| Forget everything you think you know about | | | | And that's bad, even if the person who is |
| keeping your holdings anonymous using offshore | | | | exposed is a lawyer, supposedly protected from |
| banking, limited liability companies (LLCs), | | | | having to identify their clients. |
| international business corporations (IBCs), trusts, | | | | What do we mean? Say your favored privacy |
| foundations or non-profit companies. | | | | consultant refers you to their lawyer colleague, |
| That's a bold statement. But it's a very different | | | | described as "extremely discreet; I'd trust him |
| world today than when most of these constructs | | | | with my life." This colleague is to set up an IBC on |
| were developed. Or when the books were | | | | your behalf in the Cayman Islands. The lawyer |
| written that popularized their use for | | | | offers to act as your registered agent and/or |
| privacy-seekers. | | | | power of attorney. He requires a copy of your |
| There was a time when a holding company or | | | | passport (usually notarized, if not apostilled - see |
| well-formed trust in an offshore jurisdiction, | | | | our article What's an apostille, and why is it |
| perhaps set up by a trusted intermediary, could | | | | important?) and promises to retain it in |
| assure you and your finances a good degree of | | | | confidentiality. And he does, until, two years later, |
| privacy. But those days are over. New | | | | he gets a knock on his door from authorities |
| know-your-customer rules are making the use of | | | | interested in your account. A lawyer's client |
| traditional anonymous companies and trusts | | | | privilege is easily violated if a matter is criminal, or |
| almost impossible. And improved information | | | | even perceived to be criminal. |
| sharing now allows financial authorities to | | | | What's the alternative? If you still opt to create |
| authenticate beneficiaries of LLCs or IBCs more | | | | an LLC, IBC or trust and name the beneficiary in |
| effectively than ever before, and obtain their | | | | another name than yours, you could technically |
| details with relatively simple requests. | | | | use identification that isn't legitimately yours. Your |
| What are trusts, IBCs and foundations? | | | | picture would need to appear on the ID, so as to |
| An IBC is a corporation, a legal entity entitled to | | | | be able to authenticate your image if you needed |
| do business around the world in a given name. | | | | to show up at a bank to claim your funds. Now, in |
| The names of the board of directors and | | | | the best case, and things go well, you run the risk |
| beneficiaries of the business may not be | | | | of not being able to access your holdings at some |
| publicized, but there is at least a cursory public | | | | point in the future when your camouflage |
| record from the incorporation documents. | | | | identification expires if you're unable to produce a |
| Common to all IBCs are the dedication to business | | | | new set when required to identify yourself by the |
| use outside the incorporating jurisdiction, rapid | | | | bank. In the worst case, the bank may learn your |
| formation, secrecy, broad powers, low cost, low | | | | identification is falsified and flag your accounts to |
| to zero taxation and minimal filing and reporting | | | | be frozen once they've amassed generous |
| requirements. An increasing number of offshore | | | | balances. The bank, and therefore any agency |
| jurisdictions are permitting the use of nominee | | | | pursuing you, also then has a picture of you of file |
| shareholders, directors and officers. | | | | from your ID, a picture that is likely your true |
| A trust is a legal entity that can hold property or | | | | likeness. Not to mention other identifying data |
| assets for the benefit of a specific person, group | | | | which could incriminate you, such as the IP |
| of people or organization known as the | | | | addresses, and therefore the locations, of |
| beneficiary (beneficiaries). When a trust is | | | | computers you've used to access their online |
| established, an individual or corporate entity is | | | | banking systems. |
| designated to oversee or manage the assets in | | | | How could a bank learn your identification is false? |
| the trust. This individual or entity is called a | | | | Financial institutions, even overseas, are becoming |
| trustee. A trustee can be a professional with | | | | increasingly connected via technology, and many |
| financial knowledge, a relative or loyal friend or a | | | | are now able to do realtime database validation of |
| corporation. There are pluses and minuses to each | | | | passport and drivers' license numbers from many |
| type of trustee. An individual trustee may provide | | | | countries. Read our article What you need to |
| a more personal touch, but may die or move | | | | know about camouflage identification for details. |
| away. A corporate trustee may be less personal | | | | Who needs to worry about this? |
| but provides experience, investment skills, | | | | Always remember that magnitude of investigative |
| permanence and impartiality. More than one | | | | resources that will be brought to bear in a pursuit |
| trustee can be named by the grantor if he or she | | | | will be directly proportional to the magnitude of |
| wishes. | | | | the perceived offense. Would authorities really go |
| A foundation, and many non-profits, are formed | | | | through a complicated multinational effort, chasing |
| as a sort of a private trust. A popular type is a | | | | down the beneficiary of a given company, trust |
| so-called Liechtenstein Anstalt, which has been | | | | or foundation for someone secreting away only a |
| traditionally used primarily to conceal the true | | | | relatively small amount of money, perhaps to |
| owner's name from tax authorities. All instructions | | | | minimize taxes? Probably not. |
| regarding asset management and withdrawals | | | | Would they expend more effort in tracking down |
| must come from the Anstalt's board of directors, | | | | and stopping the beneficiary of criminal activity? If |
| often a firm of lawyers. These lawyers, usually | | | | the sums were in the low millions of dollars and |
| with two signatures, are the only ones | | | | the chances of success high enough, perhaps. |
| empowered by power of attorney to give orders | | | | Would they pull out all the stops if they believed |
| to a bank that controls the trust's account(s). | | | | significant criminal activity were involved, with |
| The problem in a nutshell: identification of | | | | proceeds in the tens of millions of dollars, or if |
| beneficiary | | | | they remotely suspected a connection with |
| No matter how oblique and discreet the provider | | | | terrorism? Most definitely. |
| of your front company or trust, a name, and | | | | Why are IBCs and LLCs still being promoted? |
| often a passport now, always needs to be | | | | Why do many offshore service providers and |
| associated with the structure; at some point, | | | | asset management advisors still advocate the use |
| someone - perhaps you, perhaps a nominee | | | | of companies and trusts for securing assets? |
| director, perhaps the secretary, perhaps even | | | | Because there's an immense industry around the |
| your registered agent - needs to identify | | | | world that makes a huge amount of money |
| themselves as the beneficiary of any bank | | | | processing the paperwork to set them up. And |
| account associated with the company or trust. | | | | they have dozens of years or more of |
| Unless you're willing to offer identification that is | | | | momentum in the marketing of their services. |
| not legitimately yours, it's highly likely that you, or | | | | Their effectiveness at truly assuring you |
| someone else who actually knows your real | | | | anonymity is not really the concern of the clerk |
| identity, will be connected to the account if | | | | or legal professional involved. When you're pursued |
| someone sufficiently motivated were to seek the | | | | and their records are subpoenaed, they will oblige, |
| beneficiary of your corporate or trust holdings. | | | | and they know it. And now you know it, too. |