FINANCIAL PRIVACY

If you are a U.S. Person, the term "financial privacy" is a concept known only in fiction and dreams. It is interesting that the U.S. Supreme Court was able to find a right of "privacy" in the Fourth Amendment in order to justify its holding in the famous Roe v Wade which makes abortion a Constitutional right. That same Supreme Court sits by and allows the Congress, at the urging of the IRS, to pass and implement laws that strip every American of any pretense of privacy in their personal and financial affairs.

In a piece of legislation, ironically called the "Bank Secrecy Act." The IRS has turned every bank and S & L in the U.S. into its unpaid informants. Each bank with which you deal is required to establish a "profile" of your "normal" banking transactions. If you engage in any transaction that is outside that profile, your bank is required to report it to the Federal Reserve and to the IRS. In addition to reporting that transaction, they are required to provide a summary report of all of your banking activities for the preceding year. So if you sell your home and the proceeds are temporarily deposited into your bank account, that large deposit will be considered suspicious and will trigger the sort of reporting just described.

In addition to this, the Fed and the IRS get a copy of every wire transfer within the U.S. that exceeds $5,000 and a copy of every wire transfer out of the country, regardless of size. It is not illegal to transfer money, but it has become illegal for the transaction to remain "private."

If you purchase an interest in a foreign company or an interest in a foreign partnership, you are required to report that to the IRS. Again, it is not illegal to engage in the transaction but it is illegal not to report it. Think about that. If the transaction itself is not illegal, why should you be required to disclose it. Similarly, if you transfer any assets into a foreign trust, receive any distribution from a foreign trust or become the beneficiary of a foreign trust, you are required to promptly report that fact to the IRS. The Constitutional right of privacy will allow a teenage girl to abort her unborn child without the consent of her parents or the father, but you cannot purchase a $500 interest in a foreign corporation without being required to report it.

The simple truth is that given the combination of self-reporting that is required, the access of both government and private sectors to the immense data bases created by government agencies, credit reporting agencies and corporations whose sole business is to gather information on each American, there is effectively no financial privacy left in the United States. If you want to be able to engage in financial transactions that are private between you and the others in the financial agreement, it is absolutely necessary that you design and implement an offshore strategy. The transactions must begin and end outside of the U.S. The records of the transaction must be created and maintained outside of the U.S. This is so that the courts of the U.S. will have no jurisdiction to enforce any request or demand for the records.

It is important to note that the reason for personal or financial privacy has nothing to do with the legality of the transaction. The government would have us believe that the only people who use offshore tax havens are drug dealers and money launderers. Not only is this not true, but virtually every Fortune 500 company has an offshore strategy in place. Every major insurance company and banking institution has an offshore operation in place. Many of America's wealthiest and most powerful (including members of Congress) participate in lawful offshore structures. The intentionally created perception of impropriety and illegality is to discourage Americans from lawfully reducing the taxes they would otherwise pay. It is also done to make it easier for creditors (both private and governmental) to seize your assets. If those assets are beyond the jurisdiction of the courts, there is little leverage that the claimant can bring to bear.

Prudential Trustees acts as trustee and offshore manager/advisor to a group of trusts. Some of those trusts are settled by non-U.S. persons who reside in Europe and South America. Others are settled on behalf of offshore service providers with whom we work, for the purpose of permitting "recharacterized" assets (assets that used to belong to a U.S. Person) to be brought under foreign ownership and control. All financial transaction that take place after that recharacterization will be private, and not subject judicially compelled disclosure in the U.S.

The laws of both the Bahamas and Nevis disregard and give no jurisdictional credence to U.S. Court Orders.. Subpoenas have no force and effect. It is a criminal offense for a fiduciary located in either jurisdiction to disclose confidential financial information.

The professionals at Prudential take the concept, the goal and the mission of financial privacy very seriously. We use time-tested procedures in conjunction with the newest cutting edge technology (such as Net based encryption and isolated, hack-proof servers for the storage of sensitive data.) There is a phrase that we sometimes use at Prudential to describe the method of maintaining privacy. The term is called "building the onion." "The onion" is the structure of a complete offshore financial strategy. It involves many layers that make disclosure practically impossible. The layers are arranged so that the structure does not become too complex and cumbersome, but so that it retains its simple appearance, its elegant functionality, and its user-friendly nature. Since nothing is "impossible," we always hold out the possibility that somehow, some governmental agency will be successful in "peeling the onion." Most likely this will happen by the American client succumbing to pressure and making the disclosures personally. If that happens, the agency that "peels the onion" will do what everyone does when they peel an onion. They will cry. They will cry because when they get to the core of the onion and examine all of the layers, they will learn that the plan was legal all along. It was legal, but private.