‘Offshore’ Outshines ‘Onshore’ in Identification Due Diligence

“OECD countries do a much worse job of collecting information on the prospective owners of ‘shell’ companies than their counterparts in offshore financial centres”.

This is the view of Professor Jason Sharman of Griffith University in Australia, one of a handful of commentators known to rely less on invective and more on analytics when engaged in ‘offshore’ debate.

His study which is on-going found that in written communication to 3,000 corporate service provides in financial centres around the world, it was more often the case that the service providers in the so-called ‘offshore’ or ‘tax haven’ jurisdictions demanded the full suite of certified documentation verifying the beneficial ownership of the ‘shell’ companies they were asked to incorporate.

Global rules to combat money laundering as enforced by the Financial Action Task Force are clear.

Service providers are required to collect this identification. To do otherwise makes a ‘nonsense’ of other international disciplines on transparency and tax information exchange. It stands to reason that what you do not collect you cannot record and if you do not record you cannot exchange.

According to Professor Sharman in some cases the ‘onshore’ provider simply did not ask for the information; in other cases there was no requirement that the information submitted be verified; and the most egregious cases service providers asserted that such information was not a pre-requisite to company formation.

Surprised?

Perhaps you shouldn’t be.

Shoddy, incompetent, unprofessional service providers often find ‘safe harbour’ plying their trade in jurisdictions who as a matter of course easily achieve ‘whitelist’ credentials or other ‘proofs’ of international right standing.

On the other hand, others who know, understand and apply the rules as required by their own governments are routinely and publicly vilified for using non-compliance as a means of competitive advantage.

This is still the enduring legacy of the OECD’s origin work on ‘harmful’ tax competition.

It is for this reason that the study which hopefully will be one of many which will inform the discourse on the ‘practice’ of international business and financial services is an important adjunct to the policy work with which much of the world is currently preoccupied.

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2 thoughts on “‘Offshore’ Outshines ‘Onshore’ in Identification Due Diligence

  1. Take a closer look at Delaware and some other U.S. states. This “off shore” shell game argument that congress has made neglected to look inside the U.S. The U.S. in some states sets up this situation far, far better than most other countries do including the demonized Caymen Islands. Look out Delaware!

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    1. Exactly its not only Delaware, there’s Vermont too. So while they make regulations at the federal level they then say they have no control over whether the states decide to comply. It makes a nonsense of the G8/G20 agenda on transparency, information exchange and the fight against tax evasion.

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