OFFSHORE COMPANIES: THE NEEDLE IN A HAYSTACK

Published by El Nuevo Herald on April 17, 2016

Any person, natural or legal,  is entitled to conduct business in the country of their choice. That is the essence of our system.The problem is that politically exposed persons (PEP) and their families, apparently, also have that right.

The Panamanian firm Mossack Fonseca is only one of the creators of more than 214,000 offshore companies handling around $ 40.000 million. Recently, the analysis of a research consortium says that the firm in question has as clients 58 relatives and associates of prime ministers and kings.

When an offshore company is created, usually several objectives are pursued, namely:

▪ Hide identity

▪ Investing abroad

▪ Having foreign partners

▪ Paying less taxes on profits

▪ raise funds from the public

▪ Establish legal succession

Of course, artists, athletes and other celebrities have business offshore. And rightly argues: "I do not want people to know that I am the corner business owner ." Thus they have fewer escorts, are less exposed to vandalism or demands, and can even visit incognito their own business.

The situation is complicated when dubious resources come in. Where no previous research is done, occurs what it happened with the firm Mossack Fonseca, when they incorporated more than 14,000 companies on an island in the Indian Ocean, of which only 204 were known by its true identity of the principal.

It had already been a previous history with this firm when they were fined $ 37.500 in the British Virgin Islands for incorporating a company of the son of former Egyptian President Hosni Mubarak, while both were accused of corruption in his country.

In the 80's began to decline the numbered accounts in Swiss banks, which was the main destination of the ill-gotten money. Subsequently and following a US agreement with many European banks, the US standard was established to report  all investments of more than $ 50,000 made by US citizens.

All of this simply urged more offshore corporations to be created, especially by the fact that they are much more profitable than a bank deposit.

The greatest danger is that billionaires terrorist groups like ISIS  may have legitimate business; however, so far the most serious crimes committed  in the US have been done using onshore companies, as in the slaughter of the Twin Towers or the $ 40.000 million scam perpetrated by Bernie Madoff in 2008.

Many offshore companies continue to exist, just only now, investors will prefer smaller, discrete firms. They will continue hiding the identity, except legal provisions such as recently occurred in Miami and New York, when the federal government banned the sale of real estate to ghosts corporations that do not reveal the real identity of the buyer.

Many just say you should do business  with "God and the Devil". However, we must defend our democratic system, precisely to not giving input to totalitarian solutions.

So simply, we must not sell the rope with which to hang many, including ourselves.

Benjamin F. DeYurre

Economist and journalist.

 Follow on Twitter: @DeYURRE