Offshore Pilot Quarterly - Commentary on Matters Offshore

By Derek Sambrook, Managing Director, FIBSA,TEP,

Originally published March, 2005

Grave New World

Anton Chekhov said that every person lives his real, most interesting life under the cover of secrecy. One United States financial services company in Miami, Florida, has taken the Russian dramatist and writer seriously and built a conference room next to its elevators so that clients run less risk of being seen by the general office staff. I must say that my office in Miami had no such facility for our financial services clients, but I can understand its appeal in today's regulatory climate when those who place such a high value on privacy see it melting away just like icebergs are, according to global warming campaigners.

Naturally, privacy advocates are drawn to the remaining offshore financial services centres which still offer confidentiality. Those pockets of privacy are a magnet to them, just as Europeans in winter travel in search of tropical sunshine and some find it in Florida. Miami, besides its weather, has many financial services companies some of which are servicing the needs of those who have been victims of economic disruptions in Latin America, starting over 40 years ago when Fidel Castro took power in Cuba. Today, Miami-Dade county has a population of 700,000 Cubans. Latin American clients find a friendly and familiar environment in which their instinctive desire for privacy heightened by their concerns over security (wealthy Colombians, for example, fearing kidnapping) can be met. The city is a financial hub and a large number of corporations doing business in Latin America have established their regional headquarters there; Miami now has one of the largest concentrations of multinational banks in the hemisphere outside New York.

It follows that this financial services prominence leads to interaction with offshore financial services centres. Many of the opulent homes in Miami in areas such as Key Biscayne, according to public records, are registered in the names of offshore companies. Foreign property buyers from all over the world often use offshore companies in order to buy their Florida homes so that they can legitimately shelter assets from estate duties. The use of such companies is sometimes frowned upon because the actual owners can remain unknown and this can be of concern, for example, to the Financial Crimes Enforcement Network, an agency of the US Treasury. The associate director for regulatory policy of FinCEN has said that although there are legitimate uses for such companies, "there is an opportunity for abuse when you can't get to the real owners". That may be true, but there is also an opportunity for abuse when you can get to the real owners. Ask those who have suffered from frivolous and groundless lawsuits. More on this subject later.

Long before Latin Americans and others discovered the attractions of Miami, however, the city had gained a reputation for questionable financial activities after Al Capone checked into the penthouse suite of Miami's Ponce de Len Hotel back in 1928. And some twenty years ago, the city had...

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