Last week’s Economist magazine contained two articles that ought to be of great interest to watchers of the offshore financial services industry.
The first, entitled “They sell sea shells” discusses the uses, both legitimate and less-so, for so called “shell companies”, pointing out that some of the most egregious abuses of such companies are easier to perpetrate (and less likely to be detected) in the UK and the US than in Cayman or BVI, a drum many in the the aforementioned IFC’s have been beating for years. The newspaper notes that:
“Much of the blame for [the abuses] goes to small-island jurisdictions, often derided as “sunny places for shady people”. Yet the biggest offenders are countries that pride themselves on their financial integrity. Britain (unlike most offshore locations) does not regulate company-formation agents. It even lets firms be founded with bearer shares, which, like cash, belong to whoever happens to have them with him at the time. Most countries have abolished these securities, under pressure from international financial regulators, but one British website offers same-day incorporation of a UK bearer-owned shell for a mere £142 ($227), within four to six hours.”
The piece continues:
America is even laxer, because company formation is a job for the states, not the federal government. Formation agents are neither covered under anti-money-laundering rules nor required to report suspicious activity by firms they have established or administer. “
A graphic from the piece shows the relative frequency of domiciles according to how often corporate vehicles in each have been cited in grand corruption cases from 1980-2010.
If all this makes you wonder why IFC’s are so often painted as shady by lawmakers and media in G20 countries, join the club. (See this previous blog on this subject: http://www.cmlor.com/blog/best-cayman-islands-libel-fail-ever/)
Here’s the link: