March 29, 2020

Hong Kong Moves to Limit Information on Executives

HONG KONG — After a year in which short-sellers continued attacks on companies from China and journalists conducted in-depth investigations into the secret wealth of Chinese leaders’ families, Hong Kong is moving forward with legislation to restrict access to information about corporate directors.

Little-noticed provisions in a package of proposed laws making their way through the local legislature would prevent the general public — including journalists and investors — from gaining access to the residential addresses and ID or passport numbers of directors of private companies in Hong Kong.

Those details, which can be key to sifting through often-byzantine layers of shell companies and nominee shareholders to identify the true owners of certain assets, are currently housed in an online searchable database that is open to the public for a nominal fee.

The restrictions are expected to be voted on by the legislature in the coming months and could still be amended. They would block access to directors’ details at the more than one million private companies that are registered in Hong Kong, with exceptions granted for law enforcement, securities or industry regulators and liquidators.

The measures are raising the hackles of investors and journalists in the Asian financial hub.

“If these changes go through, it would be a sad day for Hong Kong, which has generally been a beacon of transparency in a region where opacity is rife,” said Ben Rowse, head of the Asia practice at Nardello Co., which conducts due diligence and consults on compliance issues for the investment community.

As part of a broader corporate paper trail, such information was used in 2012 by The New York Times in reports on the wealth of the family of Prime Minister Wen Jiabao of China, and by Bloomberg News in a report on the wealth of the country’s presumptive next president, Xi Jinping.

“Company searches have always been an important tool for investigative journalism,” Journalism Educators for Press Freedom, an advocacy group based in Hong Kong, said in a news release Tuesday. “This information allows journalists to grasp concrete evidence in exposing conflicts of interest among senior officials and elected representatives and to reveal the shady practices of dishonest companies. To cut off this channel of discovery is to seriously stifle an important source of information.”

A former British colony, Hong Kong maintains records on public and private companies, land transactions and other corporate filings that are detailed — and accessible — to a standard not seen in many other countries in Asia. This is particularly true in mainland China, which has been restricting access to domestic corporate filings since a series of attacks by short-sellers on the shares of Chinese companies listed in North America.

The Hong Kong government has said the purpose of the new measures is to protect the privacy of company directors better. So far, legislators examining the proposals have tended to agree and have not proposed separate amendments.

“At issue is the dichotomy between the protection of privacy and the right to know,” said Ronny Tong, a legislator who supports more democracy.

There are some exceptions, he said, but the privacy rights of directors should not be any different from the average person’s — and “exceptions do not include media trying to fish out a story.”

For the financial industry, the issue is more nuanced. Banks conducting due diligence would still be able to receive the information on the directors of corporate borrowers by asking clients directly, and could simply decline to do business with them if they refused, said Kyran McCarthy, a partner and head of the Asia anti-money-laundering practice at the consulting firm KPMG. Existing shareholders of private companies would also retain access to directors’ details.

But for others, like would-be investors, the issue of access to identifying information would be more problematic. “It’s extremely important, particularly when you are trying to work out the existence of any related party transactions or conflicts of interest that may have not been disclosed to a potential investor or business partner,” said Mr. Rowse of Nardello.

David Webb, a longtime shareholder activist in Hong Kong who has gone to battle with several influential tycoons, sees a positive side to protecting residential addresses. “In some cases, it’s a personal security issue,” he said.

But he has no objection to the public availability of ID or passport numbers, he said — “which John Smith, or Mr. Chan, do you mean?”

Blocking access to those, Mr. Webb said, would be a bad move: “Hong Kong is just going the wrong way in terms of transparency.”

Article source: http://www.nytimes.com/2013/01/10/business/global/hong-kong-moves-to-limit-information-on-executives.html?partner=rss&emc=rss

Wealth Matters: For the 2nd Time, Voluntarily Disclose Your Offshore Accounts, or Else

Everyone should know this, but that makes the Internal Revenue Service’s current program of voluntary disclosure intriguing. The program came about after a similar one in 2009 drew in some 15,000 formerly undeclared accounts. But after it officially ended, thousands more came forward, flooding the I.R.S. enforcement system.

So it made sense from an I.R.S. perspective to offer a second round of disclosure, which began in February and ends on Sept. 9. (The deadline, originally Aug. 31, was extended Friday because of Hurricane Irene.)

Yet the structure of this program has given pause to people who haven’t declared offshore accounts. The penalties are steeper — up to 25 percent of the value of the assets — and they’re assessed on the highest value of those assets over the last eight years.

The Justice Department, which prosecutes tax evasion cases, is making sure people know that the penalties are real. Earlier this month, it announced that a California man named Robert E. Greeley had pleaded guilty to filing a false income tax return that concealed $13 million in two offshore accounts at UBS in Switzerland. Mr. Greeley paid a $6.8 million penalty for his failure to file a report of foreign bank accounts.

The penalty could have been worse. Mr. Greeley had set up two shell companies in the Cayman Islands to hide his ownership of the accounts. When someone willfully seeks to evade taxes, as he did, the penalty can be as high as 50 percent of the account value for every year it existed. (A separate fraud penalty can also be levied.)

“Some people will say, ‘I didn’t have my account at UBS so they’re not going to find out,’ ” said Warren Whitaker, a partner in the individual clients department at Day Pitney in New York. “The reality is the world is shrinking, and people who think they can squeak by and they won’t get caught are kidding themselves.”

So regardless of how the rest of us may feel about tax evaders, what should someone with an offshore account do? There are two options: join the program or go it alone and take your chances. Here’s a look at the two options.

VOLUNTARY DISCLOSURE The main benefit of the second round of the I.R.S.’s offshore voluntary disclosure initiative is that people who come forward will not face criminal charges. They will owe a lot of penalties, but these may be less than if they were caught. (While the program officially ends on Sept. 9, the I.R.S. has said taxpayers who make a good-faith effort to comply may be able to file for an extension.) There are three groups of people for whom this program makes a lot of sense.

The first is people who inherited money from a relative in another country and kept it there. The penalty for inherited money is 5 percent of the account value, and paying this would save the person from a lengthy negotiation over a penalty that might end up being more. But there is one caveat: if, say, the person moved the inherited account from Italy, where the relative lived, to a bank in Switzerland, the I.R.S. could use that move as reason to increase the penalty to the full 25 percent because it was no longer a passive account.

In the second group are people who put the money offshore in better times and need it now. Gone are the days when banks would quietly accept large sums of money wired in from offshore accounts. Today, banks are required to file a suspicious activity report if money appears to be coming in from an undeclared account.

“They can’t just call their banker in Geneva and say, ‘Can you wire-transfer me $150,000?’ ” said Asher Rubinstein, a lawyer in New York who specializes in offshore tax issues. “So they’re saying, ‘Let me clean it up, make it compliant, and bring it here.’ ”

The third group is people who willfully hid money offshore to avoid paying taxes. If they are caught after the voluntary disclosure program ends, they could face penalties worse than Mr. Greeley’s.

NEGOTIATING The big difference from the last voluntary disclosure program is that this one is levying penalties on all assets kept abroad, not just financial assets.

Article source: http://feeds.nytimes.com/click.phdo?i=b1a32ba52b1f1a4bc0c1074c9f33a32d