Reforms in tax havens aid sleuths

PUBLISHED : Friday, 03 May, 2013, 12:00am
UPDATED : Friday, 03 May, 2013, 4:22am

As opaque networks of secretive companies linking offshore havens with Hong Kong are forced to become more transparent, it will be easier to track down assets hidden in jurisdictions such as the British Virgin Islands (BVI), says William McGovern, a former official with US regulator, the Securities and Exchange Commission.

"There is an uptick in positive signals that we're moving towards greater transparency," said McGovern, now a partner at Kobre & Kim, a US law firm that has worked with US government investigations on fraud, money laundering and corruption.

Following the lead of the Cayman Islands, some of the other so-called UK Overseas Territories, namely Anguilla, Bermuda, BVI, Montserrat and the Turks and Caicos Islands, have agreed to much greater transparency of accounts held in those jurisdictions, the website of Britain's Treasury announced yesterday. These jurisdictions have agreed to automatically exchange information with Britain, France, Germany, Italy and Spain, while the Isle of Man has also agreed to join this multilateral sharing of information, said the Treasury.

Britain, along with other countries involved, will be automatically given much greater information on bank accounts held by their taxpayers in these jurisdictions, including names, addresses, dates of birth, account numbers, account balances and payments into those accounts, according to the Treasury.

By the first quarter of next year, BVI would reform its laws against money laundering and terrorist financing, BVI Prime Minister D. Orlando Smith said recently.

Most of Hong Kong's offshore business was conducted through BVI and Cayman Islands, said John Bruce, Macau director of Hill & Associates, a Hong Kong risk consultancy.

McGovern said: "It will be easier to find illegal assets and connect them to the real owners in future, and seize the assets pursuant to a judgment. As a result, there will be more opportunities to identify assets. It will be a more creditor-friendly world. What we're seeing now is the walls of secrecy in some jurisdictions have started to come down."

Five years ago, if a country's government had a judgment against an individual for fraud, it would be difficult to find the money, McGovern added. "In the past, many Western clients were told by lawyers there was no hope of getting the assets. It's our view that there are increasingly more tools to recover assets on behalf of judgment holders and victims of fraud."

In the past 12 months, the number of calls to Kobre & Kim from prospective clients in the West had increased 50 per cent, McGovern said. "Most of the calls we get are judgment holders in the West seeking assets from parties in Hong Kong and China. Hong Kong shows up in the majority of our cases globally as a piece in an international jigsaw puzzle," he said.

"In our work, we have found that the corporate holding structure of Chinese companies often includes offshore entities. We have opened offices in the Cayman Islands and BVI to better serve our clients. What we find in talking to Chinese clients is so much of their business is tied to Cayman Islands and BVI. From our experience, between Chinese companies and BVI, there is often a Hong Kong company," McGovern said.