Saturday, 27 April 2013

How to Open a New Franchise in Dubai

Franchising is a legitimate business method that involves the licensing of trademarks and methods of doing business, or an exclusive right, for example to sell branded merchandise.

Franchising (from the French for honesty or freedom) is a method of doing business wherein a "franchisor" authorizes proven methods of doing business to a "franchisee" for a fee and a percentage of sales or profits. In the future the Dubai economy will more likely be filled by innovative and creative franchises which seek to capitalize on their market lead and intellectual property advantage. Franchises fill a market need and therefore, are the fastest growing way of doing business. Dubai franchise market has witnessed supremacy of few big retail conglomerates having multi brands in their portfolio and pre-dominantly the Master Franchisee arrangements but now the trend for small franchisees and sub-franchising is picking up. Dubai has a pro-business environment , whose investor-friendly policies attest to if one considers its infrastructure, corporate taxes, transfer of profits to home countries, entity ownership and availability of large pool of human resources. Businesses located in the multiple free zones enjoy tax exemption. The franchise sector in Dubai gets generous support from the government. The state is promoting the franchise sector to induce growth and development of the small and medium size businesses. Government backed Mohammed Bin Rashid Establishment for Young Business Leaders provides business training to entrepreneurs and also encourages women entrepreneurs. Further, the government established the UAE Franchise Association in 2004. The Dubai Islamic Bank (DIB) has a program for aid of young UAE citizens under which it extends to them for buying franchise business. Setting up this project need the following;

·         Business plan business, plan that includes your business overview, competitor review, market trend in the particular service, your core competency, your financial projections, marketing and distribution plans and your funding alternatives.


·         Franchise Arrangement, an arrangement whereby as a franchisor you license the franchisee, in exchange for a fee, to exploit the system developed by you if acting in the capacity of a franchisor. Generally a package including the intellectual property rights, trade mark logos, patents or designs, trade-secrets and Copy-righted protect your IP assets by Offshore Company and register in UAE Ministry of economic. Register your franchise agreement before a UAE court. You need a reputable Firm to complete this project.

Dubai remains the preferred base for franchised operations in the region, given its tax status, the comparative stability of its legal and regulatory systems and it openness to foreign investment, though Most countries in the Middle East region do not have franchise- specific legislation

The franchisee market is dominated by a small number of players who take multiple Brands franchise known as Franchise Conglomerates ,with some having as many as 50-55 brands in their portfolio. Middle East's strategic location has a key role in expanding any business around the world. Franchisors seeking new markets favor the Middle East as a franchising destination as it assures easy accessibility and communication with the surrounding areas.

The most moderate estimate of the franchise industry in the Middle East and North Africa put it at $ 30 billion today. It also puts the annual growth of Middle East franchising sector at 27 per cent.

This frantic pace provides huge opportunities for franchisors to bring their brands to the region, as this trend is set to continue for years to come, powered by massive consumption appetite, economic growth and record oil prices. In the last decade many Middle Eastern businesses proved to be very successful in the rest of the world with their efficient style, cost management and competitive distinguished products, especially in the retail, food and catering sectors.

Successful franchises in Dubai. There are many successful franchises in Dubai of which prominent examples include:

 Heritage for Henna - Beauty Franchise

Heritage for Henna started in Jumeirah Beach Hotel, Dubai. It was a huge success with foreign visitors and confirmed its owner’s belief that henna decoration has a massive market outside of this region.

To maintain quality, Heritage for Henna sets up its own farms in carefully selected regions, where top quality henna shrubs are cultivated. In addition, considerable investment is made to select and train the most talented henna artists. Heritage for Henna provides a wide variety of drawings with traditional, classical, contemporary and modern designs. Unlike other projects that required large space and high rent, setting up a henna salon required only the minimum of 4 square meters.

Heritage for Henna provides its franchise partners with a full range of support services that will enable them to manage their projects with a high level of efficiency and profitability.

Furthermore, it offers assistance with the location selection, rental negotiations and installation of decor. At the same time, staff will be selected and trained to ensure that they meet "Heritage for Henna's" high creative and professional standards.

Foot Solutions Health & Wellness Franchise

- This franchise provides foot care solutions and use high-tech computer foot scanning equipment to produce a complete line of custom shoe inserts and orthotics.

 Malridge Master Distributor - Photographic Engraving Franchise

- Malridge has developed a unique process for the customized engraving of photographs and graphics on glass surface, while, producing the highest finish and definition. They do photo engraving and personalized engraving on all types of glassware, from crystal awards and trophies to tableware.

Apart from the regulars like McDonalds, Burger King and KFC, the 3 biggest growing franchise brands internationally, there are many new casual dining, fast food franchising ventures which seem to be showing interest in the Dubai market.

Egypt's Integrated Food Franchising is promoting its Pizza Conez product, a revolutionary new take on take away. The product is a pizza cone similar to an ice cream cone and it takes five minutes to prepare. The unique selling proposition of this product is that it is portable and has mobility. The fast food products from the US, for example, Pizza Hut and Dominoes have entered the Dubai market but Pizza Conez brand is about authentic Italian ingredients.

London Dairy

- Is another food brand looking to increase its presence in the market. London Dairy is a complete Dessert Destination that offers the entire exclusive range of London Dairy Premium Ice Creams, dessert sundaes, pastries, cakes and single origin coffee.


- Subway franchise business is pushing the fast food market to continue the globalization of its company, and there are no plans on stopping in Dubai, with multiple stores opening in Kuwait, Saudi Arabia, and Qatar.

There are 60 franchises already present throughout Dubai, and this means tough competition for prospective franchisees in Dubai. Emerging markets are increasingly more important as opportunities for retail franchising in the West diminish because of market saturation and increased competition. Industries in which franchising is mature, offer fewer profits. For example, fast food, retailing, hotels and other service based industries. Emerging markets are unsaturated, poised for growth and there is increased demand for products and services that embody international standards and quality.

There are thousands of different business franchises, and there will be more than one and perhaps many in your chosen business area. Once you have made the decision to buy a franchise business it is difficult to turn back. A wrong decision takes a few seconds to make, and for some, a lifetime to put right. So do your research. Look at the alternatives. Ask existing franchisees. Ask customers. Ask bank managers. Read the franchise trade magazines, newspapers, websites. Attend franchising exhibitions. Seek the advice and opinions of friends or Business Consultant. Do some local market research to gauge demand for the products and services, to test the reputation of the franchising companies, and to test their claims about pricing and any other relevant business claims or information you've been given. Become an expert before you sign the papers - don't wait to learn about the 'unknowns' after signing the contract and parting with your cash.

These days information is easy to find - don't be shy - look for it - ask and satisfy all of your concerns before you make your decision.

Winston Wambua

International Offshore Specialist
For more information please contact me on
Mobile +971553350517

Skype: Winston.Wambua

Thursday, 25 April 2013

Cayman Creates Incorporated Cell Companies

A framework for incorporated cell companies in the insurance sector was created in the Cayman Islands on 25 March, when the Legislative Assembly passed an amendment to allow the registration of portfolio insurance companies, or PICs, within segregated portfolio company insurers (SPCs).

PICs offer four main advantages over existing SPCs, which also are offered in the Cayman Islands, said the Minister for Financial Services, the Hon. Rolston Anglin, who presented the Insurance (Amendment) Bill 2013 to the Legislative Assembly.

1. A PIC is a separate legal entity, whereas a segregated portfolio of an SPC is not. This means the PIC may have greater ease in dealing with counterparties than a segregated portfolio of an SPC.

2. Unlike a segregated portfolio of an SPC, a PIC can contract with another cell of its controlling SPC, or with the SPC itself.

3. Because each PIC is a separate legal entity, there should be less risk of inadvertent comingling of assets.

4. A single PIC can be wound up without affecting its controlling SPC or other PICs; this is not possible within an SPC structure.

Minister Anglin said that PICs compete with incorporated cell companies (ICCs) that are offered in other captive domiciles, and with structures such as the Delaware Series LLC. The PIC model is also more efficient and cost-effective than introducing standalone ICC legislation. And since PICs were created through an amendment to the Insurance Law, 2010, Cayman has positioned this vehicle to operate within fundamental and well-understood principles of corporate law, and to meet international standards.

‘PICs do not involve the highly creative and untested jurisprudence involved in an ICC’, Minister Anglin said. ‘Furthermore, because they will take on the form of an exempted company they will be subject to the same legal requirements as any exempted company’. The Bill also creates new class of insurer known as Class B(iv).

Minister Anglin thanked the Cayman Islands Monetary Authority, which regulates the country’s financial services industry; and the joint public-private sector Financial Services Legislative Committee, for their work on drafting the amendment. Cayman Islands Government Press Release 26 March 2013, George Town, Grand Cayman.

Winston Wambua

International Offshore Specialist
For more information please contact me on
Mobile +971553350517

Skype: Winston.Wambua

Saturday, 20 April 2013

Tax Free Offshore Banking Havens: Hidden Agenda behind Operation “Offshore Leaks”?

From the beginning of April this year, the subject of «Offshore leaks» has become a favourite with the world’s media. Even the issue of Cyprus has paled in significance. Loosely speaking, «Offshore leaks» can be defined as the leakage of sensitive information about offshore companies and their clients.

Offshore leaks is a planned operation

We are talking about a planned operation on a global scale. On 4 April, the leading media companies of a variety of countries almost simultaneously issued a sensational news story claiming that an organisation called the International Consortium of Investigative Journalists (ICIJ) has a rich database on offshore companies and their clients. The overall volume of files at ICIJ’s disposal exceeds 260 gigabytes… That is 160 times more information than the embassy reports made public by Wikileaks in 2010… The ICIJ files consist of more than 2.5 million documents: the registration data of 122,000 offshore companies in the British Virgin Islands; lists of people who have made use of offshore companies; copies of personal documents including passports; correspondence; and information on banking transactions and other databases related to world-class politicians and businessmen, major companies and banks. The documents have a variety of dates, the very earliest of which came into existence 30 years ago. The names of 130,000 people from 170 countriesare also mentioned in the documents.

The first phase of the operation involved an anonymous person collecting raw data on offshore companies. We do not know how long they collected the information for or which methods were used to obtain the information. It is possible that the ICIJ and individual journalists know the answers to these questions, but they are keeping silent. They give one answer: we cannot jeopardise our informant. It should be noted, however, that it would have been practically impossible for a single person to have obtained such a large amount of information. Incidentally, the idea that it was a lone person has already appeared in the press. It is exactly the same wild assumption as the idea that 11 September 2001 was the work of a group of terrorists under the command of Bin Laden.

The second phase began in January 2012, when the database on offshore companies was anonymously passed on to the organisation ICIJ. It was a huge array of weakly-structured and weakly-organised information. In fact, the ICIJ then had to set about reorganising this half-finished information. At this stage, the ICIJ used the media capabilities of a number of countries, as well as their own journalists. The bulk of the work was carried out in the field. It turns out that the project’s most prominent external participants were the British Broadcasting Corporation and the British newspaper The Guardian. During the course of the work, journalists involved in the project added new information to the data obtained from the anonymous source. Programmers and IT specialists from the US, Great Britain and Costa Rica were also involved. At this stage, the operation was given the official name: «Secrecy For Sale: Inside The Global Offshore Money Maze». At this point, the work was not only not hidden, it was even advertised in the media. At the end of 2012, a tiny fragment from the database on offshore companies (DOC) was published which related to a dozen offshore companies and their management structures. It was an all-powerful delayed-action mine.

The third stage began early in April 2013. Separate fragments of the database were made public through the media of a variety of countries. In each country, there were several «authorised» media companies that were selected. In Russia, for example, the «authorised» media companies were Vedomosti and Novaya Gazeta. It is remarkable that as the organisation holding the DOC, the ICIJ prohibited those national media companies that had use of the DOC from passing on any of the database’s documents to law-enforcement agencies or other authoritative bodies in their own countries. Apparently, there is a risk that their informants could be exposed. There has already been a report that the German media refused to provide information on local tax evaders mentioned in the documents released at the beginning of April to the appropriate authorities of the Federal Republic of Germany.

The third stage, involving the measured release of information from the DOC, could last for many years. However, the first sections of this «explosive information» could already lead to a revolutionary upheaval of the current world order.

Offshore leaks: goals, aims and motives

Many people are asking a simple question: what are the operation’s goals? There is the official goal referred to by the ICIJ, of course. This is the battle with offshore companies that have become a «black hole» in the economy, an insurmountable obstacle to social and economic development. It is difficult to dispute the fact that the process of the «offshoreisation» of the global economy has gone too far. The most recent valuations of the assets hidden in the shadows of offshore companies are between 21 and 32 trillion dollars (almost double the global GDP). Measured on a global scale, annual losses to state budgets alone as a result of offshore company clients avoiding taxes amount to hundreds of billions of dollars. As of 2011, losses to the US budget from the non-payment of taxes are estimated at 345 billion dollars, including 100 billion dollars as a result of tax evaders using offshore companies. In the European Union, losses are reaching 1 trillion euros through the use of tax optimisation schemes and a flagrant refusal to pay taxes. It is not known how much of this can be put down to the use of offshore companies, however.  On the basis of America’s percentage ratio, we get 290 billion euros, or at least 350 billion dollars. Altogether, annual tax losses to the EU and the US as a result of offshore «loopholes» amount to nearly 450 billion dollars.

Many believe that the battle with offshore companies is just an excuse to cover up other aims. An overview of the world’s media shows that in many of the reports, the main targets are not the offshore companies as such, but individual oligarchs, politicians and government officials. Individual countries are also cited as «targets». World-renowned banks, transnational corporations and financial groups are also sometimes cited.

One theory behind the operation’s true motives is that it is specifically aimed at dealing a blow to certain offshore companies in order to outrun the money and clients in a small group of «select» and «untouchable» offshore companies. Note that almost all of the documents in the DOC relate to an offshore territory called the British Virgin Islands (BVI). Owing to a high level of confidentiality regarding information on company owners, this area is one of the most reliable and popular offshore territories. Since 1984, when the British overseas territory declared itself a «tax haven», the islands have sold more than one million companies, the true owners of which have never been revealed. As well as the BVI, other offshore territories are mentioned in the ICIJ press release, including Singapore, Hong Kong and the Cook Islands. However, it should be emphasised that they are mentioned only insofar as they serve as «offshoots» of the British Virgin Islands.

There are also other theories behind the operation’s true goals: not to «blitz» a particular offshore company, but to stabilise the global economy as a whole, to cause a political crisis in certain countries and, ultimately, to move the world into a state of controlled chaos. Moreover, the operation «Offshore leaks» is not regarded as self-contained, but as part of a much larger, global plan. In which case, operation «Offshore leaks» is a logical continuation of the operation to undermine the banking system of the offshore island of Cyprus.

Of course, one can only judge the aims of operation «Offshore leaks» hypothetically. The most important organisation involved in the project, ICIJ, itself raises a number of questions. There is little information about it. All that is known is that it was established in 1997, its headquarters are situated in Washington and it includes nearly 160 journalists from 60 countries (88 journalists from 46 countries were involved in operation «Offshore leaks»).ICIJ was created as a project of the large non-profit organisation Center for Public Integrity (CPI). The Knight Foundation and the Ford Foundation act as sponsors of CPI. All of this inclines one to think that the operation really does have global aims.

The central characters of «Offshore leaks»

In the first batch of materials published in the media, we see all kinds of people. They are able to appear in the documents under a variety of titles: beneficiary, shareholder, proprietor, owner, recipient of «trust services», director, owner, co-owner, principal etc. They are all nevertheless united by the fact that they are «tax evaders». The list includes the names of politicians and government officials, businessmen and speculators, members of wealthy families and bankers from a variety of countries – the USA, Great Britain, France, Canada and Germany to Russia, the Ukraine, Mongolia, Azerbaijan, Venezuela, Iran, Indonesia, India and the Philippines. The Guardian points out that according to the documentation, the largest number of offshore company owners are located in China, Hong Kong, Taiwan, the Russian Federation and former Soviet republics. The list also includes the names of 4,000 US citizens.

In connection with the offshore scandal, a number of people have had their cover blown in the press, including: the campaign treasurer for French President François Hollande, Jean-Jacques Augier; Mongolia’s former Finance minister, Bayartsogt Sangajav; Venezuela Army General José Eliécer Pinto Gutiérrez; two sons of former Colombian president Álvaro Uribe, Tomás and Geronimo; the daughter of former Philippine president Ferdinand Marcos, Maria Imelda Marcos Manotoc; the Sheikh of Kuwait Sabah Jaber al-Ali al-Sabah; a leading art collector, Spanish Baroness Carmen Thyssen-Bornemisza; the former wife of oil trader Marc Rich, Denise Rich; and British millionaire Scot Young, who has been convicted of fraud. The media also mentioned Azerbaijan President Ilham Aliyev along with members of his family, Georgian Prime Minister Bidzina Ivanishvili, Kazakh businessman Mukhtar Ablyazov, and co-owner of the company RosUkrEnergo, Ukrainian businessman Dmitry Firtash.

As well as offshore companies and individuals, the documents also mentioned various intermediaries who act like a kind of «pilot» for individuals and companies who find themselves in the intricate maze of tax havens. The different intermediaries include legal firms, trust funds, banks, «construction» companies and so on. The intermediaries sometimes act as beneficiaries, but only interim ones. These interim beneficiaries sometimes form complex chains in order to safely keep the real owner, the ultimate beneficiary, a secret. As for the role of banks in offshore schemes, the German banking giant Deutsche Bank, the American company JP Morgan and the Swiss companies UBS and Clariden are the most active, according to ICIJ.

Several days have passed since the first volley of gunfire from «Offshore leaks». Government and political figures in a number of countries have had time to respond. The internal revenue services and law-enforcement agencies in Germany, Great Britain, Belgium, India and Greece have declared that they will be looking into the issue of checking the published facts that relate to their own citizens. Luxembourg’s finance minister, meanwhile, has declared that he is ready to cooperate with other EU countries regarding the exchange of information on banks’ clients who are avoiding paying taxes. This means that the main country for offshore banking in continental Europe has made it clear it is ready, on the heels of Switzerland, to begin dismantling its institution of banking secrecy. The Austrian government is the only one that has decided to go against the flow. It has appeased the clients of Austrian banks by announcing that it does not intend to hand them over to the tax authorities of other countries.

Winston Wambua

International Offshore Specialist
For more information please contact me on
Mobile +971553350517

Skype: Winston.Wambua

Sunday, 14 April 2013

History of Swiss Bank Accounts

For more than 300 years, Swiss bankers have had a code of secrecy concerning banking and their account holders. It began with the kings of France who required strict secrecy, had high financial needs and had the ability to always pay back their loans. Legislation regarding banking secrecy also dates back to this period. The Great Council of Geneva, in 1713, established regulations that necessary bankers to keep registers of their clients but prohibited them from sharing the information with anyone except the client-unless the City Council agreed with the need to divulge information, as lee Ann claims posted.

This began Switzerland's long reputation as a safe haven for funds for noblemen fleeing the Revolution and others seeking financial asylum. Bank secrecy was regulated solely by civil law, enabling clients to lodge complaints for damages against any bank that didn't maintain confidentiality. However, no criminal charges could be placed so there was no threat of imprisonment for the banker who divulged information.

Until the turn of the century, provisions of the Swiss civil code and labor code provided a legal framework that supported bank secrecy. In order to survive twentieth-century financial upheavals such as the stock market crash of 1929 and subsequent depression, achieving legal recognition for bank secrecy was the only way the Swiss government could maintain its beliefs and refusal to interfere in the private affairs of its citizens. Switzerland's Banking Act of 1934 accomplished this goal. The law was enacted in large part because both Germany and France attempted to press Swiss banks into divulging depositor information in the name of the "good of the state." This federal law clearly stated that bank secrecy fell within the criminal domain, meaning any banker who divulged bank client information was punishable by imprisonment.

One issue of the time that reinforced the passage of this law came during the era of Hitler when a German law stated that any German with foreign capital was to be punished by death. Swiss banks were watched closely by the German Gestapo. It was after Germans began being put to death for holding Swiss accounts that the Swiss government was even more convinced of the need for bank secrecy.

In 1984, the people of Switzerland once again voted in favor of maintaining bank secrecy -- by a whopping 73 percent.

Nazi Gold

Many European Jews deposited their life savings in Swiss banks when WWII broke out during the 1930s and 1940s. And, after the war many were not allowed to recover their assets because their documentation was gone.
Swiss banks have come under fire in recent years because of their actions towards Jewish account holders after World War II and also because money that German Nazis plundered from defeated countries and their prisoners was held in Swiss banks. Christoph Meili, a former bank security guard, exposed the bank he worked for, saying that they destroyed records of people murdered in the Holocaust so that their money would not be returned to their heirs.

Gold ingots from Sveriges Riksbank.

Courtesy of Frederik/Jurema Oliveira

According to a report by Stuart Eizenstat on Nazi theft of Jewish assets, during WWII "between January 1939 and June 30, 1945, Germany transferred gold worth around $400 million ($3.9 billion in today's values) to the Swiss National Bank in Bern." It is believed that much of this gold was stolen from Jews and sent to Switzerland to be melted down and used to finance the war. According to Eizenstat, "Although there is no evidence that Switzerland or other neutral countries knowingly accepted victim gold ... at least a small portion of the gold that entered Switzerland and Italy included non-monetary gold from individual citizens in occupied countries and from concentration camp victims or others killed before they even reached the camps." This gold was deliberately mixed with other gold when re-smelted. It's assumed that the Swiss feared possible invasion from neighboring Germany.
After the war, to ensure that there could be no Nazi return to power, the Allies held or disposed of German external assets to prevent their return to German ownership or control. A plan was also made to take care of Nazi victims who needed aid. The Paris Agreement of 1946 provided that non-monetary gold recovered by the Allies in Germany and an additional $25 million from the proceeds of liquidating German assets in neutral countries would be transferred to the Intergovernmental Committee on Refugees.

The 1946 Allied-Swiss Washington Accord was held by the United States, United Kingdom and France. Switzerland was invited to discuss issues as a result of the Paris agreement. Under the Washington Agreement, Swiss negotiators agreed to transfer approximately 250 million Swiss francs ($58.1 million) of gold into the Tripartite Gold Commission's (TGC) monetary gold pool. In return, according to Eizenstat, the United States, United Kingdom and French governments agreed to "waive in their name and of their banks of issue all claims against the government of Switzerland and the Swiss National Bank in connection with gold acquired from Germany by Switzerland."

Recognized claims against the monetary gold pool greatly exceeded the amount of monetary gold actually recovered. So the TGC established a proportional redistribution system which established that each country would receive approximately 65 percent of its recognized claim.

The problem of dormant accounts and heirless assets was not directly addressed in the Washington Agreement. The head of the Swiss delegation did state, however, that his Government would "examine sympathetically" possibilities for making available for "relief and rehabilitation" proceeds of property found in Switzerland which belonged to (Nazi) victims . . . who have died without heirs." Although no action was taken until 1962 when a Swiss Federal Decree required banks, law offices, trustees and others to comb through records to discover dormant accounts belonging to foreign or stateless persons who were deemed victims of racist, religious or political persecution. As a result, a total of nearly 9.5 million Swiss francs (an approximate 1962 value of $2.4 million) was reported and about three-fourths was transferred to the rightful heirs. Of the remaining heirless assets, two-thirds were given to the Swiss Federation of Jewish communities and one-third to the Swiss Central Agency for Refugee Assistance.

The current investigation by the Swiss Bankers Association, begun in 1995, is the most recent attempt to find remaining dormant accounts and heirless assets. The investigations turned up approximately $32 million in 775 additional dormant accounts opened prior to 1945, though not all were of European origin.

An ad hoc task force known as the Historical Commission was established by the Swiss to determine what happened to assets transferred to Switzerland as a result of the Nazi regime. During this study, bank secrecy laws will be waived for a period of five years so the Commission can conduct a thorough study. The Swiss have indicated a three-to-five-year time frame for this study with the release of interim reports that will be submitted to Parliament. This will help resolve whether dormant accounts were used to satisfy Swiss business claims against central and eastern European countries which nationalized that property during the Communist era.

Winston Wambua

International Offshore Specialist
For more information please contact me on
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Skype: Winston.Wambua

10 Best Countries for Offshore Banking/Our handy guide to the offshore banks that are right for you

This is a list of the best offshore banks that I have used in 2012. Post by Streber January 18, 2013

The word "used" refers to myself having an account, card or other services with the bank, or a bank which any of the companies I deal with as a director or consultant uses.
There will be no Caribbean banks here. This does not mean that banks in Belize, Dominica, Bahamas, St. Vincent, and so on are not good. It simply means I do not yet have enough experience with any of them.

Anyway, without further ado, here are the best offshore banks of 2012, in no particular order.

Bank: Jyske Bank
Jurisdiction: Gibraltar

Time with bank: 3 years

Purpose: Company bank account for Gibraltar company

Jyske Bank stands out in terms of service and competitive fees. Their Netbank (online banking) has never been down, and I have never had a card purchase declined due to problems with the bank. They have competitive interest rates, and they have helped set up a very good low- to medium-risk investment portfolio for the company's savings. For those interested in opening an account, Jyske Bank requires all the usual documents (notarized passport and company documents) and an opening deposit of 150,000 EUR. Being in the Single Euro Payments Area (SEPA) region helps for cheap and quick transfers across Europe.

Bank: HSBC       

Jurisdiction: Hong Kong

Time with bank: 2 years

Purpose: Company bank account for Seychelles IBC

Very easy-going bank with excellent telephone support. Account opening and maintenance are a breeze. A low minimum balance makes this bank a good fit for my small Seychelles-based company. For accounts held by non-resident companies, they issue only UnionPay ATM cards (accepted in over 100 countries), which is usually not a problem, unless a company credit card, such as Visa, MasterCard, or Amex, is required. Their internet banking has not been down a single time outside of maintenance.
Minimum balance varies depending on account type but for smaller companies, an Integrated Account is enough with a minimum of 25,000 HKD being required. If you fall below that, they charge a rather humble 50 HKD per month. Multi-currency by default. For company accounts, a director must visit the bank in purpose. For personal accounts, you must visit the bank.

Bank: Hang Seng 

Jurisdiction: Hong Kong

Time with bank: 1.5 years

Purpose: Company account for Hong Kong Company

Hang Seng is owned by HSBC and products are nearly identical. The reason we decided to go with Hang Seng over HSBC was that Hang Seng has slightly lower fees and is much more lenient with issuing business cards.

Bank: Crèdit Andorrà 

Jurisdiction: Andorra

Time with bank: 3+ years

Purpose: Personal savings

This bank is simply amazing. All accounts are multi-currency, and they support a lot of currencies, including some less-common ones. Transfers into and out of Europe are faster than mainstream European banks, and within Europe it’s usually as fast as SEPA despite not being a SEPA enabled bank.
Fees are higher than mainstream European banks, which can be offset by using the bank's huge selection of investment opportunities. Credit Andorra gives you access to stocks, bonds, funds, and equities around the world. See here for more information. For your own security (as well as privacy) you can generate an endless number of virtual cards (called Cybertargetas) with the bank. These cards can hold up to 2,000 EUR.
Customer service speaks Catalan, Spanish, French, English, and more.
There is no minimum balance for opening a personal account. The requirement for private banking varies; the lowest I’ve heard was 50,000 EUR. You must visit the bank in person to open an account. Private banking is also available with the bank’s Panamanian branch.

Bank: Banquede Luxembourg (BDL)    

Jurisdiction: Luxembourg

Time with bank: 20+ years

Purpose: Luxembourg trust

Excellent returns on investment funds, and highly professional staff. The trust had been with this bank long before I was involved and I have found no reason to recommend another bank.

Bank: Abu Dhabi Commercial Bank (ADCB)  

Jurisdiction: United Arab Emirates (UAE)

Time with bank: 4 years

Purpose: Company account for UAE (RAK) company

This is one of my preferred banks in the Middle East. There have been times when we have needed to call our account manager in the middle of the night local time, and he has been happy to take the call – and solve the issue! They offer a special credit card for smaller businesses, which is something I wish more banks did. The card is easy to get and can be invaluable to new businesses.

ADCB is also a big merchant bank with settlement in a wide range of currencies.
New accounts can be opened with as little as AED 50,000 (around 10,000 EUR or $13,500 USD) to avoid penalty fees and all accounts are multi-currency, which in addition to the usual EUR, USD, GBP, and local AED covers some other regional currencies. Islamic banking is available.

Bank: Banque Audi 
Jurisdiction: Lebanon

Time with bank: 4 years

Purpose: Savings products for UAE (RAK) Company

Lebanon was chosen for its extremely tight banking secrecy, and Banque Audi had the services best fitting for this company (cash collection, savings). The interest rates on savings accounts are phenomenal and the staff is always helpful. Rigorous application process but smooth sailing after that (very few questions asked).

Bank: United Overseas Bank (UOB) 

Jurisdiction: Singapore

Time with bank: 1 year

Purpose: Company account for Singapore company

This bank is a fairly new acquaintance, but so far, it's been nothing short of excellent. Multi-currency accounts, top-notch customer service (in English), and simple account opening and credit card applications. Contrary to its name, UOB is not particularly open to offshore companies and have recently made it even more difficult for overseas individuals to open accounts. They will and do open accounts for some offshore companies (especially Hong Kong and other surrounding Asian countries), but European or American (including Caribbean) individuals or companies may find it difficult.

Bank: Multibank 
Jurisdiction: Panama

Time with bank: 2+ years

Purpose: Savings account for Panamanian holding company

Anyone who has ever opened – or tried to open – an account in Panama knows that it can feel like taking a deep dive into an ocean of paperwork. I walked out of several banks shaking my head at the amount of paperwork required. Multibank, however, made it easy. They still required a lot of paperwork, but they were very upfront about what they needed.
They have some very interesting card products, and it's all very international-friendly since the bank uses USD as standard currency. Account opening can be very difficult for non-Panamanian entities or persons. Multi-currency is available but not standard. Minimum deposit varies from $1,000 to $35,000 USD, depending on service needed.

Bank: Federal Bank of Middle East (FBME) 

Jurisdiction: Cyprus and Tanzania

Time with bank: 5 years

Purpose: Merchant accounts for various offshore companies

FBME is, for many, the go-to bank in Cyprus, and rightfully so. The bank traces its roots back to Lebanon and is currently one of the biggest banks in the high-risk merchant account market – not because of their rates but because of their leniency and how easy it is to get a merchant account with them. They also offer an impressive range of card products, such as prepaid cards, anonymous no-name cards, and regular credit cards, including the exclusive Visa Infinite card.

FBME in Cyprus rarely opens personal accounts. They are mostly a corporate and merchant bank. Unlike many other Cypriot banks, FBME has virtually zero exposure to Greece and even offered to help the Cypriot government pay for a bailout in the 2011/2012 crisis.

FBME charges fairly high fees, which can be a bit daunting to small companies, but I would say it's worth it. No Cypriot bank comes close to FBME.”

Note that  this information provided is for general knowledge and discussion, thank you.

Winston Wambua

International Offshore Specialist
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Wednesday, 10 April 2013

How to Set Up An Offshore Bank Account

For a few guys, an offshore bank account may sound like something out of a James Bond movie or maybe a clever way for an arms dealer to conduct business. But the truth is that lots of guys use offshore accounts for a variety of reasons. It may sound sexy to talk about an offshore account, but for the most part, banking offshore is about saving on tax dollars. 
But if taxes aren't a concern, liability may very well be -- in which case  offshore banking limits a creditor’s access to your funds (different country, different law). Finally, there are some guys who don’t need that Swiss bank account, but open it while on vacation because what better pickup line is there than dropping “my Swiss bank account” into the conversation? If any of those reasons sound like they match your own motivations, here’s how you can open an offshore bank account. 

Legal issues

If you’re a U.S. citizen, it’s not illegal per se to open an offshore account. If the underlying reason, however, for setting up the account is an illegal act, you might be keeping your money safe, but you could still be in hot water. For example, if you’re accused of tax evasion and you’ve sent the funds abroad, you could still face criminal charges here.

The offshore bank account, however, may remain free from the long arm of the law.


When you bank in the U.S., you can be secure in the knowledge that your money is insured by the government. No such guarantees exist with offshore banks. In other words, a country could have a coup or a natural disaster or an accounting scandal one day and all the money could be gone the next. Furthermore, you could find yourself scammed; it does happen. Remember, this is a business built on skirting the law, so you won’t always deal with the most honest people (but that varies by country).Should you keep your cash in Switzerland or the Caymans? Decisions, decisions…


Offshore banking isn’t just for the super wealthy, but it’s not for paupers either. Minimum deposits vary by bank, but you need to pick a number to make it worth your while. Still, if you’re a U.S. citizen, you’re supposed to declare any amount over $10,000.


You don’t have to visit your money or even be there to open the account. This is international business at its finest and bankers wire money by phone and e-mail. However, at the end of the day, you’re still in your country and your money is somewhere else. If you really want to be safe and avoid U.S. laws and taxes, move.

Location Switzerland

Description/legal status: Accounts can be set up in person or via mail. The key feature of a Swiss bank account is Secrecy and anonymity. It works like your American bank, but most legal matters like divorce, taxes and bankruptcy are considered private. In fact, the Swiss are known for keeping their secrets. While some countries change their laws under American pressure, Switzerland just keeps going. On the other hand, everyone knows about Swiss bank accounts, so if a creditor knows you've got one, they also know you’re hiding something.

Locale: Cayman Islands

Description/legal status: Once again, it’s basically like setting up a U.S. account. The difference is that Cayman accounts are geared to corporations, so it’s possible to open an account and keep your identity a secret. In other Words, your corporate name will be the only name the bank knows. If you’re clever and really concerned about secrecy, you’ll insulate yourself with a series of corporations, making a paper trail of holding companies that don’t lead to you. The Cayman Islands don’t officially encourage illegal activity like tax evasion, but they don’t report deposits or interest on those deposits -- that’s your job. But remember: In the war on terror and drugs, Cayman banks have buckled under American pressure. This means that when the bank opens its doors to the American government to catch a drug dealer or terrorist, it also opens the door to your information.

Learn about stashing cash in Singapore and Luxembourg

Locale: Singapore

Description/legal status: The setup in Singapore is much the same as anywhere else. Money moves to Singapore primarily for tax reasons because the country has the lowest tax rate in Asia. If you play your cards right, interest earned in Singapore can be tax free. While you might get tax breaks on interest in a lot of places, there’s a good reason to choose Singapore: Investment happens locally.

Singapore banks pump money into China’s growing economy. So when you put your money in a Singapore bank, you’re doing three things: saving on taxes, investing in the world’s fastest growing economy and protecting your money by letting local experts pick and choose the investments for you. In other words, you get to invest in Asia without leaving home and without paying U.S.


Locale: Luxembourg

Description/legal status: There are a few hurdles to opening an account in Luxembourg, but they're minor. For example, you'll  need a reference from your current bank and you’ll need to be able to answer some financial questions about how you intend to use that money in Luxembourg (if at all).

Like Singapore, Luxembourg is known for a great return on investment, but that return has dropped for some deposit holders who are citizens of European countries. If you’re not affected, you’ll grow your money tax-free in a very stable country. In other words, if you pick Luxembourg over Singapore, you make a tradeoff: Your money might not grow as fast (although it will likely grow), but you won’t be exposed to the risk of investing in a developing economy.

Bank on it

While we tend to think of offshore banking as an underground act, it’s really quite legitimate. But the basic lesson learned here is that if you bank offshore, complying with your native country’s laws is up to you. In other words, unlike American banks that report your income to the IRS, offshore banks leave you on the honor system. You can save a bundle on taxes, clear a higher return on your investment or simply keep your affairs private, but if any of that runs afoul of the laws in your own country, you might need to visit your money in person -- permanently.

On the other hand, if you don’t break the law, you can reap the benefits of offshore banking without breaking a sweat.


Winston Wambua

International Offshore Specialist
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Tuesday, 9 April 2013

How the K2 tax avoidance scheme works case study

There are a lot of rash statements being made about whether or not the K2 tax avoidance scheme used by Jimmy Carr was "legal”. The implication being that if it was not,it was a bad thing to do obviously. And if it was "legal", well that is OK then, even if Prime Minister David Cameron says it was "morally wrong".

Unfortunately, tax is a bit more complicated than that.  Tax evasion is the illegal thing. It happens when people deliberately do not pay the tax they should. It is criminal. Tax avoidance is the arrangement of a taxpayer's affairs in such a way as to pay the least amount of tax legitimately.

A fine line? Some would say so.

How the K2 tax avoidance scheme works

The investigation into individual tax avoidance in the UK said comedian Jimmy Carr used an offshore wealth management scheme so called K2. 
K2 is used by more than 1,000 high earners and was described by Prime Minister David Cameron as "very dodgy." Here is the basic premise of how it operates:

• UK earners 'quit' their job

• They then sign new employment contracts with offshore shell companies

• The offshore companies 'rehire' their new employee to the UK but take their earnings

• The offshore company pays the employee a much lower salary each month, but 'loans' them several thousand pounds

• These loans can be written down as tax liabilities, thus substantially reducing tax payable to the Government . This is how the K2 tax avoidance scheme works. High earners using the K2 Scheme do not keep as much money as is being portrayed.

This is how the K2 tax avoidance scheme works in general terms the actual workings may be slightly different to those described here. The Prime Minister described this way of avoiding tax as “Very Dodgy”. The question is why is it dodgy? It is not illegal or even close to being illegal because it is declared to HMRC every year.

What it is, is very difficult to close down.

If you were to say the government should tax the loans, then everybody would have to pay tax on their mortgage and any other loans that they took out. This has the government in a very difficult position and the only way they can deal with it is by embarrassing people that use this and similar schemes.

This is how the K2 tax avoidance scheme works for individuals and companies and lets not forget the UK is the fourth highest taxed country in the world.


HM Revenue and Customs (HMRC) is referring to K2 in the category of tax avoidance, so let us concentrate on that. Just because a scheme is classed as tax avoidance does not mean it is all right.

Usually, it has to be registered with HMRC, so they can check if it complies with tax rules. If HMRC decides it is not acceptable, then the taxpayer would have to hand over all the unpaid tax along with interest and, possibly, penalties.

Basically, officials treat the underpayment of tax as a mistake. It could be that the scheme takes advantage of some obscure loophole. In that case the tax people would get the Treasury to change the law, but the scheme's users would get away scot free until such an order was made. So the Jimmy Carr ruse is not being talked about by the authorities as illegal, but that does not mean he - and the others who are or were signed up to it - will not have to pay back the tax.

HMRC's (HM Revenue & Customs) line is that K2 is being investigated. Another phrase being bandied about is "tax abuse" which, confusingly, can be applied to both evasion and avoidance. A tax avoidance scheme which HMRC finds to be a blatantly artificial construction to dodge tax could be an abuse.  There will soon be a General Anti-Abuse Rule to deter this sort of dodging. Some accountants say it will "kill it stone dead", others that it will just lead to more complicated disputes. 

How tax shelter schemes work

The K2 tax scheme, a Jersey-based accountancy arrangement, is used by 1,100 people. It works by transferring salaries into a Jersey-based trust, which lends investors back the money. As the loan can technically be recalled, it is not subject to income tax. Jersey is self-governing, with its own financial, legal and judicial systems. It has no VAT in place and sets its own income tax. And low taxation is the reason why the affluent flock to the tiny island.

Income tax is a flat-rate of 20 per cent. Britain, in contrast, charges top earners 50 per cent, although this will fall to 45 per cent next April. Jersey's s Goods and Service Tax (GST) - equivalent to the UK’s 20 per cent VAT - is also far lower at 5 per cent. But beyond that, non-residents have also benefited. An accountancy industry has thrived in what critics say is a lax regulatory environment – finance makes up 41 per cent of its economy compared to, say, 4 per cent for hospitality.

But ‘tax havens’ worldwide, from Bermuda to Liechtenstien, have come under pressure to clean up their act as the cash-strapped U.S. authorities and EU governments try to claw back tax lost to avoidance schemes. Jersey rejects the criticism saying it is a ‘transparent and cooperative jurisdiction’. It calls the perception of it as a tax haven an ‘ancient myth’.
Winston Wambua

International Offshore Specialist
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Tuesday, 2 April 2013

Offshore financial structures

The bedrock of most offshore financial centre is the formation of offshore structures – typically:

·    offshore company
·    offshore partnership
·     offshore trust
·           -    private foundation

Offshore structures are formed for a variety of reasons.

Legitimate reasons include:

Asset holding vehicles.  Many corporate conglomerates utilize a large number of holding companies, and often high-risk assets are parked in split companies to prevent legal risk accruing to the main group (i.e. where the assets relate to asbestos, see the English case of Adams v Cape Industries). Similarly, it is quite common for fleets of ships to be separately owned by separate offshore companies to try to circumvent laws relating to group liability under certain environmental legislation.

Asset protection.  Wealthy individuals who live in politically unstable countries utilize offshore companies to hold family wealth to avoid potential expropriation or exchange control limitations in the country in which they live. These structures work best when the wealth is foreign-earned, or has been expatriated over a significant period of time

Avoidance of forced heirship provisions. Many countries from France to Saudi Arabia (and the U.S. State of Louisiana) continue to employ forced heirship provisions in their succession law, limiting the testator's freedom to distribute assets upon death. By placing assets into an offshore company, and then having probate for the shares in the offshore determined by the laws of the offshore jurisdiction (usually in accordance with a specific will or codicil sworn for that purpose), the testator can sometimes avoid such strictures.

Collective Investment Vehicles. Mutual funds, Hedge funds, Unit Trusts and SICAVs are formed offshore to facilitate international distribution. By being domiciled in a low tax jurisdiction investors only have to consider the tax implications of their own domicile or residency.

Derivatives trading. Wealthy individuals often form offshore vehicles to engage in risky investments, such as derivatives trading, which are extremely difficult to engage in directly due to cumbersome financial markets regulation.

Exchange control trading vehicles. In countries where there is either exchange control or is perceived to be increased political risk with the repatriation of funds, major exporters often form trading vehicles in offshore companies so that the sales from exports can be "parked" in the offshore vehicle until needed for further investment. Trading vehicles of this nature have been criticised in a number of shareholder lawsuits which allege that by manipulating the ownership of the trading vehicle, majority shareholders can illegally avoid paying minority shareholders their fair share of trading profits.

Joint venture vehicles. Offshore jurisdictions are frequently used to set up joint venture companies, either as a compromise neutral jurisdiction (see for example, TNK-BP) and/or because the jurisdiction where the joint venture has its commercial centre has insufficiently sophisticated corporate and commercial laws.

Stock market listing vehicles. Successful companies who are unable to obtain a stock market listing because of the underdevelopment of the corporate law in their home country often transfer shares into an offshore vehicle, and list the offshore vehicle. Offshore vehicles are listed on the NASDAQ, Alternative Investment Market, the Hong Kong Stock Exchange and the Singapore Stock Exchange. It is estimated that over 90% of the companies listed on Hong Kong's Hang Seng are incorporated in offshore jurisdictions. 35% of companies listed on AIM during 2006 were from OFCs.

Trade finance vehicles. Large corporate groups often form offshore companies, sometimes under an orphan structure to enable them to obtain financing (either from bond issues or by way of a syndicated loan) and to treat the financing as "off-balance-sheet" under applicable accounting procedures. In relation to bond issues, offshore special purpose vehicles are often used in relation to asset-backed securities transactions (particularly securitisations).

Illegitimate purposes include:

Creditor avoidance. Highly indebted persons may seek to escape the effect of bankruptcy by transferring cash and assets into an anonymous offshore company.

Market manipulation. The Enron and Parmalat scandals demonstrated how companies could form offshore vehicles to manipulate financial results.

Tax evasion. Although numbers are difficult to ascertain, it is widely believed that individuals in wealthy nations unlawfully evade tax through not declaring gains made by offshore vehicles that they own. Multinationals including GlaxoSmithKline and Sony have been accused of transferring profits from the higher-tax jurisdictions in which they are made to zero-tax offshore centres
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Ship and aircraft registrations
Many offshore financial centres also provide registrations for ships (notably Bahamas and Panama) or aircraft (notably Aruba, Bermuda and the Cayman Islands).

Aircraft are frequently registered in offshore jurisdictions where they are leased or purchased by carriers in emerging markets but financed by banks in major onshore financial centres. The financing institution is reluctant to allow the aircraft to be registered in the carrier's home country (either because it does not have sufficient regulation governing civil aviation, or because it feels the courts in that country would not cooperate fully if it needed to enforce any security interest over the aircraft), and the carrier is reluctant to have the aircraft registered in the financier's jurisdiction (often the United States or the United Kingdom) either because of personal or political reasons, or because they fear spurious lawsuits and potential arrest of the aircraft.

E.g., in 2003, state carrier Pakistan International Airlines re-registered its entire fleet in the Cayman Islands as part of the financing of its purchase of eight new Boeing 777s; the U.S. bank refused to allow the aircraft to remain registered in Pakistan, and the airline refused to have the aircraft registered in the U.S.

Insurance,A number of offshore jurisdictions promote the incorporation of captive insurance companies within the jurisdiction to allow the sponsor to manage risk. In more sophisticated offshore insurance markets, onshore insurance companies can also establish an offshore subsidiary in the jurisdiction to reinsure certain risks underwritten by the onshore parent, and thereby reduce overall reserve and capital requirements. Onshore reinsurance companies may also incorporate an offshore subsidiary to reinsure catastrophic risks.
Bermuda's insurance and re-insurance market is now the third largest in the world.[46] There are also signs the primary insurance market is becoming increasingly focused upon Bermuda; in September 2006 Hiscox PLC, the FTSE 250 insurance company announced that it planned to relocate to Bermuda citing tax and regulatory advantages.

Collective investment vehicles

Many offshore jurisdictions specialise in the formation of collective investment schemes, or mutual funds. The market leader is the Cayman Islands, estimated to house about 75% of world’s hedge funds and nearly half the industry's estimated $1.1 trillion of assets under management,  followed by Bermuda, although a market shift has meant that a number of hedge funds are now formed in the British Virgin Islands. As at year end 2005, there were 7,106 hedge funds registered in the Cayman Islands, 2,372 hedge funds in the British Virgin Islands and 1,182 in Bermuda. These figures do not include other collective investment vehicles. See also the recent survey by Deloitte in Hedgeweek.

But the greater appeal of offshore jurisdictions to form mutual funds is usually in the regulatory considerations. Offshore jurisdictions tend to impose few if any restrictions on what investment strategy the mutual funds may pursue and no limitations on the amount of leverage which mutual funds can employ in their investment strategy. Many offshore jurisdictions (Bermuda, British Virgin Islands, Cayman Islands and Guernsey) allow promoters to incorporate segregated portfolio companies (or SPCs) for use as mutual funds; the unavailability of a similar corporate vehicle onshore has also helped fuel the growth of offshore incorporated funds.[citation needed]

Banking Traditionally, a number of offshore jurisdictions offered banking licences to institutions with relatively little scrutiny. International initiatives have largely stopped this practice, and very few offshore financial centres will now issue licences to offshore banks that do not already hold a banking licence in a major onshore jurisdiction. The most recent reliable figures for offshore banks indicates that the Cayman Islands has 285 licensed banks, the Bahamas has 301. By contrast, the British Virgin Islands only has seven licensed offshore banks.

Winston Wambua

International Offshore Specialist
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Trillions hidden in offshore accounts

The Caribbean island of Nevis, seen here from neighboring St. Kitts, and the Bahamas were the locations of secret accounts that Greene County optometrist David Alan used to avoid income taxes, federal prosecutors say. After a former employee reported him to the IRS, Alan pleaded guilty to tax evasion and went to federal prison in October. More than half the world's money passes almost undetected through a series of financial black holes that shelter it from not only the tax collector but from shareholders, partners and wives,
 a Tribune-Review investigation found.Once employed by gangsters such as Meyer Lansky and Lucky Luciano, these secret bank accounts have grown so vast and lawless that some experts tell the Trib they fear the amount of money involved threatens societies from China to Africa, Europe and the United States. World leaders railed against the impact of secret havens during the G20 summit in Pittsburgh three years ago.
“They have caused a huge imbalance in the market,” said John Christensen, director of London-based Tax Justice Network, which was established by the British Parliament in 2003 to examine tax issues worldwide.  “They are the very opposite of capitalism, which is supposed to be based on transparency. They are the shadow economy.” From Switzerland and a couple of Caribbean islands, the black holes are in 70 or more countries. Christensen said studies by several organizations, including the International Monetary Fund, put the total stash at as much as $25 trillion.  In contrast, the Commerce Department pegs the gross national product of the United States at more than $15 trillion.
The black holes emit no light, according to organizations that study them, including the IRS. They hide owners and assets. Officers and directors are strawmen. Host countries get little, if any, taxes and earn fees mostly by promising to keep everyone in the dark. Few public records exist.
Owners revealed by accident typically are corporations in other black holes halfway across the world.
Though tax evasion and avoidance are only part of the reason for the shadow economy, they play a role. Tax losses to the United States amount to $1 trillion over a decade, according to the Congressional Research Service. That's the amount congressional leaders tried to cut in last summer's deficit showdown.  Across Europe, experts say tax dodgers undermine economies in places such as Greece and Spain, threatening the euro as a whole. It isn't just tax dodgers or “old money” in New York or London who use the accounts. New players have caught on.  For every $1 that Western companies invest in China, a Trib analysis found, the Chinese hide $4 offshore.  From 2000 to 2009, that net illicit outflow totaled $2.74 trillion, according to Global Financial Integrity, which champions tax reform in the developing world.  “Corruption in China dwarfs the rest of the world,” Global Financial spokesman Clark Gascoigne said. “The economists here are very pessimistic about China's long-term prospects.”
James Henry, owner of the Sag Harbor Group in New York, an international business consulting agency, said he disagrees with the methodology that Global Financial uses to reach its figure, but agrees that there is significant capital flight from China. He said at least half of world funds pass through shadow jurisdictions, at least on paper. China soon will see the effects of corruption in the failure of infrastructure the Communist Party built during the past decade, said Sarah Freitas, one of the economists who wrote the Global Financial report. Until then, the Chinese appear determined to shovel their newfound wealth out of the country. A 2011 study by China Merchants Bank and Bain & Co. found that nearly 60 percent of wealthy Chinese have or will invest overseas.
The British Virgin Islands is a favorite haven. The islands' 30,000 people host more than 400,000 corporations – at least 13 for each resident.
A simple, shady process  Offshore accounts can hide wealth and disguise losses. Enron Corp. used off-shore accounts to hide weakness in its balance sheet, records show.
The shadow economy reaches virtually every place on Earth.
Western Pennsylvania companies have more than 300 subsidiaries in countries that federal researchers deemed to be “financial privacy jurisdictions,” such as the Cayman Islands, Singapore and the South Pacific island of Vanuatu. Nationwide, doctors set up Caribbean island accounts to hide assets in case of malpractice suits. Anyone with an Internet connection could, for example, create a company in the Indian Ocean nation of Mauritius that would control a shell company in Wyoming and be run by a trustee in the Central American country of Belize.  Because it can be done so easily for just a few hundred dollars, a husband sitting at home could hide nearly all of a couple's money before driving to a courthouse to file for divorce.  ‘Step ahead of the sheriff'
Americans who hide money illegally in foreign accounts cost the United States up to $70 billion a year, the Congressional Research Service reports.  David Alan, a Greene County optometrist, set up accounts in the Bahamas and the Caribbean island of Nevis to avoid income taxes. He claimed just $38 in income – and $4 in federal taxes – for a year when actual amounts were $242,740 in income and $66,898 in taxes, prosecutors said. Alan went to federal prison in October after a former employee reported him to the IRS.  “It's a blatant defiance of the tax law,” said Sybil Smith, acting special agent in charge of the Criminal Investigation Division at Pittsburgh's IRS office. “It shifts the tax burden to innocent taxpayers, and is that fair?” Efforts to sweep up tax cheats largely have foundered. Since 2009 and the G20 summit in Pittsburgh, world leaders have stepped up enforcement but dodgers have moved money to more obscure hideouts.

Evasion was the tack followed by a Pittsburgh couple who opened a secret Swiss account in the 1960s. Because their bank was compelled to turn over account information in response to a U.S. indictment, the couple moved their money to a smaller, private Swiss bank and then to another. Finally, one of their grown children talked with Swiss bankers about coming clean to the IRS. U.S. prosecutors now are using the family to go after the bankers.  In all, more than 33,000 Americans voluntarily came forward in 2009, 2011 and this year to disclose $5 billion held in secret foreign accounts, the IRS said last month. No one knows how much remains hidden. Rules that take effect in 2014 under the Foreign Account Tax Compliance Act require foreign banks to report holdings by Americans or be subject to a 30 percent withholding tax on money leaving the United States.

The Paris-based Organization for Economic Co-operation and Development has led the international effort to bring havens into compliance with information-sharing agreements about hidden bank accounts. Still, the group cannot estimate how much money remains hidden, according to Monica Bhatia, head of the OECD's Global Forum on Transparency.

“It's a work in progress,” she said. “As we progress, we're making life more and more difficult for people to hide money anywhere.”  Nations that benefit from taxes and bank fees on offshore accounts have no self-interest in helping developed countries track down hidden money, said Robert Kudrle, a professor at the University of Minnesota. “Nobody really wants to do anything, other than stay one step ahead of the sheriff.”
Countries pay high cost
Though the numbers are “squishy,” corporations using mostly legal tax dodges through subsidiaries in offshore financial havens cost the United States $60 billion a year, said Jane Gravelle, a researcher with the Congressional Research Service.  Offshoring combined with transfer pricing – in which profits are shifted to low- or no-tax jurisdictions – plays a big role, the service reports.  U.S. companies hold $22 trillion abroad, according to a Commerce Department annual survey, and much of it pools in places known for low taxes and tight secrecy: $1.25 trillion is in Luxembourg and Mauritius holds $34 billion.
Even when companies say they are using legal means to avoid paying taxes, it can lead to disputes.
Drug company Merck paid $2.3 billion in back taxes and penalties as part of a 2007 agreement with the IRS; GlaxoSmithKline paid the feds $3.4 billion in back taxes and fines a year earlier because of a transfer pricing dispute. Lawmakers could close legal loopholes but don't, said Dhammika Dharmapala, an economist at the University of Illinois College of Law and an expert on corporate tax havens. “It should be a no-brainer,” said Joseph Stead, senior economic justice adviser for Christian Aid, a British charity that tracks lost taxes in developing countries. “You have governments all over the world in desperate need of revenues at the minute, and this would help them track it down. And yet they're not.”
Secrecy first
Tax evasion no longer is the lead motivation for much of the money flowing into the shadow economy. Often, people simply want to hide what they have — either from law enforcement or lawsuits.
Websites offer to help small business owners protect assets from potential litigants and tell divorcees how to keep their former spouses from touching their assets. Money flowing from other countries ends up in states such as Wyoming, Nevada and Delaware with low reporting requirements. Corruption, kickbacks, bribery and illicit trade pricing throughout developing countries accounted for most of the $8.4 trillion siphoned out in the century's first decade, according to Global Financial.
In developing countries, the amount of money leaking out often equals or exceeds aid flowing in, Stead and other experts said. Fixing that problem could reduce dependence on foreign aid.

Ethiopia's 94 million people are among the worlds poorest, with per capita income of about $1,000 by CIA estimates. The country received $829 million in development assistance in 2009. The Global Financial analysis found that the Ethiopian elite transferred $3.26 billion out of the country that year. The impact of that lost bounty, it said, is clear: “The people of Ethiopia are being bled dry.”

Winston Wambua

International Offshore Specialist
For more information please contact me on
Mobile +971553350517

Skype: Winston.Wambua