As High Net Worth Individuals (HNWIs) navigate the complexities of global finance, a new era of financial transparency has dawned, ostensibly to combat crime but with far-reaching implications for privacy and strategies for asset protection. In the latest episode of our podcast, we explored the underlying motives of FATCA, CRS, and beneficial owner registers, and I’ll be sharing insights on safeguarding your assets against an increasingly intrusive fiscal landscape with effective strategies for asset protection. You can access the episode here.
The Facade of Crime Prevention
FATCA and CRS were sold to us under the banner of fighting money laundering and financial crime. However, the true purpose is becoming increasingly clear: these measures are about wealth surveillance. The premise is simple – you cannot tax what you cannot see. Thus, FATCA, CRS, and beneficial owner registers are mechanisms not for crime prevention but for tax collection, challenging traditional strategies for asset protection.
The Rise of Wealth Taxes
The timing is conspicuous. Just a few short years following the widespread implementation of beneficial owner registers, proposals for wealth taxes are gaining traction globally. Similarly, the concept of citizenship-based taxation is being floated more frequently. This is no coincidence; it’s a well-orchestrated bait and switch by governments worldwide, impacting strategies for asset protection.
The Ineffectiveness Against Crime
Let’s consider the logic. Would a criminal brazenly place assets in their name, easily traceable through these transparency measures? Of course not. Straw men and complex structures owned and operated are the tools of their trade. The UK’s beneficial owner register, for example, exposed the futility of such registers in combating crime, identifying a minuscule fraction of potential wrongdoing from millions of companies.
Governments’ Ulterior Motives
It’s not naivety but strategy that drives these initiatives. As governments grapple with fiscal irresponsibility, wealth surveillance becomes a tool to fund their profligacy. The erosion of rights and freedoms is the collateral damage in this quest for revenue.
The March Towards Confiscation
While outright wealth confiscation may seem extreme, the trajectory is worrying. Penalties for minor infractions could skyrocket, akin to Switzerland’s income-based speeding fines, turning taxation into a form of confiscation.
Protecting Your Wealth
The question stands: how does one protect themselves and their wealth? Here are some strategies:
- 1. Relocate to Tax-Advantaged, Wealth-Friendly Countries: Choose a domicile that respects wealth and offers favorable tax regimes, a core aspect of strategies for asset protection.
- 2. Remove Wealth from Personal Ownership: Utilize trusts, foundations, and other structures to hold your assets, distancing them from your name.
- 3. Geographical and Jurisdictional Diversification: Spread your wealth across multiple asset protection and tax-friendly jurisdictions. The same applies to residencies—have alternatives ready.
- 4. Implement Backup Structures: As discussed in a previous episode here, have a secondary structure ready to receive your assets should the need to exit a jurisdiction arise swiftly.
The Tightening Noose
Governments are aware of these protective strategies and are actively working to counter them with exit taxes and laws that penalize the transfer of assets to protective structures. The United States, for example, generally continues to tax assets even after they’re placed in trusts or foundations.
The Window Is Closing
It’s a grim forecast, but one that cannot be ignored. The window for setting up new, beneficial structures is closing. If these strategies are not implemented soon, they may become impossible to execute in the coming decade.
As wealth planners, we urge you to consider these protective measures seriously. The world is changing, and with it, the rules of asset protection. To learn more about creating robust strategies for asset protection for your wealth, refer to our episode on backup structures and reach out for tailored advice.