Starting a Small Home Business

If it Sounds Too Good to Be True

April 25th, 2009 Filed under: Uncategorized — Small Home Business Author

If you read headlines regarding offshore banking centers like we do, you have probably been bombarded with the news regarding Stanford Financial Group. Robert Allen Stanford and his group defrauded investors of nearly $8M, according to The New York Times, by issuing uninsured CD’s at a high interest rate. The bank’s Antigua-based associates originated the CD’s.

It’s easy to feel uncertain in the offshore banking world, particularly with headlines like these. The Stanford Financial Group took advantage of lack of regulation in the Antigua market to make risky investments at the clients’ expense, but not all offshore financial companies are seeking these same dubious activities. In fact, certain jurisdictions are well-regulated and conform with standard international practices.

How do you know the difference? Ask a few simple questions before you invest offshore to determine the validity of an acquisition.

- How long has the company you are acquiring or placing funds with been in business?

- How long as the jurisdiction you choose been offering this type of financial institution?

- Is the jurisdiction a member of the Organisation for Economic Co-operation and Development (OECD)?

- Is the jurisdiction in compliance with the Financial Action Task Force (FATF) or its Caribbean partner (CFATF)?

- Is the jurisdiction on the list of non-conforming tax havens, or “black list”?

- Does the jurisdiction have a tax treaty with the US?

While it may seem appealing to seek non-conforming locations for financial benefits, remember: you pay for what you get. Domiciling your company or your funds in jurisdictions with brand new or unapproved legislation poses risks. Among those risks are less security and less prestige; additionally, you face the uncertainty that new legislation may be imposed on your non-conforming company, greatly undermining the reasons you chose that company and location to begin with.

An offshore acquisition should be no different than any other acquisition your business proceeds with. Do your research, and know that the size of your investment should be an indication of the value of your investment. If you are shopping on the discount shelf, be prepared for what you find.

Bethany Henderson is a Senior Consultant at Worldwide Business Consultants, an International Mergers & Acquisitions firm headquartered in Manhattan Beach, CA.