Launderers usually move their activities to jurisdictions where there are weak anti-money-laundering measures in place. Favorite spots are the financial services havens and offshore centers.

What are referred to as “offshore banks” can be located anywhere in the world and refer to banks that accept deposits only from non-residents. The general public often thinks of the Caribbean when hearing the term “offshore” but there are numerous offshore banks around the world.

As of 2007, offshore banking centers harbored over $5 trillion in assets – $1 trillion in bank deposits and $4 trillion in the form of stock, bonds, real estate and commodities.

The largest offshore centers are, in order, London, New York, Tokyo and Hong Kong, and the Cayman Islands. The Cayman Islands has roughly 600 licensed banks, with deposits of over $500 billion.

During the last two decades, many countries with few prospects and limited natural resources have succeeded in the growing their economies and developing their financial strength by becoming tax havens and offshore banking centers.

These countries offer low tax rates that are attractive to investors, company owners and ordinary citizens anxious to reduce their tax burdens. Used by many legitimate business, they are also highly sought after by the world�s tax evaders, since these havens also offer structures –which are only for non-residents and only for use offshore– designed to defeat the tax laws of other countries.

Bank Secrecy

As a general rule, tax havens offer strict financial secrecy, which critics say shield foreign investors from investigations and prosecutions from their home countries, but defenders note protect privacy in an international context of decreasing respect and protection of private information. Interestingly, the countries which complain the most about other countries banking secrecy laws are precisely the jurisdictions which the highest rates of identity theft.

Money-laundering does not need an environment of bank secrecy and perpetrators usually actively avoid it precisely because of the increased scrutiny which operations from these jurisdictions arouses.

Corporations and Shell Companies

Money launderers of typical sophistication will set up a bank account in a financial haven as a corporation. Individuals with a numbered account are largely a thing of the past although they still do exist. The �legitimacy� of the corporation�s activity will then be created through the establishment of some kind of history of actual activity.

It should be recalled that many of the world�s top multinational companies use these same havens, advised by the top accounting and consulting firms, to legally channel their profit centers to low tax jurisdictions.

Many of these special tax havens have the legal requirement that the registrant company may no do business locally. Other jurisdictions do not require corporate books or records, which can be useful for concealing the origin and destination of goods in international commerce, and is at least highly useful for reducing accountancy and fiduciary fees.

Often such companies are capitalized with bearer shares, which does not record a company owner: the person who physically possesses the share certificates owns the company.

Permalink | Leave your comment