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The IMB aware of the escalating level of this criminal activity, wanted to provide a free service to the seafarer and established the 24 hour IMB Piracy Reporting Centre (PRC) in Kuala Lumpur, Malaysia.
A newsletter about fraud and global asset recovery from the office of International Chamber of Commerce's FraudNet. To read about key asset recovery cases and global compliance with anti-fraud and money-laundering laws, please click in the link above for the Newsletter PDF.
CCS offers a flexible membership arrangement based on the selection of predetermined membership packages. A prospective member can elect to join one or more Bureaux according to their requirements.
Losses due to official misconduct account for a great many maritime trade incidents. Each incident can be complex and wide-ranging in nature. It is therefore unlikely that any one company will have the knowledge and resources to be able to investigate it thoroughly.
Counterfeiting and piracy are a drain on our businesses and on the global economy. It has resulted in the widespread loss of lawful employment and a massive reduction of tax revenues.
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StephenBaker@bakerandpartners.com www.bakerandpartners.com |
Address
Baker and Partners
Midland Chambers 2-10 Library Place St Helier JE1 2BP Jersey |
Telephone
+44 1534 766254
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Languages
English
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Panama Papers’ Demonstrate the Criminalization of Offshore Corporations The International Consortium of Investigative Journalists’ (ICIJ) reporting on a leak of 11.5 million documents from Panamanian law firm Mossack Fonseca continues to make headlines, as examination and analyses of the documents reveal much about the practice of establishing offshore corporations for financial protection or gain.
Yet many in the public – and even some with extensive knowledge of the inner workings of this industry – are wondering how this practice flies so easily under the radar to allow so many people to take advantage. |
As a specialist in fraud, as well as asset tracing and recovery, I’ve watched criminals and corrupt governments and their leaders, manipulate the process of setting up an offshore corporation simply to hide the assets they’ve stolen through their commission of crimes elsewhere. This criminalization of a legitimate business strategy to serve multiple jurisdictions and easily move money between them is what the “Panama Papers” have brought to light in a profound and intriguing way. How Offshore Corporations Work When a company serves multiple jurisdictions and wants to transfer funds of different currencies easily between its outposts, it will set up an offshore corporation. To do this, it must work with financial institutions and advisors, as well as attorneys acting as incorporation agents. In the case of the “Panama Papers,” Mossack Fonseca acted as incorporation agents with countless financial institutions and clients. Aside from legitimate companies, criminals also seek to set up offshore corporations. They follow the same path to establish their offshore subsidiaries – working with banks, advisors and lawyers – but their reasons for doing so usually fall into one or several of the following:
The global nature of offshore companies appeals to criminals, especially since regulations governing the establishment and operations of corporations vary greatly. While places like the Crown Dependencies ofJersey, Guernsey and the Isle of Man have regulatory and legislative mechanisms in place to try to curb illegal activities of these corporations through the robust prudential regulation of corporate service providers, countries like the United Kingdom, Switzerland, Singapore and Hong Kong remain relatively unregulated. Further, certain jurisdictions, including some states in the US, do not require the disclosure of the identity of ultimate beneficial owners of corporations, even to the registered agent. Criminals can simply register their companies, name corporate directors and nominee shareholders and can keep and grow their fortunes, often undetected by law enforcement or fraud investigators. The tightening net has forced some traditionally opaque jurisdictions, such as the British Virgin Islands, to recently tighten their requirements when it comes to disclosure rules. What’s Next? Of course, herein lies the thrust of the problem and why the “Panama Papers” are captivating the world. And why as a fraud investigator, I am intently watching this story unfold. If this leak helps frame regulation and helps uncover some of the most notorious abuses of offshore companies, we stand to track and recover assets for some of our former, present and future clients. And new regulations and laws will help ease some of the difficulties we have traditionally encountered tracing assets across multiple jurisdictions. I won’t be so naïve as to believe criminals won’t come up with innovative ways to circumvent the regulations and laws in the future, but at least for now, we’ll have an extra tool to level the playing field. Bakers & Partners’ Director of Regulatory Services Ed Shorrock contributed to this report. Stephen Baker is an Advocate and Partner of Baker & Partners, and a member of ICC FraudNet. He is also an appointed Crown Advocate. He has acted regularly for foreign governments including Brazil, Kenya, Pakistan and Nigeria in asset recovery actions, and has been responsible for handling suspicious activity reports and investigations for the Attorney General of Jersey. Regularly instructed by both the Attorney General and the Jersey Financial Services Commission, Stephen is a specialist in conducting investigations into the flow of suspected corrupt payments made to politicians through Jersey. He also has expertise in cases involving complex fraud and money laundering, particularly those with an international and political dimension. ICC FraudNet is an international network of independent lawyers who are leading civil asset recovery specialists in each country. Recognized by Chambers Global as the world’s leading asset recovery legal network, our membership extends to every continent and the world’s major economies, as well as leading offshore wealth havens that have complex bank secrecy laws and institutions where the proceeds of fraud often are hidden. Founded in 2004 by the Paris-based International Chamber of Commerce (ICC), the world’s business organization, FraudNet operates under the auspices of the ICC’s London-based Commercial Crime Services unit. |
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edavis@astidavis.com www.astidavis.com |
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1001 Brickell Bay Drive
79th Floor, Miami Florida 33131 |
Telephone
+1 (305) 372-8282
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Languages
English, Spanish, Portuguese, Italian
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The ‘Legitimacy’ of Offshore Corporations It seems everyone is talking about the “Panama Papers.” The International Consortium of Investigative Journalists (ICIJ) blew the top off the offshore financial market with its reporting on the 11.5 million documents obtained through a leak from Panama-based law firm Mossack Fonseca. Now the weaknesses of governments, heads of state, corporate shareholders, bank executives, tax authorities, regulators and law makers have been exposed and the seedy underbelly of offshore corporate anonymity is being smoked out.
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‘No Legal Reason to Remain Anonymous’ To an asset-tracing and asset-recovery specialist, like me, it’s not surprising this revelation materialized. After all, I firmly believe there is no truly legitimate reason to anonymously own an offshore company. Yes, setting up offshore shells can be completely legal and there are so-called legitimate reasons to set them up: In international business, being able to serve clients in their home countries and to transfer currencies easily between countries is necessary, to be sure. But, if you’re acting completely above the fold, why do you need anonymity? Protection of Privacy Some, especially the wealthiest among the world’s population, argue that anonymity protects them from criminals going after their wealth. The truth is it protects them from anyone – including law enforcement, fraud investigators, tax authorities and asset-recovery specialists – from having an easier time trying to figure out whether they’re acting in good faith or criminally. Moreover, many of the people who make this claim live ostentatiously, so that justification easily falls away in most instances. US Tax System vs. Territorial Tax System In the United States, our tax system was designed to collect taxes on money made by our citizens and multinationals in any other country in the world. If you live here and make money selling goods in Canada, you pay taxes on the taxable income you make in Canada. Not so in countries that use a territorial taxation system. Money made offshore by investors in Hong Kong, France and Germany, for example, is often exempted from taxes in the onshore country. It’s why the British Virgin Islands, the Channel Islands in Europe and now, some say, Delaware, Wyoming, Nevada and South Dakota in the United States have become safe havens to own corporations used for the purpose of evading taxes. And while it may seem that as a result of our tax code, many more in the U.S. would be looking to “hide” their taxable wealth in offshore corporations, we also have a central banking system that is heavily regulated. The world at-large has no regulatory body to oversee and impose sanctions against countries not playing by the accepted norms in international banking. The closest we have to true international oversight is the Paris-based Organisation for Economic Co-operation and Development (OECD), which recommends policy changes but doesn’t have the authority to make those changes. So many throughout the world have learned that to reduce their legitimate tax burden, they can set up and use these offshore shell corporations. This is key, though: If this was a legitimate business strategy, they wouldn’t mind having their name attached to these shell companies. Criminals, fraudsters and Ponzi schemers - who want to be sure they are in no way traceable to the profit of their crimes, use the lack of regulation to distance themselves – and their assets – from the eyes of the world. Tectonic Shift Toward Transparency’ So what are we in the asset recovery business hoping comes out of the “Panama Papers”? While policy hacks and tax regulators sort through how to harmonize the world’s various tax laws, regulations and practices, we’re hoping for a tectonic shift toward transparency to help us root out the criminals who are greedily grabbing up the world’s assets and hiding them through allowable opacity. We, like the rest of the world, are watching this unfold and hoping good comes out of it. Edward H. Davis, Jr. has practiced law for 28 years, and is a founding shareholder of the Miami international law firm, Astigarraga Davis. As a Certified Fraud Examiner, he heads the firm's Asset Recovery and Financial Fraud group, representing victims of fraud and grand corruption including governments, governmental entities, corporations, hedge funds, insolvency practitioners and individuals by investigating and prosecuting civil fraud and asset recovery actions. He serves as inaugural chair of the International Bar Association’s Anti-Corruption Committee’s Subcommittee on Asset Recovery, and is a leading original member of the London-based International Chamber of Commerce Commercial Crimes Services FraudNet Network. In 2013 Ed has been recognized as the Asset Recovery Lawyer of the Year by Who’s Who Legal since 2014. ICC FraudNet is an international network of independent lawyers, who are leading civil asset recovery specialists in each country. Recognized by Chambers Global as the world’s leading asset recovery legal network, our membership extends to every continent and the world’s major economies, as well as leading offshore wealth havens that have complex bank secrecy laws and institutions where the proceeds of fraud often are hidden. Founded in 2004 by the Paris-based International Chamber of Commerce (ICC), the world’s business organization, FraudNet operates under the auspices of the ICC’s London-based Commercial Crime Services unit. |
- Details
StephenBaker@bakerandpartners.com www.bakerandpartners.com |
Address
Baker and Partners
Midland Chambers 2-10 Library Place St Helier JE1 2BP Jersey |
Telephone
+44 1534 766254
|
Languages
English
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Tax Planning Operates on a Spectrum In early March, the UK’s Supreme Court ruled in two cases concerning offshore vehicles, which were set up over a decade ago in Jersey and the Cayman Islands, that shares awarded to employees as bonuses should have triggered tax payments to the UK revenue authorities. In a fairly blunt assessment, the Supreme Court said that they “had no business or commercial rationale beyond tax avoidance.”
The media attention has focused on the legality ofsuch schemes, which has been a recurring theme in many other cases. This oversimplifies the issue and overlooks a number of relevant considerations. |
UK tax law, or most tax law for that matter, is exceptionally complex. An inevitable product of such complexity is a body of intelligent and highly educated individuals who are able to analyse domestic tax law in the wider context of the international fiscal landscape and devise intricate schemes that exploit the legislative cracks and crevices to minimise the tax liability of any given individual or organisation. Similar schemes or structures have been openly referred to as being “legal” and, accordingly, assumed to be entirely legitimate for exploitation. This is a term that seems increasingly inappropriate when one considers how most tax planning schemes find their way on to the shelves. The use of the word “shelves” is intentional, as many of these products are commoditised, albeit there are more sophisticated versions that have elements of customisation. If a scheme is designed or approved at great expense by a tax Queen’s Counsel or firm of highly respected accountants, this does not make it legal. At the head of the document setting out the terms of the scheme the word “OPINION” usually appears in bold, capital letters. The use of this word is not an accident. What this word implies is that what is being proposed is not rendered specifically illegal by the legislation as it stands. There is not likely to be a statement in the law permitting such a scheme, nor has there been a court decision declaring such a scheme to be legal according to the law as it currently stands. In fact, by definition, the nature of such structures normally places them outside the contemplation of the drafter. It is simply the opinion of one, albeit expert, person. The problem occurs when this opinion finds its way into the hands of financial advisors and the word “legal” takes a decidedly liberal turn. It might well be used to support the legitimacy of a number of tax planning schemes marketed to a broad customer base as “legal.” It might seem like a subtle distinction, but it is an important one. The UK revenue authority, HRMC, probably has the intellectual power of its private sector rivals, but given the volume and speed to market of such schemes, it lacks the capacity to deal with all schemes about which it has doubts. This is probably why it took over a decade for the UBS and Deutsche Bank schemes to be tested in the UK’s highest court. However, when one drills into the schemes, it is not the legality (in the sense of criminal tax evasion) which is in question. At its heart, is the question of whether the scheme produces the tax effects that it was designed to generate. Currently, when one scheme is deemed not to produce such tax effects, it is mothballed, possibly restructured and the next idea is developed. A general theme of tax tribunals and the court system, in general, is that they are increasingly moving toward an interpretative approach to such cases, i.e. what the legislature intended when it drafted the law, as opposed to a strict reading of the law. This is likely to lead to more cases being settled in favour of HMRC as other recent cases have shown, but creates uncertainty in the minds of advisors and taxpayers. The bedfellow of the “legal” issue is the phrase “aggressive tax planning.” Like many things, there is no definition, but the educated layman, and certainly those operating in the offshore financial services industry, are likely to recognise it when they see it. Tax planning operates on a spectrum. At one end are well understood and entirely transparent tax mitigation techniques starting with efficient tax allowances and the like. The spectrum then moves through schemes until it finally ends up with schemes that are novel, supported by opinions and appear to play to the form, rather than the substance, of the arrangements. It is only when they are tested by the court system that it is finally determined as to whether they “work.” Stephen Baker is an Advocate and Partner of Baker & Partners, and a member of ICC FraudNet. He is also an appointed Crown Advocate. He has acted regularly for foreign governments including Brazil, Kenya, Pakistan and Nigeria in asset recovery actions, and has been responsible for handling suspicious activity reports and investigations for the Attorney General of Jersey. Regularly instructed by both the Attorney General and the Jersey Financial Services Commission, Stephen is a specialist in conducting investigations into the flow of suspected corrupt payments made to politicians through Jersey. He also has expertise in cases involving complex fraud and money laundering, particularly those with an international and political dimension. ICC FraudNet is an international network of independent lawyers who are leading civil asset recovery specialists in each country. Recognized by Chambers Global as the world’s leading asset recovery legal network, our membership extends to every continent and the world’s major economies, as well as leading offshore wealth havens that have complex bank secrecy laws and institutions where the proceeds of fraud often are hidden. Founded in 2004 by the Paris-based International Chamber of Commerce (ICC), the world’s business organization, FraudNet operates under the auspices of the ICC’s London-based Commercial Crime Services unit. |
- Details
s.bonifassi@lebray.fr www.lebray.fr |
Address
7, rue de Madrid
75008, Paris, France |
Telephone
+33 1 44 90 17 10
|
Languages
French, English, Russian, divish, Arabic, Romanian, Bulgarian
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The Global Impact of the Panama Papers Leak Following the leak of what we’ve now come to know as the Panama Papers, I joined Pascal Saint-Amans, Director of the OECD’s Centre for Tax Policy and Administration, Friederik eRöder, France Director of the NGO One and Serge Michel, a journalist at Le Monde, on the TV channel France 24, to share my thoughts about the global impact of this leak.
Here are my four main points: |
Watch the two-part debate here: Haven Forbid: Panama Papers, how to stop tax dodging?” on France 24 Part I http://www.france24.com/en/20160406-debate-panama-papers-tax-evasion-haven-part-one Part II http://www.france24.com/en/20160406-debate-panama-papers-tax-evasion-haven-part-two ICC FraudNet is an international network of independent lawyers who are leading civil asset recovery specialists in each country. Recognized by Chambers Global as the world’s leading asset recovery legal network, our membership extends to every continent and the world’s major economies, as well as leading offshore wealth havens that have complex bank secrecy laws and institutions where the proceeds of fraud often are hidden. Founded in 2004 by the Paris-based International Chamber of Commerce (ICC), the world’s business organization, FraudNet operates under the auspices of the ICC’s London-based Commercial Crime Services unit. |
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