The overwhelming majority of the offshore sector only provides services that are fully compliant and legal
April 5, 2016: The allegations made in the Panama Papers case are not representative of the international financial services industry.
Regards the leak of confidential documents from Panamanian law firm Mossack Fonseca, like many people, I have found the details of the Panama Papers case, outlined in the BBC Panorama programme, very concerning as it suggests there might have been tax evasion on a grand scale. Clearly, tax evasion is illegal and punishable by law. It is a serious criminal global issue that needs to be tackled with more vigour.
However, I do not believe that the Panama Papers allegations are representative of today’s wider international financial services industry.
The overwhelming majority of the offshore sector only provides services that are fully compliant and legal and they are used by law-abiding clients, who are simply looking for typically better returns, more investment options and greater flexibility.
Many of the documents that have been revealed by the Panama Papers case date back decades and for the last several years, a new and totally unprecedented era of transparency and disclosure has been ushered in.
Indeed, the idea of a ‘tax haven’, in the traditional sense of the phrase, is now somewhat outdated. In today’s world, in which financial information is being automatically exchanged with tax authorities globally, it is almost impossible to hide money. No longer can people stash assets on ‘treasure islands’ and not expect to be caught.”
The international financial services industry plays a vital and largely positive role in the global economy. Yet, this is typically overlooked by the media.
As the press is quick to point out, there are many questionable reasons why people might want to keep money in an offshore account, which is simply an account in a jurisdiction different to the one in which the person currently lives.
However, in my experience of working with expatriates and international investors, who have generally more transient lifestyles, offshore accounts are preferable simply for convenience. They offer centralised, safe, flexible and international access to their funds no matter where they live and no matter to which country the individual moves to in the future. In addition, they offer a wide choice of multicurrency savings and investment solutions.
Offshore financial centres allow those who qualify to do so to use legal, bona fide international investment products to form part of a robust and sensible financial planning strategy.
Other major advantages of such centres include that they allow companies to avoid getting taxed twice on the same income and that they offer legitimate financial refuge for those in countries where there is economic and political turmoil, such as extremely volatile currency and confiscation of assets.
Whilst most international financial centres are now well regulated, transparent and cooperative, and provide a much needed and in-demand service for people and firms all over the world, the Panama Papers claims underscores that more can still be done.
Indeed, this should act as an opportunity to further enhance the effectiveness and credibility of these international financial centres and the sector. This is especially important as the industry is set to grow exponentially in the coming years as individuals and companies become ever more globalised.
Nigel Green is the founder and chief executive of deVere Group