Seychelles is an offshore magnet for money launderers and tax dodgers | Hacker News Reader

Seychelles is an offshore magnet for money launderers and tax dodgers

icij.org

49 pointsrobdoherty239 comments

Very informative. Another tax haven many people are unaware of is the City of London. George Monbiot puts it this way: The Corporation of the City of London is the dark heart of Britain, the place where democracy goes to die, immensely powerful, equally unaccountable. (See http://www.monbiot.com/2011/10/31/wealth-destroyers/ and http://www.newstatesman.com/economy/2011/02/london-corporati... )

That's probably because the City of London isn't in any meaningful way whatsoever a "tax haven".

Fretting over the utter archaicness of the corporation, the power of the financial lobby and the connection of actual tax havens to the city doesn't make it a tax haven. Notice how the Monbiot piece is silly with irrelevant footnotes (in case you're worried he's pulling your finger on the date of the Lord Mayors parade, don't worry, it's carefully sourced) - except the bit where he makes his central assertions?

Here's the relevant test: Does incorporating inside the jurisdiction of the City of London change your tax liability compared with incorporating anywhere else in London, in any way whatsoever (except business rates, which are actually slightly higher in the city)?

There is a LOT more that can be said about the Company of London (and the its incorporated subsidiary, the Federal US Government)

I did research on incorporating offshore when I was planning on becoming a travelling freelancer.

The Seychelles came up as one of the easiest and cheapest places to incorporate. Very little regulation.

Can you recommend any good resources that you found during your research?

Many clients will not want to pay your freelancing invoice coming from a Seychelles corporation. Payments to offshore tax heavens are red flags for regulators and tax authorities and your clients will not want that risk.

Invoicing isn't the issue - trying to get a bank account in the name of a company in the Seychelles is very difficult.

I was told that people use Seychelles corporations as holding companies and then incorporate in a more reputable jurisdiction such as Hong Kong.

This guy has a blog with some useful articles that could get you started: http://flagtheory.com/bvi-company-formation/

There are some upsells, but the articles suffice as an introduction to offshore company formation and offshore banking.

Lee Hadnum's books gave me a good foundation: www.UKtaxclub.co.uk

Use a reputable incorporator like Ocra. Cheaper companies will take your money and not actually form the company.

Don't have to pay tax, don't have to file anything, just send them 300EUR a year and you're good.

Does this whole thing depend on countries not publishing their registered companies online? And becomes immediately transparent when they do?

If you're the government of one of these island tax shelters with basically no economy outside of banking, you understand that the party will stop the moment wealthy people stop perceiving your banks as safe from the US government. That would be the end of your country's prosperity and your own.

In depends on the fact that if US investigators come calling, all the government will tell them is "fuck off."

Its generally a collection of companies in various countries. They take advantage of the fact that each country has unique laws. By stringing them together you can eventually make it impossible to track to it's original source. It's kind of like one way encryption in a really stretched analogy.

It seems like you could just fly around obtaining or suing for the information, so it's not really impossible it's just too expensive because the data's not online yet?

I'm not quite sure about that. From my understanding you can do it in a way where eventually you lose the trail. Because of the legalities of what information each country shares, if you get it in the right order you can prevent it from leading all the way back.

Not as simple as that. You want to find the ultimate beneficiary and that can be hidden behind numerous layers.

E.g. I set up a trust and appoint a law firm to handle my affairs (I can already hide behind client attorney confidentiality). My lawyer sets up an offshore company and appoints nominee officers. That company sets up another offshore corporation in another jurisdiction again with nominee officers. Etc.

To get back to me you would have to find company information, find who those nominee officers represent (which would require international warrants) and follow the trail. Rinse and repeat until you eventually get to my lawyer who still has few ways of preventing you finding my name.

And you can do many more layers of hiding than the three illustrated here

Obviously, with enough resources the information can be extracted. The US or Russia clearly have enough resources to either dig through technically or simply threaten to murder those who don't cooperate.

However, the real issue is that very powerful people are using these techniques. So, governments have to worry that they're going to accidentally trip over somebody who is powerful enough to cause problems. If you are a bureaucrat examining what you think are low-level offenders but accidentally stumble onto something held by Vladimir Putin, you're going to bury that post haste so as not to endanger your life.

> The US or Russia clearly have enough resources to either dig through technically or simply threaten to murder those who don't cooperate.

A government is not going to threaten to murder folks for not turning over some financials. I think you've been reading too much Tom Clancy.

I would say yes to this. If the case is big enough, like the someone assassinated the leader of a large country they could pull enough strings or threaten to embargo etc.

It mainly depends on a lack of cooperation between nations.

I register a company in small country A.

As a representative of that company, I open up another company in another country, preferably one that will not extradite and has a history of a lack of cooperation in criminal and civil cases.

They then use that company to open up another company in Seychelles which in and of itself according to this post is a known place to siphon funds through a corporation.

I'm descended from a Seychellois family on my mother's side (hence my French name). It's a rotten paradise, sadly.

Yeah okay, but how does the amount of lost tax revenue here compare to lost corporate tax revenue?

You don't even need to go as far as the Seychelles to dodge taxes - there's the inter-state tax dodging version called "Delaware" (although the incentive is a bit weaker).

Right now, the hot commodity for corrupt officials, criminal billionaires, and money launderers (domestic and foreign) is real estate in the U.S. (and in Canada, esp. Vancouver). The U.K. is having the same problem. Even if this seems like a small percentage of purchases (but it's not; in London, foreigners laundering money make up about 75% of the purchases) it combines with price inelasticity to make prices go through the roof: several times what they would be otherwise.

Take China as an example (mostly, just because it's a very large country) where corruption is a death-penalty charge. If things turn against you, you're going to need not only a new identity (for your entire family) but possibly a new face (not exaggerating). The West Coast has some of the best plastic surgeons, but it also has expensive houses (which you can borrow against) and tech companies (where non-technical executive positions involve zero responsibility and make great sinecures). The sort of high-level makeover process these guys involves buying a career (including fake references) and being inserted in an executive sinecure somewhere, but that takes about 3 years, so you need 3 years' worth of cash before you can start earning on your own again. With most assets frozen and the previous identity gone, the house (delivered through a shell company to the new identity) is the only reliable store of wealth. Silicon Valley is attractive to the world's criminals because it's the one place where you can have $4 million of "wealth" tied up in a house and not raise an eyebrow.

> The buyer, an Italian, was in town for a week, with a million or so dollars to spend. We met one Sunday morning at 20 Pine, a Financial District condo building. She wore a red scarf, jangly jewelry, and a pair of lime-green sunglasses perched atop her curly hair, and she told me she would prefer to remain anonymous. Working through a shell company, she was looking to anchor some of her wealth in an advantageous port: New York City.

Article is a fascinating read: http://nymag.com/news/features/foreigners-hiding-money-new-y...

Interesting idea - the main thing I would object to is because it's the one place where you can have $4 million of "wealth" tied up in a house and not raise an eyebrow.

If you go to any first world capital/metro region you can spend that money easily at a decent apartment. No matter if it is Hong Kong, Paris or New York, $4m are actually not that much money for decent real estate.

Fair point. The cancer of the global elite has spread to quite a large number of cities: certainly not only London and NYC.

Silicon Valley, I think, is more attractive because if you're going to make over an exiled corrupt official into a corporate executive with a completely different CV and identity, the privacy advantages of a free-standing house are pretty compelling.

Also, it's easier to pull one over on tech people (see: highly talented young people working 80+ hour weeks for tiny pieces of equity). If you need to turn a corrupt official into an executive, you're going to have an easier time of it in some flake-ball VC darling than at Goldman Sachs.

don't forget how easy it is to launder money through internet advertising.

What you say is extremely interesting. But I have to ask, do you have a source for any of it? Where can I read more about it?

Londoners being priced out of their own city:

http://www.bloomberg.com/news/2014-04-04/londoners-priced-ou...

Here's another one.

http://www.bloombergview.com/articles/2014-04-28/buy-london-...

It said a row of 10 houses worth a total of $122 million have stood unused since they were bought between 1989 and 1993, supposedly on behalf of Saudi royalty.

In other words, criminal motherfuckers who abuse their own people and finance religious extremism, now also fucking up London for the people who live there.

On New York real estates's appeal to the worst scumbags of the new (mostly criminal) global elite:

http://nymag.com/news/features/foreigners-hiding-money-new-y...

This is hard-core class war, and it won't stop until we end it on our terms.

Thanks. I'm also interested in the "new identity" and "new face" stuff, if you have a link for that.

Your anger is misplaced. It's precisely these countries' governments that prop up dictators and princes that accumulate all that wealth instead of investing/distributing amongst their own people.

What goes around, comes around. And please don't tell me that the people are not representative of the govt. Most western governments are democratic....and I don't think ordinary civilians can have any more power than what they already have(even though they might not exercise it).

Btw, this makes me wonder if we should make foreign affairs something that is more actively debated amongst the general public than Kadarshians/Hollywood/Royal Babies.

> delivered through a shell company

You lost me. Suppose from here, where I am, in the US I set up a foreign corporation, and it buys a nice house in NY State. I move in as a 'renter'.

Then too soon the IRS notices that I am living high on the hog, e.g., in a nice house, but paying very little in income taxes.

Similarly if the garage of the house has a half dozen 'super cars' worth $1 million or so each. And maybe the interior decorating of the house is drop dead gorgeous, cost $1+ million, which the IRS could notice if they could can inside, maybe with a search warrant, or even just interview a maid I hired to run a vacuum cleaner, and then get a search warrant.

So, the IRS and their lawyers start after me?

Okay, maybe I pay a 'fair' rent for the house and pay it to the offshore company. My understanding is that that doesn't work because that company needs a US branch office that has to file US taxes. So, the IRS could get my banking records and see the rent checks I paid. Okay if could arrange that somehow the US branch office made $0 earnings each year so that it owed no US taxes, maybe.

Or, maybe I 'work' for the US branch office, and they pay me a salary, and I pay my rent to them. Hmm. But the rent would have to come from ordinary income, after tax?

Or, use part of the house for my business and pay part of the rent as an ordinary business expense from my pre-tax revenue? Maybe for a little of the house, say, a home office, that would be okay with the IRS, but that leaves maybe the other 90% of the house the IRS would insist that I pay for in some sense out of taxable ordinary income.

Or maybe be an employee of the US company and hired as a 'house sitter' keeping the house safe and, thus, don't pay rent? The IRS might just tell a judge that this whole setup is tax fraud and let me have an extended 1 on 1, in person, tutoring session with Bernie Madoff?

Or maybe the US company could sell me the house for, say, $1000, and somehow I would convince the IRS that my little house, that cost $10 million to build, is something a person paying so little in taxes could afford? I could get the IRS and a tax court judge to agree with that?

Maybe I'd like 2000 acres of New Hampshire woods around the house. Okay, maybe the US company buys the woods as an investment and lets me and my kitty cats make some use of the woods, the stream that flows through, the lake from a dam on the stream, etc.?

I guess basically I'm lost on how I could live in a $10 million house and still convince the IRS that am within the law.

Or, maybe a corporation owns the house but has a lot of debts otherwise so in total is next to worthless, and I buy the corporation for $1, keep the $10 million house, and do something, somehow I don't mind doing, about the debts of the corporation. E.g., maybe my business loaned the corporation $10 million that the corporation used to buy/build the house. Then the corporation is worth essentially $0. Then I buy the corporation for $1. I keep the house. For the debt, my business calls that a loss.

I'm trying to understand.

Cough ...

"She sells shelters to tax shills by the Seychelles sea shore."

The only time I have ever wished "Hacker News Gold" was a thing.

Or: "tax shirks" wirks well.

<golf_clap>

what is the new news here?

Most interesting things aren't new.

Reply on news.ycombinator.com