Behind the Offshore Veil

Table of Contents:

1. The United States is an Offshore Banking Center
2. The History of Tax Havens
3. 9/11 Changes Everything
4. Why Go Offshore…Not for Tax Purposes
5. Why Go Offshore NOW, a Macro View
6. An Overview of International Financial Centers
7. Types of Offshore Vehicles
8. Banks are Unique
9. Private Trust Companies, an Alternative to Bank Ownership
10. The Evolution of Global Banking
11. Profit
12. Asset Protection
13. Your Privacy for Sale
14. Questions You Should Ask when Considering an Acquisition
15. Fact vs. Fiction
16. Final Thoughts



Chapter 5: Why Go Offshore NOW, a Macro View

Now that we have dispelled some of the popular misconceptions for “going offshore”, this chapter presents the most prominent benefits that can be attained legally & ethically. Profit, Privacy and Asset Protection make up a few of the common reasons business professionals, investors and entrepreneurs all seek ownership of private financial institutions offshore.

Profit
Perhaps no benefit afforded to individuals who decide to “go offshore” is as important as increasing profit. The two main methods of making a profit are by cutting costs and selling more. The concept of going offshore for profit is based in a common principle: less regulation results in lower overhead and higher profit margins. This can apply to numerous industries including banking, insurance, manufacturing, shipping and trading, just to name a few.

For many years now, the concept of “offshore outsourcing” has been the front runner in the quest for increased profit. By definition, “offshoring” is the process of relocating business processes from one country to another. This may include production, manufacturing and/or services. Most simply, the economic logic behind offshoring lies in the ability to obtain the same goods and services for less cost than in the home country.

The two basic types of offshore outsourcing are information technology and business processes. Information technology refers to computer programming, data analysis, and transcription, while business processes can include call centers and claims processing. Based on the type of offshoring services desired, there are many countries to consider yet, for the most part, the main players involved include India, China, Brazil, and the Philippines, to name a few.

In order for an individual and their business endeavors to continue to profit and expand, they must be able to sell more products and services. Additionally, the need to provide clients with new services on a continuous basis further increases production and ultimately profit. Owning an offshore private institution enables businesses to expand by offering new services, of which they were previously not capable, to gain membership to prestigious international financial processing systems, to move money and investments at a quicker rate to capitalize on new opportunities and much more.

Privacy
In addition to profit, the benefit of increased privacy is one the main motivations for going offshore. The advances of modern society have caused our lives to move at a faster pace than in previous years, mostly due to the computer age and the instant access to information it offers. For many, this may be not only disheartening but precarious. Wealth, fame and business success are just a few factors that can make an individual a target for unwarranted probes by those that are less than scrupulous. The average person must also contend with the potential problem of information theft. Serious damage to one’s records or finances can result. Disclosures of private information, for reasons other than what was originally intended, have become a consequence of the times in which we live.

“Banks and other institutions readily proclaim that their policy is one of strict confidentiality yet in reality can be quite different. For example, in the 1970’s, the White House “plumbers” discovered that Daniel Ellisberg had been seeing a psychiatrist; knowledge found by prying into his bank records. With that information, the secret Nixon administration investigative unit was able to plan the break-in into the psychiatrist’s office in search of records.”

Even if you find personal privacy to be a luxury, consider your Social Security Number. “Social Security cards are used for identity checks; it is absurdly unreliable. This means that with this number someone can probably obtain military information, bank information, college grades, etc.” In other words, the potential for fraud becomes very real. Thus, identity theft has become a more common crime.

Privacy, however, is not just a political or ideological matter; it has tremendous meaning in everyday life. Any corporate manager that has ever e-mailed an employee can attest to this need. Trade secrets, client lists, portfolio information, potential business ventures are just a few examples that require privacy for business success.

Cyberspace now represents the newest battleground for privacy. As recently as a decade ago, the United States government was involved in a battle for cyber privacy. Philip R. Zimmermann created a computer encryption program called “pretty good privacy”, or “PGP.” Mr. Zimmermann wrote his program with human rights in mind and gave it away for free on the Internet in 1991. The federal government proceeded with a criminal investigation, claiming that he had violated Arms trafficking laws, stating the software qualified as “munitions.” The government eventually dropped the case. We would suggest that those interested in exploring this story in more detail check out the multitude of sources available on the internet. The government’s classification of the encryption software as munitions, clearly exemplifies the weight of this issue; the topic of privacy on the Internet is as important as gun control in the mind of the Federal Government.

Additionally, as we mentioned a few chapters back, the terrorist attacks of September 11, 2001 have altered American citizens’ personal privacy rights. The 9/11 Commission, the Department of Homeland Security and the Information Awareness Office were all created with the intent to protect our country from potential future attacks; yet, unfortunately, many of these agencies have been criticized for over-stepping their bounds ultimately resulting in the loss of many personal privacy rights. Going offshore enables owners and investors to attain a higher degree of privacy and anonymity in their financial endeavors, much more so than in the United States.

Asset Protection
Reaching epidemic proportions, statistics now show that US citizens have a one in four chance of being sued during their lifetime. Business owners and professionals are among the most likely to be sued. Also included in that union are physicians, plastic surgeons, stockbrokers, law enforcement officials and real estate developers. Governing rules of civil procedures have been liberalized, consequentially making the process of taking legal action much easier than ever before. Results can be devastating, and products such as liability insurance are rarely enough to cover all eventualities. As a result, the use of offshore vehicles has been brought to the forefront of estate and financial planning.