,100 miles SE of Miami. 100 miles from San
Juan and USVI.
Based in the tax free haven of the Bahamas, I have over 20 years experience
reading and writing about tax havens and financial center.
Thomas Azzara
New Providence Estate Planners, Ltd.
(Consultants)
54 Sandyport Drive
P.O. Box CB 11552
Nassau, Bahamas
Fax/phone: (242) 327-7359 E-mail:
This e-mail address is being protected from spam bots, you need JavaScript enabled to view it
http://www.bahamasbahamas.com/
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