It is simple for John Q. Citizen of New York City to place money in an offshore account. Just how easy is it for him – and you – to open such an account?
It requires establishing a company (or buying one off the shelf), nominating a director who has power of attorney, opening a bank account for the company and transferring money into it.
Demand for offshore accounts is so high that a whole industry of lawyers, banks, accountants and other service providers exists to make the process as simple, easy, low cost and straightforward as possible.
And the whole thing is perfectly legal – if Mr Citizen declares the account to the U.S. tax authorities. If he doesn’t – and leaves the funds hidden – only then the act is illegal.
The International Consortium of Investigative Journalists (ICIJ), a global network of 160 reporters in more than 60 countries who collaborate on in-depth investigative stories, has launched a major project, Secrecy For Sale: Inside The Global Offshore Money Maze [www.icij.org/offshore] that details how the offshore system works. Don’t miss their interactive “Stash Your Cash” tutorial that walks you through the process [www.icij.org/offshore/interactive-stash-your-cash] of creating these accounts and teaches you how to do it based on your choice of location, bank and way of moving money, complete with the pros and cons of each choice and option.
It’s not just the How, but the Who
However, the big scoop for the ICIJ is not the How, but the Who. ICIJ landed a treasure trove of information in the form of a computer hard drive packed with 260 gigabytes of data, containing four large databases with half a million text, PDF, spreadsheet, image and web files, plus more than 2 million emails – 2.5 million files in all.
These files “help chart the offshore industry over a long period of explosive growth,” according to Gerard Ryle, ICIJ’s director.
With the help of 86 reporters and leading newspapers around the world, ICIJ started naming names. They include the families of presidents, prime ministers and dictators, a French publisher, Gazprom executives, flamboyant playboys, even a mercenary.
The published list is far from complete. Just like Wikileaks, the large mass of data requires time to go through it and therefore the revelations are arriving in installments. After naming internationally headline grabbing names, less famous names are about to be named.
Offshore accounts and diamonds
Diamonds are part of this story in a number of ways. First, the use of diamonds to transfer funds undetected. Once a secret bank account exists, one method of transferring money into it is for Mr Citizen to buy a high value diamond, pocket it and travel to the Virgin Islands, the Bahamas or one of several other prime money hiding locations. Once there, he sells the diamond and places the proceeds in the secret account.
Another way in which diamonds are connected has to do with people from the industry. According to initial reports, a number of Antwerp-based diamond traders are about to be named.
Further, ICIJ just announced that it’s about to publish the Indian names in the offshore tax havens data. After the client lists leaked from HSBC Geneva private banking and LGT Bank in Lichtenstein, another list disclosing possible tax evaders will have very ugly repercussions, especially if diamond traders are on the list. The reputational backlash will be unpleasant to the diamond industry as a whole.
Additionally, ICIJ claims that diamond-financing bank ABN AMRO registered dozens of companies for their clients in offshore refuges.
I hope our imaginary John Q. Citizen of NYC is not a diamond trader, that his diamond business was not involved in cash transactions resulting in a large stash of undeclared money, that he did not buy diamonds and then travel to one of 16 tax havens where he sold them and deposited the cash in a secret bank account. If he is a trader, we hope, for his sake and the diamond industry’s sake, that he reported the existence of the account.
If he didn’t – and he is joined by other colleagues from the trade – Mr Citizen should know that his name is about to be published for all to see and for tax authorities to act upon.
