Money Laundering and Your Bank Accounts – Part II – Avoiding Scrutiny

image by Andrew Gook

This is a continuation of our series on money laundering and bank accounts. We hope to help you avoid making yourself look guilty during the normal course of business. Keeping things above board is the surest path to a sound sleep.

Guilty Until Proven Innocent

When interacting with the banking system you have no assumption of innocence working on your behalf. With over a trillion dollars having already been laundered and billions more being laundered every year, monetary authorities are nervous. Furthermore, only 0.2% of the money laundered is caught. Every citizen pays the cost for this in higher taxes and higher prices.
Know what the cop on the beat is looking for and you can stay above reproach. Sometimes this may seem troublesome, but in the long run, your life will be easier.

Common Efforts to Avoid Reporting or Recordkeeping Requirements

You try to persuade a bank employee not to file required reports or maintain required records for your bank accounts.

This is a high-speed train to prison. Don’t even think about it.

You are reluctant to provide information needed to file a mandatory report, to have the report filed, or to proceed with a transaction after being informed that the report must be filed.

Reluctance looks like guilt. Know in advance everything that is required of you. If the workload is too great or the information too sensitive, don’t open an account.

You hesitate to furnish identification when purchasing negotiable instruments in recordable amounts.

Negotiable instruments are cumbersome, but in sufficiently large quantities can be useful to money launderers, especially if they are smurfing. (Doing many small transactions to avoid alerting authorities.) Banks know this. Bank examiners know this. Never, ever hesitate to show your identification.

You ask to be exempted from reporting or record-keeping requirements for your bank deposits.

When it comes to money, criminals don’t want perfect records. Sloppy/missing records are the hallmark of criminal intent. Keep perfect records and give the banks what they ask for and be happy to do so.

You often use the automated teller machine to make several bank deposits below a specified threshold.

Banks look for multiple small transactions (“structured transactions”) which are used to get around the $10,000 limit. Using an ATM or multiple ATMs won’t hide the structured deposits. Make deposits to different accounts and in different amounts and collect them ultimately in one account and you’ll set off an alarm. Don’t bother to try.

You deposit funds into several bank accounts, usually in amounts of less than $3,000.Then you consolidate them into a master account and transfer them outside the country.

Bad move. If you send the money to or through a suspicious location you may hear a knock on your door. This is just one small step more complicated than the earlier approach. They will notice.

You access a safe deposit box after completing a transaction involving a large withdrawal of currency or accesses a safe deposit box before making currency deposits structured at or just under $10,000, to evade the bothersome CTR filing requirements.

The bank tracks everything you do with its computers. You can’t fool them with something this simple. Why try?

Money Laundering and Your Bank Accounts – Part I – Hiding Information

money laundering machine
Businesses and individuals don’t know what banks are looking for when deciding to open an account; it used to be so easy!  Anti-money-laundering and terrorist financing detection regulations are the problems.

Over the next few blogs, we will alert you to a number of things that legitimate banks must check. If you want to avoid difficulties, don’t stray into any of these areas.

The first customers that regulators look for are those who provide insufficient or spurious information. When such situations arise, the money laundering alarms will ring and the bank will take significant actions to resolve the situation; usually not to your benefit.

Identification Problems

The customer uses unusual or suspicious identification documents that cannot be readily verified.
His chances of opening an account are almost nil at any bank that he can actually trust with his money if they don’t believe his identity is real.

When the customer first opens the account he gives a taxpayer ID and then later provides a different sort of taxpayer ID. For example, in the U.S. he provides an individual taxpayer identification number after earlier providing a Social Security number.

The customer uses different identification numbers with variations of his or her name.
The customer may not know this, but banks design their software to detect such frauds.

A business won’t provide complete information about the nature and purpose of its business, anticipated account activity, prior banking relationships, the names of its officers and directors, or information regarding its place of business.
Of course, a customer who conceals facts sets off money laundering alarms.


The phone company says that customer’s home or business telephone is not in service.
Why would someone opening a legitimate bank account provide a bad phone number? In fact, banks don’t believe they would; they’re probably money laundering or terrorists.

Suspicious Activity

The customer’s background differs from that which would be expected on the basis of his or her business activities.
If someone leaves his job in one field to start a business in another field may have this problem. He will need to give a convincing reason for accepting this.

The customer makes frequent or large transactions and has no record of past or present employment experience.

The customer is a trust, shell company, or Private Investment Company and is reluctant to provide information on controlling parties and underlying beneficiaries. In such cases, beneficial owners may hire nominee incorporation services to establish shell companies and open bank accounts for those shell companies while shielding the owner’s identity.
Anonymous intermediaries are one of the most common problems banks have with prospective accounts. Unsurprisingly, bank regulators don’t trust them and proper jurisdictions provide one way or another for revealing the beneficial owners of the account. Banks must know their customers and anonymous intermediaries prevent that.

You must beware of over a hundred other things that banks may use to impair your account. Deal with the professionals at Hilda Loe Associates to maximize your chances of opening a bank account.

Singapore Government Sets Small Business Controllers Astir As AEOI Comes Knocking

singapore registered controllers red tape
Image by James Petts
Until now the controllers of most local businesses could sit quietly in the background, passively earning money. To the world at large they appeare to be unconnected with the company providing their income or wealth. In the new world of AEOI and FATCA, goverments no longer condone such anonymity. These folks are now deemed Registerable Controllers” whom we describe in more detail further on.

For government departments to learn who actually controls the business is a significant chore today. So legislation will now go into effect on 31 March 2017 to rectify that problem.

From that time forward, some companies must maintain a register of their “Registerable Controllers”. Government owned companies, financial institutions and companies traded on a stock exchange are exempt.
Their registrar’s office or the registered address will keep a new document known as the “Register of Controllers”. You can find more detail on it here

Registerable Controllers

The legislation is interesting in that it doesn’t say who IS a registerable controller; it defines who isn’t one.
If you (either as a person or a company) control a company indirectly through one or more controllers, you aren’t a controller. In that case, don’t have to appear on the register. In other words, for example:

  1. If you are company A and own or have a significant interest in company B and
  2. company B owns company C,
  3. then B would have to register with C as its controller and
  4. A would have to register with B as its controller.

Because 25% interest in the company or in its voting shares is the cut-off. A company could have up to four registered controllers, if they each controlled 25% of the voting shares.

More Information

This is just a brief summary of how the law works. There are more details for the immense variety of ownership and control structures that could exist, but the principal is always the same:

  1. If the company is already statutorily required to keep a record of its controllers somewhere, it isn’t required to maintain a second copy.
  2. If an individual or legal person controls a company indirectly through one or more companies, they need only be listed at the directly owned company(ies) subject to a above.

As always, the devil is in the details, which you can find here.

AEOI Forcing Moves from Offshore to Midshore

AEOI drives Putin offshore
AEOI and FATCA make it more and more difficult to shield one’s income in offshore havens. Today, many people are finding that the risks and inconvenience of banking offshore merely to save on taxes no longer make sense. For that reason, more and more individuals and companies are moving to midshore locations. Locations that have strong banks and banking sectors and favorable tax systems are termed “midshore’.

Midshore Locations

Midshore locations are relatively few. The best are Singapore, Hong Kong, The Netherlands, Ireland and Delaware. If you know how to take advantage of their tax systems, then your real taxes can be quite reasonable. In addition, business that move to a mid-shore jurisdiction start being taken seriously. The reality isk that no one trusts businesses from offshore jurisdictions; their purpose is known by everyone. But a business in a midshore location can have low taxes but enjoy the benefits of the reputation of the jurisdiction.

Everything Leads to Trump

Much of the world knows about the Christopher Steele dossier about the Russian Government’s kompromat bribes and promised bribes to Donald Trump and his rather motley crew. The dossier claims that Vladimir Putin promised to give Trump a 19% share in Rosneft when he kills the sanctions on Russia. Now, you may choose not to believe the dossier, and that’s understandable. However, it is indisputable that the deal was funded by only 300 million euros. And 19.5% of Rosneft is worth at least 10.2 billion euros.

When the new owners of the transaction are traced, it turns out to be a Cayman Islands company. To top that off, of the three owners of the Cayman Islands company, no one knows who the third party is. But the other owners are a Cayman Island company owned by a Cayman Island company.  When it came time to regularise the deal and present a respectable face to the world, they chose to form a Singapore company, QHG Shares Pte. Ltd. Clearly midshore companies make sense, even when buying a President.

Rosneft boss, Oligarch, former Putin aide and Tillerson friend, Igor Sechin revealed the deal on December 7, 2016, exactly one month after Donald Trump was elected. In the process, Putin pounded another nail in the coffin of the Cayman Island’s reputation. He gloated that the deal was a sign of international faith in Russia in spite of the sanctions.

He could have boasted that it was a cheap price to pay to buy the President of the United States. Dirty dealings. And that’s why no one respects offshore companies. And shady types love them.

AEOI Says Now’s the Time

AEOI kicks the comfortable in the rear and says “Wake up!” It’s time to get moving and stay ahead of malevolent bureaucrats who would do you harm. Contact us to get started on regularising your operations. We have a number of competitive, high-reputation midshore locations to choose from.

New Country. New Business. New Life. AEOI & FATCA Part II

Where not to do business:

By Sbw01f [GFDL ( or CC BY-SA 3.0 (], via Wikimedia Commons
Percentage of People living on $1.00/day or less

We ended the first part of this discussion of inequality. While extreme equality isn’t needed to make a country a good place to do business, extreme inequality is a significant barrier to doing business in a country. That doesn’t mean that it isn’t a good place to settle down, but it does mean that must either concentrate on making your money elsewhere or concentrate on a business serving those who control the wealth.

This is the same table we presented in Part I of this essay:

Country Tax Percent
of GDP
HDI Ease Of
Doing Business
Inequality* 2025 Population Growth** Economic Freedom*** 2015 Real GDP Growth
New Zealand 27.8 0.913 1 0.362 5.6 3 3.00%
Singapore 13.5 0.912 2 0.464 0.7 2 2.00%
Denmark 34.8 0.923 3 0.248 0.7 18 1.00%
Hong Kong 12.5 0.910 4 0.537 -1.2 1 2.40%
Korea 13.9 0.898 5 .0302 -0.2 23 0.50%
Norway 22.4 0.944 6 .0268 3.4 25 1.60%
U.K. 25.0 0.907 7 0.324 2.2 12 2.20%
U.S.A. 11.4 0.915 8 0.450 3.0 17 2.50%
Sweden 43.3 0.907 9 .0249 2.2 19 4.20%
Macedonia 16.4 0.747 10 .0436 -1.6 31 3.20%

* The data isn’t available from a single source so Wikipedia has used a combination of CIA, World Bank and UN data. You can use the links on the Wikipedia site to get to the original data.

** Based on UN constant fertility forecast for the period 2025-2030. I selected this period because almost all population rates of growth are declining and if you are going to have a business, it is important to have an idea of whether you are enterenting a market that growing, static or shrinking. For comparison, the least developed countries have a forecasted birth rate of 27.3 births per thousand and that rate is increasing.

*** This data is from the Heritage Foundation which is a conservative political group in the U.S. that views the U.S. as a socialist state. (!) That should be borne in mind when interpreting the results…at least for the U.S. In any case, most of these countries rank fairly well on the scale of economic freedom.

Population Growth

Throughout the developed and developing world, the rate of population growth is dropping. In much of Eastern and Northern Europe as well as some other countries, the population is declining. We have not yet developed an economic system able to cope well with declining population. If you plan on doing business, you are far better off doing business in a country that is both prosperous and experiencing a reasonable rate of population growth. I’ve selected a date a bit into the future as it is important to know what is coming in this case, not what has passed.

It would probably be optimal to live in a society of zero population growth where there was full employment for everyone who wanted it as they were engaged in improving the quality of life rather than simply producing more and more stuff. Of the countries in this table, those showing positive growth are all reasonable choices based on this one criterion. Barring a change in economic systems in the next ten years the ones showing negative population growth should be avoided.

Economic Freedom

The following components go into the makeup of the Heritage Foundation calculation.  Heritage is not an honest broker so its judgement as to what exactly comprises economic freedom is skewed towards the Burkean ideal rather than that of Voltaire. Furthermore, they have an incentive to make the U.S. look bad when Democrats or moderate Republicans are in office.  That is something to keep in mind.

Property Rights Government Integrity Judicial Effectiveness Trade Freedom
Government Spending Tax Burden Fiscal Health Investment Freedom
Business Freedom Labor Freedom Monetary Freedom Financial Freedom

Real GDP Growth

This is a number that is fairly difficult to tinker with over the short term, but, of course, countries such as China have regarded it as just another piece of propaganda for so long that it is difficult to know what the actual facts are in their GDP reports. Having said that, the countries in our top ten are fairly consistent in their reporting methodologies year-over-year so we can be fairly certain that these growth numbers are real, even if their absolute GDP numbers may not be.

For lack of space we did not list Human Freedom or Polical Risk on the list at the top.  They appear below.

Political Risk

This is not a measure of political freedom. One can make a case that increased democracy brings with it increased political risk. Of course, one can say the same for totalitarianism. For business purposes, one doesn’t care particularly whether a country is democratic or autocratic, the one thing it must be is stable. So lower political risk is a measure of stability, not a measure of freedom.

Human Freedom

This may be the most important of all freedoms but, as business is defined today, it isn’t considered a necessary component although it is hard to point to any countries that have had long term business success without a great deal of human freedom. For that reason, we are presenting the scores here. First is a list of all the many indicators that are used and then the scores. You can download the report here:

Healthcare System Efficiency

WHO measures the health systems of the world to determine the quality and equity of the system in three areas, health outcomes, responsiveness and fairness in financing. From these they calculate a composite index which is what we display here. Because a poorly performing healthcare system adversely affects a country in numerous ways. It is an important measure to look at on its own, as we do here.

Best Countries to Live In

U.S. News & World Report uses sixty-three criteria to determine which the best countries are to live and work in. Among the criteria used for Entrepreneurship, for example, are: Provides easy access to capital, Well-developed infrastructure, Transparent business practices, Educated population, Skilled labor force, Entrepreneurial, and Connected to the rest of the world. These are just a few of the many scorings used. This is clearly an important adjunct to making your final decision as to where to live and to have a business.

Human Freedom Index
2016 Political Risk
WHO Health System Ranking
U.S. News Best Country Index
1. Hong Kong 92 n/a n/a
3. New Zealand 87 14 41
5. Denmark 82 34 12
6. U.K. 81 18 3
13. Norway 81 11 10
15. Sweden 88 23 6
23. United States 85 37 7
35. Korea 81 58 23
40. Singapore 91 6 15
55. Macedonia n/a 89 n/a


How Not to Pay Taxes in the U.S. (Hint: Copy Amazon)

Amazon is one of the world’s biggest companies and it isn’t just a digital company – it does physical things in the real world. Amazon has a physical presence in thirty countries and a digital presence everywhere. It had US$136 billion in revenues in 2016, a stock market valuation of more than US$450 billion. But it has never made a profit! And it probably never will. Think about that.

Vampire Profits

How do you grow a great company? Reinvestment, of course. If you pay taxes, that is money that isn’t available to reinvest. How do you avoid paying business income tax? That’s easy: don’t have profits; think of profits as a vampire, sucking away at your wealth.
Now you may need to adjust your way of thinking here, after all, wasn’t it the profit motive that got you into business in the first place? Probably not. You probably got into business to feel a sense of achievement, have some control over your own destiny and to accumulate wealth. None of those involve profits. Because of business tax laws, in fact, profits reduce your ability to accomplish your goals. If you don’t have profits you can use the money that you would have paid in taxes to undercut your profit-making competitor’s prices and to expand your business.

But How do I Make Money?

If your goals are as outlined above, money, per se, is incidental. You can eventually convert wealth to money if that is what you or your heirs want, but the wealth you will pass to your heirs is your company.

You may draw a salary for living expenses on which you may or may not pay taxes depending on how you have arranged your tax domicile. Through appropriate tax domiciliation and aggressive but legal use of company expenses, you should be able to avoid all or nearly all taxes.

How Well Does This Work?

Amazon is probably the foremost practitioner of the zero-profit strategy. Jeff Bezos intentionally started the company in a garage and grew it to today’s gargantuan size. Intellect, luck, hard work, and cost-avoidance were his tools and can be yours, too. Avoiding making profit taxes has given the company tens or hundreds of billions of dollars to use elsewhere. Amazon has kept prices down, made award-winning movies, provided low-cost delivery, and spun off new businesses. Jeff Bezos is not starving nor is it necessary for him to engage in complex tax-avoidance practices for the company. Nick Hanauer, Bezos’ first outside investor is doing just fine as well, largely as a result of Amazon’s success.
Not even Amazon can avoid making a profit forever. For all fast-growing companies there comes a point where good ideas become scarcer, execution becomes slower and the income continues to rise. When you hit that point, you’ll start making profits. This is part of the self-reinforcing feedback mechanism that leads to concentration of wealth. If you get to this point, you are truly on the gravy train.

Can I Replicate This?

Every business is different, but generally speaking, the idea of reinvestment and keeping prices low to foster growth will work for almost any business. All you need to do is to build the discipline into your everyday thinking. Do that and the world will look like a very different place. Your opportunities are far greater than you ever imagined.

How do FATCA and AEOI Affect Me?

The short answer to this is that there is no change except that if you minimize your salary as we suggested above, you won’t have much to be concerned about. Report your modest taxes honestly to your tax domicile and the tax authorities will be, at most, a minor nuisance and your taxes a minor expense or none at all.

New Country. New Business. New Life. AEOI & FATCA Part I

Majestic Center Wellington, NZ. moderate taxes and good growth.
Majestic Center Wellington, NZ, Photo by Dabbelju
The best countries in the world have a compelling mix of taxes, lifestyle opportunities, and business support. Let’s take a look at the best of the best.

Generally speaking, all of us have the same core wants and needs. The Human Development Index (HDI) attempts to boil these needs & wants down to a single number to allow country-to-country comparisons. In our estimation, your quality of life should be paramount in your planning and the HDI helps you do that. However, if you are reading this, more than likely you are also interested in the best place to start a business. We’ve tried to provide you with the essential data for that, too. In this essay, then, I’ve attempted to provide you with the basic data you need to decide on where to work and to live.

The table below is gathered from a number of reliable sources (OECD, World Bank, etc.) and each statistic uses a consistent methodology for all the countries listed. I will discuss the first four columns in this post and the remaining four columns in the next one.

Presenting: The Data

Country Tax Percent
of GDP
HDI Ease Of
Doing Business
Inequality* Population Growth Economic Freedom** 2015 Real GDP Growth 2016 Political Risk
New Zealand 27.8 0.913 1 0.362 0.72 4 3.00% 87
Singapore 13.5 0.912 2 0.464 1.97 2 2.00% 91
Denmark 34.8 0.923 3 0.248 0.42 9 1.00% 82
Hong Kong 12.5 0.910 4 0.537 0.83 1 2.40% 92
Korea 13.9 0.898 5 .0302 0.48 34 0.50% 81
Norway 22.4 0.944 6 .0268 1.27 31 1.60% 88
U.K. 25.0 0.907 7 0.324 0.63 14 2.20% 81
U.S.A. 11.4 0.915 8 0.450 0.75 10 2.50% 85
Sweden 43.3 0.907 9 .0249 0.73 18 4.20% 88
Macedonia 16.4 0.747 10 .0436 0.16 43 3.20% n/a

* The data isn’t available from a single source so Wikipedia has used a combination of CIA, World Bank and UN data. You can use the links on the Wikipedia site to get to the original data.
** This data is from the Heritage Foundation which is a conservative political group in the U.S. that views the U.S. as a socialist state. (!) That should be borne in mind when interpreting the results…at least for the U.S. In any case, most of these countries rank fairly well on the scale of ecoomic freedom.


Taxes are a complex issue that actually makes it impossible to perfectly compare tax burdens across countries, but it isn’t for lack of trying. We can safely say is that these data can affect the way you think about your life and your business. Tax data is presented in what is probably the only reliable way. There are so many variables that you must consult a professional before finalising any decision. Still, these numbers are fairly representative of the actual state of taxes in a country vs. what the laws say. The lower the number, the better your personal tax situation is likely to be.

You will find some cases, such as the U.S, where the nominal taxes are far higher than the actual taxes collected. For example, claimed billionaire, Donald Trump, may not have paid income taxes on fifty million dollars of personal income a year quite legally. It is important that before making any significant financial decision you think about the tax implications. With a good tax accountant or attorney it may be possible to use the deal to avoid taxes not only on the deal, but on other income you make as well.

Human Development Index

This score is incredibly important if you are going to raise a family or to hire competent workers in the country. The HDI covers three important aspects of your life:

  • Can you expect a long and healthy life?
  • Education: How educated is the populace?
  • How likely are the folks around you to have a decent standard of living?

For education, of the countries on this list, New Zealand is second, Norway is third and the U.S. is fifth in the world for education. But it is the total package you should be concerned about and the HDI gives you that number.


Our core belief is in a universal taxation system in which everyone would pay taxes on their wealth and businesses would pay no taxes. Perhaps one day we’ll explain why this is so, but because that is unlikely to happen while our species is dominant. We’ll set that discussion aside for another time. In the real world, FATCA and AEOI are going to make tax avoidance for those wishing to live in a nice country, almost impossible. Almost. But if you are willing to live a peripatetic lifestyle, then you have the possibility of never living 183 or more days in a single location.

For non-Americans, that can make it possible to avoid personal income taxes completely. If you prefer to live a stable life in a decent country such as one of the ten listed here you will pay some income taxes. Your task is to find the country that best matches your criteria for a good place to live and do business while minimising your tax burden.

Ease of Doing business

How easy is it do deal with governments and banks? These are the criteria included in the index:

  • Dealing with construction permits
  • Getting electricity
  • Registering property
  • Getting credit
  • Protecting minority investors
  • Paying taxes
  • Trading across borders
  • Enforcing contracts
  • Resolving insolvency

Economic Inequality

More than a few people would yawn at the idea of economic inequality being a problem because they hope that they will be at the top of the heap looking down. We often think that way because our minds are utterly unable to comprehend the level of inequality in the world. I shall try to give you an idea, though:

Let’s say that you have one million dollars in the bank. We will assign your one million dollars the height of one pixel on a chart. Twenty-eight million dollars would make a line 28 pixels high. That’s just a bit more than a centimeter. So your line is 1/28th cm tall.  About 1/3 mm.
Bill Gates has been busily giving away his money for sixteen years now and has engaged in it exclusively for the past eight years, and yet his net worth is now 85.9 billion dollars. His line next to your pixel is going to be 89500 pixels tall. your wealth is 1/28th of a centimeter. In order to see his line fully, you will need a screen 32 meters tall. And most of the people in the world don’t have even the wealth that an atom would represent in that scheme. That is inequality.

Final Thoughts for Part I

By and large, it is consumption that drives the production pump. However, when there is gross inequality, money is unavailable for consumption and so producers don’t produce. For that reason you want your business to be in a country with a relatively low inequality (GINI) coefficient.

Start a business in a country that scores well on taxes, human development, the ease of doing business and economic equality and you are well on your way to living a long, prosperous and satisfying life.
There is no perfect country for starting a business, but these are some of the best by any objective measure. We can help you get up and running in several of these countries. Save time, money and aggravation. Connect with us.

Asset Management & Asset Protection – An Offshore Business Perspective

stack of Asset Management papers
photo by Niklas Bildhauer

Start an offshore or midshore business for Asset Protection through wise asset management. Start a business offshore and you’ve immediately diversified your risk. This is one of the easiest and least expensive steps to take. Go offshore to:

  • Prevent irresponsible government policy from hurting your business.
  • Shield yourself from currency manipulation.
  • Expand your market.
  • Safeguard your assets.
  • Grow your business.

The benefits are great. The cost is small.

Tax collectors and do-gooders say that offshore companies are started to evade taxes. However, in survey after survey, owners of offshore companies say that the ease of management as the biggest advantage. That is easy to understand. Consider the minimal reporting requirements of most offshore and midshore jurisdictions. Even when there are moderate taxes, businesspeople pay them willingly for access to vibrant economies.

Low Paperwork isn’t No Paperwork

Compared to most countries, midshore and offshore jurisdictions don’t require a lot of paperwork.
Don’t do the bare minimum of record-keeping and the government will come after you. Or worse. That is to say, corporations shield their stockholders from liability. If you don’t do the minimum amount of record-keeping, your corporation will lose that capability. So the first lesson of business is “don’t ignore the record-keeping.”

On the other hand, midshore locations usually have significant record-keeping requirements.Vibrant markets with low taxes attract businesspeople from around the world. If revenue generation as well as asset protection is your goal, then midshore locations should be given a good look.

Asset Protection, Offshore Style

There are two main reasons for considering managing assets through an offshore entity.

  1. To make the actual owner of the assets difficult to determine
  2. To raise the cost to anyone trying to attach your assets

Both offshore and midshore jurisdictions offer relatively good privacy except for criminals. Offshore jurisdictions normally do not keep a public record of officers or shareholders. If a jurisdiction publishes names of officers and/or shareholders, it is possible to use nominees. The cost for this is generally quite nominal given the benefit.

If someone learns the actual names, there are still more hurdles.

First, in most offshore and midshore locations, local law prevails. If the action that is being litigated is not illegal in the company’s domicile, litigation fails on its face.
Second, the cost of litigation can be very high because of geographic separation. Given the uncertainty of the outcome, the high cost will often stop lawsuits from being pursued.

If you want to start an offshore business you need the right organisation to help you. Almost everyone you encounter will either be very expensive but will provide you with extensive custom services or be very inexpensive and essentially leave you on your own. Hilda Loe Associates manages to be both inexpensive and to provide personalised services. Contact them here.

* I am promoting “hir” as a much needed contraction of “him or her” or “his and hers”.

Wealth, Capitalism & Survival in a Hyper-critical World

Mob attacks plutocrat’s house
Former McKinsey Senior Partner Eric Beinhocker and multi-billionaire Nick Hanauer appeared at the Aspen Institute to participate in a discussion of redefining capitalism. The definition of wealth is fundamental to their system. It is apt that two folks with their particular sets of credentials be the public face for this relatively new approach. Certainly, neither can be accused of being big-government socialists. And they are wealthy enough that they don’t have to be envious of anyone.

Automatic “Wealth” Generation

As Hanauer notes, he’s reasonably bright and works reasonably hard. He’s probably no brighter or harder working than you are, but he’s a billionaire and you aren’t. Why? Automatic, self-reinforcing feedback loops. Without them, Hanauer would have been a moderately successful heir and entrepreneur. But selecting the right parents and the right genes put him in the spot to be the first non-family investor in Amazon.

Hanauer didn’t do nothing, he made some astute decisions and worked reasonably hard, but he didn’t make decisions or do work that would be worth billions in a rational world.
You see, once the money was in Amazon, for the investors, it was just a self-reinforcing feedback loop. Each time you did nothing but let the money ride, it grew. And grew. And grew. The same for two of his other investments. Each was, for him, a self-reinforcing feedback loop.

Wealth is Accumulated Solutions

Wealth/Prosperity, Hanauer & Beinhocker say, is the accumulation of solutions for human problems. Whatever form of stuff you choose, none of it is wealth unless it solves your problems.
If you are in the middle of a desert with no water and a kilo of gold, gold won’t quench your thirst. Someone may show up with a canteen of water and be quite unwilling to part with it. Water will quench your thirst, but your gold won’t. Solutions are wealth, not stuff. Stuff can be a means for accumulating wealth, but it is not wealth.

Capitalism is Failing

Capitalism is the greatest tool for accumulating wealth that man has developed. However, it no longer works. Near-stagnant GDPs in advanced economies all over the world attest to that fact. Obviously, something is awry. Wealth is concentrating at the top. Productivity rewards go to the wealthy. Middle class real wages decline or remain stagnant. Much of the reason for that lies in the failure to understand why Capitalism is better than every other economic system we have tried.

Capitalism is an evolutionary, solution-finding system. The more we remove it from being an evolutionary, solution-finding system, the more poorly it will function. An ethos has developed over the years, that explicitly tries to quench its essential trait. Capitalism, we are told, is a system for generating stuff; the more, the better. As we all know, GDP measures the creation of stuff, not the accumulation of solutions. But measuring GDP leads to perverse outcomes.

Short Termism

By the 1980’s the static economic models used for theoretical illustrations had become cant and affected both government regulation and corporate thinking. Prior to that time the goal of the CEO was a satisfied customer and a satisfied shareholder was a hoped-for byproduct. Starting in the 1980’s the phrase “shareholder value” became inescapable. By 1987 when T. Boone Pickens wrote his Eponymous Memoir, “Boone”, shareholder value, was the siren call for corporate raiders.

Regulations were written the ensured executive compensation would be calculated on share prices, not profits or sales. Accordingly, average CEO compensation rose from 30 times that of the average employee to 500 times…. a relative growth of over 1,500 percent. Executive wages became a large piece of the concentrated “wealth”. This over-concentration of pseudo-wealth has pushed the world into a hyper-critical state. It is the nature of hyper-critical states that very small events can cause a dramatic change in state. The pitchforks and torches may be outside your door tonight.

Growing Real Wealth

If you accept that real wealth is solutions to problems, then you see the world as a very different place:

  • Economic growth is the rate at which problems are solved/
  • Maximising the number of people solving problems will maximise growth and wealth.
  • Therefore, maximising the opportunities to be a problem solver will maximise wealth.

The reader might comment “Governments just get in the way.” But that would be wrong. Although Democratic Capitalism is the greatest tool we’ve ever developed for wealth generation, it has a number of problems:

  • It doesn’t define long-term problems well.
  • Capitalism is biased toward the first, not the optimal solution.
  • It may hamper or destroy good solutions while in the process of providing a bad solution.

The Role of Government

These failures are best resolved by a democratic government that provides the necessary regulation to correct each of these problems. It should not, however abet rent-seeking through predatory licensing (e.g. licensing of hairdressers, cabinetmakers, etc.). Neither should it use any other of the many tools that government has at its disposal to put its thumb on the scale. Regulations are not intrinsically bad or good; their manner of application and results are determinative. Their goal is to help people solve more problems than they create.

The second major role of government is to maximise the number of problem solvers in society. Among other things, this means ensuring that everyone starts their economic life with the best possible equipment to solve problems. Genetics and luck will always determine that outcomes will be different, but in a well functioning society, we can expect wealth distribution to fall on a normal curve.

The very best way you can protect your assets is to live and work in a society that practices this sort of capitalism. As a matter of self-protection and self-satisfaction, you should encourage your government to organise itself to maximise the number of people solving problems.

In the short term, you may want to seriously consider diversifying where you keep your assets. We can help you do that. Contact us now.

AEOI, FATCA and the Death of Offshore Island Tax Havens

Singapore beats tax havens
Three of the world’s strongest banks.
If you don’t care about access to your money then this essay is not for you. If you don’t mind if businesses look askance at your BVI or Seychelles tax haven company or account, this essay isn’t for you.

Tax Havens are Offshore Zombies

Face reality. The OECD giants are awake and are not going back to sleep. There’s no getting around it, you can be sure that they will recover “their” money stashed in island tax havens. The world changes and you need to change with it. Sure, island tax havens are still in business, but no matter how much they resist, their days are numbered. Even moreso, if you have a company or bank account there, you can find your life change without warning. Clearly, zombie hunters are after the island tax havens.

All is Not Lost

Thank goodness, you can still achieve most of what you want and open new options for yourself. Open your mind. Expand your vision. The press is well behind the curve on this. You can be sure that they do not write stories that convey today’s reality. There is no getting around it, onshore and midshore should be your bywords now. If you go where taxes are few and low and structure your business to take advantage of the rules, you’ll be better off than you are today.

Dangerous Banking in Tax Havens

When is the last time you thoroughly checked out your bank in terms of liquidity, solvency and sovereign risk? Odds are, if you are banking in an island tax haven, you haven’t thought about it much or at all. If others bank there, it must be okay, right? Unfortunately for you, that is now an ancient truth that is no longer viable. Most banks in island tax havens have no oversight worth the name. Furthermore, if they publish their financials, they aren’t worth the paper they are written on. If you have an account there, when things get rough you may be the last person who hasn’t moved his funds to another country. Think about that.

Safe Banking

The thing about sovereign risk is that countries seem safe until suddenly they aren’t. Change, when it comes, is often alarmingly fast and confusing. Russia now threatens the Baltic countries, Ukraine and Georgia. In fact, as I write this, Russian soldiers are posting selfies from inside Ukraine. Russia is waging a cyber war on the Baltic countries. And to cap it off, Georgia is still reeling from its dismemberment by Russia. Visit four of the five countries and things seem just fine. But if you bank or live there you could lose everything overnight.

If you don’t look at their books, the same is true of banks. When times are good, all banks seem equal. Collapse the economy and everything is revealed. If you put your money in an unsound bank, you are going to look pretty silly when your bank goes under.

Practice safe banking:

  • Eliminate all politically risky jurisdictions.
  • Eliminate the jurisdictions with high real tax rates.
  • Find the most liquid and solvent banks in several of the remaining jurisdictions.
  • Test them to see which are friendly to you and your money.
  • Test them to see how quickly you can move your money out of the country.
  • Choose two or three banks from the resulting shortlist and analyse more closely.
  • Finally, open an account with the one that makes you most comfortable.

The Great Equalizers

AEOI and FATCA have essentially flattened the playing field for banks. Jurisdictions that once thrived because of their lax laws and supervision now report their depositor’s information just like everyone else. Take the anonymity away and compare the sovereign and bank risk with the modest tax savings you may or may not get. It is clear, onshore banking is preferable.

If you need to rethink your banking arrangements, contact us