Sipping fizzy water at the Café de Paris, in Monaco last week, I soaked up the warm sunshine; it felt good. Strolling through the opulent streets of Monte Carlo, there was no hint of concern that the rich community which inhabits this 2 square kilometres bordering the Mediterranean is about to be hit by a tsunami of hostility and litigation.
At the Wealth Forum, the conference I was speaking at, the mood was sombre. Governments around the world are broke (with the exception of Monaco – which ironically is a zero tax state). Having sought extra funds through tax amnesties, higher tax rates and increasingly complex tax legislation, Governments are now united to flush out tax evaders who hold funds offshore. And they are brutal. If a Government suspects that you have evaded tax whether rightly or wrongly, it will embark upon an investigation under which you will have less rights than a murderer. Think about how difficult it would be to prove that you have not evaded tax, when you do not know what information is held by a Government on your offshore financial position, or indeed what misinformation it has!
Governments care little as to the discomfort and distress of their tax payers even if innocent. If a Government is found to have been misinformed, it will not pay a penny in compensation, neither will it indemnify you for the years of legal costs you may have incurred in proving your innocence.
As if the threat of a tax investigation on the back of misinformation is not enough to worry about, there are other people keen to know what are your financial interests and where; disgruntled heirs, estranged spouses, former business colleagues, the press and crooks; such as thieves and kidnappers who will pay significant sums for access to such information.
As you can imagine the more people who have access to sensitive information the greater is the risk that someone will be able to pay to get it. A Government employee could be bribed or geeks paid to get into into the Governments computer systems.
Julian inherited a business with his brother Manuel on the death of their father. The brothers found it difficult to work together and as they bickered and bothered the value of the business declined. Eventually, it was worth only a fraction of what the boys inherited and Julian eventually bought out Manuel. In due course, Julian got the business back on track and paid the excess profits into a Swiss bank account, to finance his passion for skiing and his chalet in Verbier.
Manuel managed to acquire information about Julian’s business including his Swiss bank accounts. He hired detectives to bug his brothers phone, pester his wife and follow his children. Julian was distressed and paid an agent to find out who was behind this mischief. He took out an injunction against Manuel who responded by suing Julian for fraud. Manuel then managed to get Julian’s worldwide assets frozen. It took Julian three years, an enormous amount of pain from the betrayal from his own brother and hundreds of thousands of pounds to clear his name, and unfreeze his assets.
With the increase in the availability of sensitive financial information due to be exchanged this year, Julian’s story will no longer be unusual. It will be commonplace; privacy is valuable but for some this fact will have to be learnt the hard way.
The sad truth is that the best people to inform the UHNW community how important privacy is to them are their private bankers; but they have been gagged. Why? Because they are fearful of being fined.
Credit Suisse in 2008 was fined $2.4 billion for criminal conspiracy when informing their clients that they could avoid US withholding taxes by setting up a company in the BVI. Since 2008 private banks have paid an eye popping $321 billion in fines. No industry can brush off such costs without making some changes; the changes they have made, is to keep schtum.
This does not mean that private bankers do not care – they do, so if they cannot advise their clients directly, they direct them to someone who can – GFOS. We are now on the panel of approved advisers of the most prestigious private banks world-wide.
We review a client’s offshore structure, their personal goals and concerns and the reason why they have financial interests offshore. We can look for solutions to asset protection, succession, control and for ways to secure privacy, but will not advise if the aim is to evade tax.
GFOS is able to advise, because we are under no obligation to report, we have no agreement with the private banks as to how we will advise, we are independent and will not act for anyone for whom we do not know the source of funds or who is not tax compliant.
Caroline can be contacted on svetlana@garnhamfos.com or on 020 3740 7423.
“When you are Super Rich who can you Trust” Caroline’s book, can be bought on Amazon or direct from Svetlana – see above.