The Pandora Papers do not represent the wider offshore financial industry which typically helps people seek enhanced flexibility and greater returns.
Over the weekend, around 12 million confidential documents of world leaders, politicians and ultra-high-net-worth individuals were leaked, including former UK Prime Minister Tony Blair, the King of Jordan, Azerbaijan’s ruling Aliyev family, Czech Prime Minister Andrej Babis, and Pakistan’s political elite, amongst many others.
Of course, in terms of people who have previously held political or royal office, and/or those who look to break the law by hiding or ‘washing’ their money or evading tax, there needs to be full transparency.
Yet, the overwhelming majority of people who use firms providing offshore financial products and services do not represent these high-profile names uncovered in the Pandora Papers.
The majority of these people are hard-working, law-abiding citizens utilising legal, compliant solutions to find better returns, increased options and more flexibility.
Over my 40 years working with cross-border investors, I can say that the principal reason people hold money in offshore accounts is simply for convenience. They offer centralised, safe, flexible and global access to their funds regardless of where the person lives or where they may move to in the future. This is crucial for those living away from their country of origin, with typically transient lifestyles.
Furthermore, many offshore financial hubs offer tax neutrality, thereby protecting companies from double taxation that are operating in numerous jurisdictions. As such, many international investors use these hubs as they can offer flexibility of corporate structures and issuance of a mix of share classes, easy incorporations and a strong legal system.
These international financial centres can also offer financial refuge for people in countries with economic and social turbulence, such as volatile currency and expropriation of assets.
I’ve said many times that financial privacy is often required to ensure the safety of individuals and their families. Yet there is a world of difference between privacy and secrecy. Exchanging information between government authorities for relevant tax matters is legitimate, whereas sharing information with any others is not. Privacy is often essential, secrecy is not.
Indeed, offshore financial services provide a much needed, fully legal and in-demand service for individuals, companies, organisations, agencies and charities across the globe.
The Pandora Papers highlight that more needs to be done to achieve better cooperation between some jurisdictions, yet they are certainly not indicative of today’s wider international financial services industry.
That said, they should as a chance to further bolster the effectiveness and credibility of these international financial hubs and the sector as a whole.
This is particularly important as the industry is predicted to grow significantly over the next few years as individuals and businesses seek to become ever more globalised.
Nigel Green is CEO and founder of deVere Group, one of the world’s largest independent financial advisory and fintech organisations.
Photo: Iman Mosaad