Over the past few months the issue of offshore jurisdictions and
the role they play in the global economy has come under extreme
scrutiny, especially from onshore governments seeking to increase
tax revenues. The recent Panama Papers Leak has only served to fuel the
flame and has resulted in more people who know very little or
nothing at all about offshore jurisdictions calling for their
Those who understand offshore jurisdictions however, understand
that the issue is not offshore jurisdictions per se, but rather
entities and individuals who seek to use offshore structures for
illicit gains or criminal behavior.
Offshore is legitimate
In fact, if one were to have a look at the Panama Papers and the
recently released searchable database of company information (and
not just digest a one minute clip of the evening news), you would
realize that on almost every page on the International Consortium
of Investigative Journalists' website dealing with the Panama
Papers, there is a statement which reads:
"There are legitimate uses for offshore
companies and trusts. We do not intend to suggest or imply that any
persons, companies or other entities included in the ICIJ Offshore
Leaks Database have broken the law or otherwise acted
That statement cannot be taken lightly. It is a fact that there
are many legitimate uses for offshore companies and trusts, and
that a majority of the persons who use offshore entities come with
clean hands and have good intentions. It is only the few that have
unlawful motives which tarnish the good reputation of many offshore
jurisdictions. Unfortunately, even with good rules and regulations
some of those entities and individuals will continue to fall
through the cracks and cause damage. It is therefore
imperative that regulators in offshore jurisdictions continue to do
more to minimize the likelihood of abuse.
Abuse of regulated systems globally
The Bernie Madoff Ponzi scheme, which originated in the U.S.,
clearly shows that even with the best intentions, and what was
thought at the time to be adequate regulations, regulators can be
conned. A view of the enforcement page of the U.S. Securities and
Exchange Commission's website shows that there are numerous
cases of entities and individuals who have tried to violate rigid
and strict rules and regulations put in place by the SEC. Like the
SEC, offshore jurisdictions must deal with those entities and
individuals who seek to violate their rules and regulations,
particularly in relation to ownership information and declarations
(tax or otherwise). The current state of affairs is not entirely
the fault of offshore jurisdictions, but offshore jurisdictions can
and should do more to protect themselves.
Offshore and Onshore Regulators must join forces
It is clear that offshore and onshore regulators must join
forces to battle those who are intent on breaking laws across
borders. Onshore jurisdictions, especially G20 nations, have the
upper hand and a call for a level playing field by offshore
jurisdictions is not unreasonable. The Common Reporting Standard is
seen as a move towards a level playing field but it needs to be
more widely accepted, especially by major onshore players like the
Offshore jurisdictions such as the BVI have signed multiple tax
exchange information agreements, signed on to FATCA and FATCA-like
regulations, and now CRS. They are making beneficial ownership
information more readily available via new mechanisms with the aim
of improving transparency, efficiency and accountability. Although
there may be a perceived battle between onshore and offshore
jurisdictions, ultimately, the battle should be against those who
seek to abuse both onshore and offshore rules and regulations.
The content of this article is intended to provide a general
guide to the subject matter. Specialist advice should be sought
about your specific circumstances.
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When Walkers was launched as an offshore law firm in 1964 in the Cayman Islands it is fair to assume that the founders would never have dreamt their creation would, fifty years later, be working in a cross-border restructuring market driven by China.
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