Asset Protection - Common Mistakes to Avoid

Avoiding offshore scams by becoming more informed.

Asset Protection Mistakes Introduction- There are a lot of asset protection packages being offered out there today that are flawed. This will give you the sophisticated offshore investor an idea as to what to look for in your asset protection package.

Where are the assets located? - Our law firm constantly gets contacted by individuals from other countries (offshore to Panama) wanting to take a brick and mortar business in another country and shift the title of the business into the name of an offshore corporation or foundation. Wrong Tactic! This will not accomplish anything. Yes I know non-lawyers sell these packages to people all the time. Here is what is wrong. The offshore corporation, offshore LLC etc. will need to domesticate or register in the country where this business is since they are now actively operating in this country. This means the anonymity of the owners will be destroyed, the entity will need to register for taxes and pay them as well. If the offshore entity does not domesticate in the country where the business is the ownership will be flawed in that the corporate or foundation structure will not be valid in the country where the business is and the owners/operators will not get the protection of the corporation or foundation in that they would be personally exposed. Now if the offshore company owns a passive investment like a piece of land or non-income producing property this will be treated differently in most countries making this a workable strategy. This is viewed as an investment versus the offshore entity actually engaging in business which would be the case with a piece of income producing property like apartments or a business with employees and a physical place of business. Where the assets and if they are portable is key in asset protection.

Offshore Bank Accounts - Some think this by itself is enough of an asset protection strategy. Wrong! The name on the personal account indicates the owner of the account loud and clear. When checks or wires are sent to that offshore account it leaves a trail right to the person whose name is on the account. Today the check clearing system and the wire transfer systems are monitored by the clearing banks, the correspondent or intermediary banks, the banking authorities in different countries and the various governments that are interested. All of these entities will have a record of the account and the person?s name. Forget privacy. When you use a Panama bearer Share Corporation it is like the old numbered Swiss bank accounts except instead of a number a name is being used. The owners of the Panama Corporations do not appear in any database or registry. When the wires and checks move through the system it can not be determined who the natural persons are behind the corporation or foundation (Panama Foundations are also just as anonymous). Don't deceive yourself with a personal account in an offshore jurisdiction.

Bearer Share Corporations - The advantage of a bearer share corporation is that the ownership is based on who owns the stock certificates of the corporation. The owners are never recorded in any database or registry. The stock share certificates can be made out in blank and stored anywhere on planet earth. Well this is when it is done correctly like in Panama. The majority of other jurisdictions have ineffective bearer share corporations. The problem is the clients of these corporate agents who are not lawyers often do not explain things correctly or fully. Most jurisdictions require the bearer shares to be kept with the non-lawyer corporate agent in that country. The share must be made out to the owners and any and all changes of ownership must be through the corporate agent who records the new owner's identities etc. The corporate agent of course must collect identity documents on the owners. In Panama the owner's names may or may not appear on the share certificates, it is the client?s choice. The shares can be kept anywhere. The law firm must follow know your customer rules and get identity documents and references on the client but all that is attorney client privileged information that would only be released under a court order. If some civil attorney wanted to get into clients records to determine ownership we would need to be notified at the onset of the legal process and we would come out spitting and hissing to defend our client. We are a panama law firm and we will fight like a wildcat to protect our client's privacy. Do you think a corporate agent who is not a lawyer is going to go out and spend $5,000 to $15,000 to defend the privacy of his client is he gets a civil subpoena? Do you think he might think it is easier and cheaper to just get another client versus spending thousands on a lawyer to defend any rights to privacy his client may or may not have? In Panama attorney client privilege is very strong.

Offshore Trusts - Most people do not know that a Trust is just a written agreement as to how assets are going to be handled. That is it. The superior asset protection vehicle is the Panama Private Interest Foundation. The foundation is a judicial person just like a corporation. The foundation has its own assets and liabilities just like a corporation. This is not the case with a trust. Foundations have protectors and beneficiaries, something like a trust. Foundations have no owners at all. There are no shares or stock certificates, no one owns a foundation. Foundations are anonymous. Foundations can own bearer share corporations and thus remove the ownership from the person forming the asset protection structure. Since a foundation is owned by no one he has the asset protection advantages of being an owner of nothing. He could be the protector of the foundation and he could be a beneficiary of the foundation, his choice entirely. The corporation could hire the person as an employee requiring him to do the investment management activities as thus he is required to be the signatory on the bank account. He can get compensated, get expenses, get medical benefits etc. All the while he owns nothing and the whole structure is dead anonymous. Try that with a trust. Trusts in offshore jurisdictions are generally not very anonymous requiring identity documents to be kept in the jurisdiction of the trust. This is vulnerability especially if these documents are not in the hands of a lawyer. While these offshore jurisdictions have laws to protect privacy a civil lawsuit can get a lawyer into court with reasons why the trust should be busted open, identity wise at first. A non-lawyer will be hard pressed to go out and spend $10,000 to defend his trust client. So just because it is a trust and offshore do not think it is so safe. The Panama Foundation is a far more secure asset protection vehicle than a trust, even an offshore trust. Panama Private Interest Foundations combined with Panama Anonymous Bearer Share Corporations can take you places no Trust would dare to go. Trusts are for the rich and foundations are for the very rich.

Tax Treaties - When there is a tax treaty there can be a fishing expedition conducted by a government to see if there is compliance. If there is no tax treaty with your country you run the risk of cooperation from a country that has a tax treaty with the jurisdiction you are using turning the information over to the other country. Tax treaties are vulnerability. Panama has no tax treaties with any country. Panama has dead anonymous corporations and foundations. Panama has excellent attorney client privilege. Panama has what is probably the world?s strongest bank secrecy. Panama has world class banks with billions of dollars of assets. You can not find any other country with this combination because it does not exist anywhere else.

MLAT - This stands for Mutual Legal Assistance Treaty. Countries sign these for assistance in prosecuting criminals. Panama is in one such treaty with the USA. Many of these so called offshore havens are in 15 or more of these MLAT treaties. The Panama treaty with the USA concerns serious crime like Terrorism, Narcotics, Money Laundering (real big time money laundering not paying off a $6,000 credit card bill), Extortion, Blackmail, Kidnapping and Fiduciary Fraud (like promoting a phony bank). It does not cover taxation offenses by themselves. Pay attention here carefully. Most all of the MLAT treaties use a principle of dual criminality. The offense must be a crime in both countries in order for the MLAT to be in effect. This is to protect citizens from being prosecuted for things like being a member of a certain race, religion etc that is being prosecuted like Hitler and the Jewish people. It also protects against sexual crimes that may be allowed in one country and not in another. Panama has no crimes regarding taxation. Any and all tax offenses in Panama are civil including tax evasion, failure to file, tax fraud etc. So forget about Panama cooperating on just a pure tax matter. This is not the case with most of the offshore jurisdictions. They have laws in the offshore jurisdiction criminalizing purely tax offenses and thus the MLAT treaties allow for the obtaining of information and eventual extradition for purely taxation matters.

Offshore Island Jurisdictions - Okay now you have your offshore tax haven asset protection structure set up on some island. Now just when you need to go online and wire out some funds there is a storm and the island has no electricity for two weeks which means no internet, no faxes and no phones. What are you going to do? One of the reasons the Panama Canal was built in Panama is because Panama has no hurricanes, no earthquakes (not in Panama City anyway), no tsunamis and no volcanoes.

Stability of Government - Panama is stable. It uses the USA dollar. Panama does not have a central bank like the Federal Reserve Bank that charges the country interest for the money this breaking the backs of the people with debt that mounts up over the years. Panama has no such debt. Panama could easily switch to the Euro. Panama has treaties with the USA to protect the Panama Canal. If the country was being threatened the USA would see the Panama Canal at risk and intervene with the military. This would take hours, not days. Compare the US Dollar with some of the currencies used in these tax haven countries.

Has Been Offshore Jurisdictions - many of the corporate agents out there offer structures from numerous jurisdictions, some as many as 20 different countries. This is their way of getting credibility. Their philosophy is to just sell the client something. They often sell asset protection structures from jurisdictions that were once good but over the years since 9/11 have weakened their laws and are now nothing more than a has been jurisdiction.

Corporate Agent Renewal Games - Many people new to offshore asset protection fail to ask what the fees for subsequent years will be for the structure. Many non-lawyer corporate agents feed on this and charge very high fees starting in year two because they can get away with it. Even worse they collect these fees and never pay the government where the formation is. They are not in the country where the formation is so what do they care. If you complained the island they operate on would probably not do anything about it or if they did the corporate agent would say the payment was not received. If you proved the payment was made then it would be a bookkeeping error and corrected. What they are hoping for is that the bank never asks you for a certificate of good standing and they can collect the money from you and pocket it for some years and then you just go away never even knowing your corporation was no longer in good standing. Generally a corporation can be brought back to life for seven years or so, depending on the country. If a lawyer did this serious penalties would result in any jurisdiction especially in Panama.

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