ST. LUCIA — Client confidentiality, changing reporting standards, and new developments in trust and estate planning were among the topics of discussion this week at the 2016 Society of Trust and Estate Practitioners Caribbean Conference in St. Lucia.
Underlying many of those topics was the issue of the Panama Papers — a trove of 11.5 million documents leaked from the Panama-based law firm Mossack Fonseca that reportedly reveal money laundering and other nefarious activities taking place in offshore financial centres — with speakers giving attendees advice on how to avoid being caught in a similar crisis and what to do if they are.
Chris Mathers, a former undercover agent for the United States Drug Enforcement Agency, spoke at a panel discussion on client confidentiality, pointing out some of the common mistakes many people make when handling confidential information. Such mistakes, he said, could have led to the Mossack leak.
“The mistake all of you are probably making right now as we speak is that you’ve got all your information, all the gold, in a server that’s attached to a computer that’s attached to the Internet,” he said. “Here’s what you’re going to do when you go back to your office: You’re going to take all the information you don’t need to have at the tips of your fingers, you’re going to put it on a hard drive, and you’re going to stick it in a safe.”
Mr. Mathers pointed out that even with the most advanced encryption systems, data leaks can still happen via employees who are bribed, threatened or disgruntled.
Tim Prudhoe, a partner at the Virgin Islands-based firm Kobre & Kim, raised the point that many clients want access to requested information immediately, but Mr. Mathers said that in the age of cyber hacks, privacy and security should be the foremost considerations.
How to respond
Kerry Harris, a public relations specialist who founded ReBoot Consulting, gave advice on how attendees should respond if a data leak from their firm is publicised.
“I often speak at universities and colleges, and I would use [the Panama Papers] as a case study on how to not handle a crisis situation,” she said.
Ms. Harris said Mossack officials made several mistakes after stories on the Panama Papers broke on April 3: taking too long to respond, painting themselves as the victims, and even saying last week that they will not change any of their business practices.
“Not smart,” she commented. “I look at them and I give them a failing grade.”
Reporting standards
With much financial data being disclosed not through data leaks but through legal means such as the Organisation for Economic Cooperation and Development’s Common Reporting Standard — an agreement between some 80 jurisdictions to exchange information on residents’ assets and incomes — another major topic of discussion at the conference was the ever changing regulatory landscape and how it affects offshore financial jurisdictions.
The VI was an early signer when the new CRS reporting requirements took effect on Jan. 1, but the US is not participating. As a result, many conference attendees shared the sentiment that American states such as Delaware and Nevada are becoming increasingly attractive options for clients looking to maintain privacy.
“Is the US becoming the world’s next tax haven?” London-based BDO tax attorney Richard Morley asked, receiving affirmative murmurs from the audience. “And what are we going to do about that?”
Answering his own question later in the discussion, Mr. Morley said some attorneys think the CRS could be vulnerable to a legal challenge on privacy grounds.
Mr. Morley argued that even though the information shared between the 80-plus jurisdictions is ostensibly supposed to be kept from the public eye, in practice, “Can any of us actually say that when information is flowing from country to country it will remain 100 percent confidential?”
Peter Cotorceanu, CEO of the Switzerland-based firm G&TCA, also pointed out that some of the jurisdictions participating in the CRS have draconian penalties for tax evasion — China, for example, imposes the death penalty for the offence — which raises human rights issues.
Uses of trusts
While much of the discussions involved client confidentiality and the changing offshore landscape, time was also devoted to talk about some of the new developments in trust and estate planning.
Gregory Sanders, the head of the Canada-based firm Perley-Robinson, Hill & McDougal, gave a talk on some of the “non-traditional” assets his clients want to hold in trust.
Such assets range from the esoteric — for example, Mr. Sanders said he helped a client put a fleet of World War II planes in trust — to the downright bizarre.
The lawyer said he’s now being approached by some clients who believe in the future of cryonics, the practice of preserving one’s body and brain at low temperatures with the hope of reviving decades or centuries later when science permits.
Those clients plan on preserving themselves, and want to be the beneficiary of their own trust so that they can collect their fortune upon resurrection, Mr. Sanders said.
This raises all sorts of “interesting” trust issues, he said, such as what body the beneficiary would occupy upon revival, and when the trust should switch over to a new beneficiary if the science of cryonics doesn’t advance.
“You’ll hear the occasional story about this, but until I actually sat down and met with a client I didn’t think these people really existed,” he said.
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