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7 J. Fin. Crime 9 (1999-2000)

handle is hein.journals/jfc7 and id is 1 raw text is: ANALYSIS The Protection of Offshore Confidentiality: Policy Implications and Legal Trends Rose-Marie B. Antoine The principle of offshore financial confidentiality is a controversial issue in offshore law. On the one hand, offshore jurisdictions view confidentiality in financial matters as an essential ingredient in the offshore industry which deserves to be protected. On the other, onshore states are increasingly hostile to con- fidentiality and have been willing to take drastic mea- sures to undermine it. The offshore confidentiality legal principle has provided the impetus for many of the questions sur- rounding offshore activity and the catalyst for much litigation. The paper examines the conflicting legal issues of confidentiality and disclosure within the context of regulation of the offshore industry as a whole. It outlines the extent to which offshore inves- tors can legitimately expect confidentiality. The need to balance these competing interests is particularly important in offshore law, given the competitiveness of the offshore sector in the world of international finance. At the same time, the paper explores what can be described as the emerging law of confidential- ity in offshore finance. The paper will lay the foundation for further dis- cussion on money laundering, financial crime, disclo- sure initiatives and financial regulation and attempt to provide a framework for policy makers. Bankers, trustees, accountants, lawyers and everyone else asso- ciated with offshore business are affected by offshore confidentiality norms. Everyone is at risk if confiden- tiality is breached. All stakeholders need to under- stand the legal parameters of the duty of offshore confidentiality in contemporary investment in the offshore sector. One factor to be considered in the discussion, and one which is not to be underestimated, particularly in relation to comity issues, is that offshore govern- ments make no apologies for laws which establish and uphold confidentiality. They pursue the preser- vation of confidentiality as a legitimate objective in itself. Questioning offshore confidentiality laws is more than a mere legalistic inquiry. To some extent it is also questioning the right of sovereign govern- ments to create laws in harmony with their own nationalist and developmental perspectives.' Off- shore courts perceive the protection of confidentiality as part of their wider duty in the public interest, albeit in the exercise of jurisdiction conferred by law. It is thus not simply a matter of questioning the validity, efficacy and morality of contemporary domestic legal norms on confidentiality derived from a common law perspective. The issue of confidentiality has also had implica- tions for several other areas of law. These are men- tioned with a view to forging some coherent legal principles in the creation of an offshore jurisprudence. They include the appropriate parameters of bank regulation within the context of the prevention and detection of certain undesirable or criminal activities, such as money laundering and tax evasion, issues con- cerning the comity (the extent to which one country will respect the laws of another) and sovereignty of nations in international law, business efficacy and eco- nomic reality as measured against the potential for abuse, and constitutional issues such as the right to privacy, the privilege against self-incrimination and arbitrary search and seizure. The list is not exhaustive. The proposition that confidentiality is legitimate, albeit in measured form, will be discussed against the background of such notions. THE PROBLEM POSED - THE ABUSE OF CONFIDENTIALITY A major obstacle to the goal of financial regulation and law enforcement is the ability of onshore govern- ments, tax authorities and private individuals to over- come the confidentiality laws or practices of offshore regimes. Information relevant to taxation, banking and other financial matters, even for the use of criminal or civil investigations, is often not accessible. © Emerald Backfiles 2007

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