2020 Foresight Report: No Safe Havens – Changes in Offshore Private Banking

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2020 Foresight Report: No Safe Havens – Changes in Offshore Private Banking

Governments globally have been taking initiatives to curb offshore tax evasion for many years. However, this phenomenon has assumed increased urgency since 2008–2009 when economies across the world, developed nations in particular, were severely impacted financially. Their prime targets have been offshore tax havens such as Switzerland and Singapore. Coordinated and individual actions taken by different jurisdictions have significant ramifications for offshore wealth management companies and other institutions whose business is significantly driven by offshore deposits.

The economy at the forefront of fighting offshore tax evasion is the US. It has entered into agreements with several nations to ensure that their financial institutions implement the provisions of the Foreign Account Tax Compliance Act (FATCA), passed by US Congress. Under FATCA, the financial institutions of partner nations are required to give details of accounts held by US taxpayers with them, or be subject to a withholding tax of 30%. Jurisdictions such as the UK have been signing bilateral agreements with other economies, under which limited timeframe disclosure facilities are being offered to offshore account holders to come clean on their wealth or face penalties.

Wealth management companies in tax havens entering into these agreements are expected to handle significant funds through tax payments by offshore account holders. This comes under the category of tax information exchange agreements, whereby financial institutions in treaty countries are required to submit client data.

Key Highlights

-The US, through the medium of FATCA, has been putting the onus on financial institutions based out of its treaty partners to provide information about the US taxpayers holding accounts with them by a certain date or be subjected to withholding taxes.

-Countries such as the UK are mainly offering disclosure facilities to their citizens to come clean on their offshore wealth upon which they would be subjected to lower penalties.

-Some countries such as Germany are not hesitating from buying out stolen offshore bank data and based upon it are taking punitive measures both against those who have evaded their taxes and also the banks abetting them.
Wealth management companies in offshore tax havens have to increasingly highlight the wealth management proficiencies that they have built over a period of time rather than highlighting confidentiality of tax information.

-Due to the reduced returns on wealth deposited offshore due to penalties, individuals will increasingly keep their money onshore. In the long run, it would be in the interest of the offshore wealth management companies to obtain full-fledged licenses to operate onshore in the countries that they have previously been dependent on business for.

2020 Foresight Report: No Safe Havens – Changes in Offshore Private Banking

1 Executive Summary
2 Global Snapshot and Outlook
2.1 Global Offshore Tax Evasion Dynamics
2.2 Regulations and Compliance across Key Markets
2.2.1 Developed economies
2.2.2 Tax havens
2.2.3 Emerging economies
2.3 Recent Developments and Future Outlook
3 Developed Economies
3.1 The US
3.1.1 Introduction to FATCA
3.1.2 Key agreements with offshore economies
3.1.3 Impact on wealth management business
3.1.4 Challenges
3.2 The UK
3.2.1 Introduction to offshore tax evasion regulations
3.2.2 Key agreements with offshore economies
3.2.3 Impact on wealth management business
3.2.4 Case study
3.2.5 Challenges
3.3 Germany
3.3.1 Introduction to offshore tax evasion regulations
3.3.2 Key agreements with offshore economies
3.3.3 Impact on wealth management business
3.3.4 Case study
4 Tax Havens
4.1 Switzerland
4.1.1 Initiatives to curb tax evasion
4.1.2 Key agreements
4.1.3 Impact on wealth management business
4.1.4 Case study
4.1.5 Challenges
4.2 Singapore
4.2.1 Initiatives to curb tax evasion
4.2.2 Key agreements with other economies
4.2.3 Impact on wealth management
4.2.4 Case study
4.3 Hong Kong
4.3.1 Initiatives to curb tax evasion
4.3.2 Impact on wealth management businesses
5 Developments in Emerging Economies
5.1 Brazil
5.2 Russia
5.3 India
5.4 China
6 About WealthInsight
List of Tables
Table 1: Key Destinations for Offshore Wealth, 2011
Table 2: Offshore Tax Evasion Regulations in Developed Economies
Table 3: Anti-Tax Evasion Legislations in Tax Havens
Table 4: Initiatives to Curb Offshore Tax Evasion Taken by Emerging Economies
Table 5: US Accounts Held By Financial Institutions and Reporting Guidelines
Table 6: Exempted Offshore Institutions and Products
Table 7: FATCA Regulations and their Implications
Table 8: Number of US HNWIs and their Overall Wealth, 2008–2017
Table 9: Key Challenges of FATCA Regulations
Table 10: Penalties for Different Inaccuracies
List of Figures
Figure 1: FFIs Under FATCA Regulation
Figure 2: Obligations for FFIs Under FATCA Regulations
Figure 3: Evolution of US FATCA Regulations, 2010–2014
Figure 4: US FATCA and its Impact on Financial Institutions
Figure 5: Completed and In-Process Agreements with Offshore Economies, February 2013
Figure 6: Taxation Agreements Between the US and Switzerland
Figure 7: Taxation Agreements Between the US and Ireland
Figure 8: Taxation Agreements Between the US and Mexico
Figure 9: Taxation Agreements Between the US and Denmark
Figure 10: Taxation Agreements Between the US and the UK
Figure 11: Number of US HNWIs and their Overall Wealth, 2008–2017
Figure 12: Case Study – HSBC
Figure 13: Case Study – Wegelin & Co.
Figure 14: Classification of Territories for Determining Penalties for Offshore Tax Non-Compliance
Figure 15: Classification of Territories for Determining Penalties for Offshore Tax Non-Compliance
Figure 16: Benefits to Individuals who Volunteer under LDF
Figure 17: Benefits of Providing Information under IOMDFK
Figure 18: Case Study – Tax Payments and Offshore Employee Benefit Trusts
Figure 19: Case Study – Offshore Tax Evaders Roderick Smith and Stephen Howarth
Figure 20: Case Study – Credit Suisse
Figure 21: Case Study – UBS
Figure 22: Singaporean and German Tax Agreements
Figure 23: Case Study – Bank of Singapore
Figure 24: Impact of Tax-Evasion Regulations on Hong Kong Wealth Management

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About WealthInsight

WealthInsight provides detailed data and insightful analysis on the global wealth sector. With decades of experience providing business information, we help organizations in the wealth industry make informed decisions, position themselves more effectively and uncover and capitalize on opportunities to win new business.

At the core of WealthInsight is our proprietary HNWI database of the world’s wealthiest individuals. Your business can utilise this database to identify which wealthy individuals to reach out to. You can use our reports and briefings to analyse where the greatest opportunities lie.

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