Over the last few months, we heard a lot of news about Mossack Fonseca and Panama Papers. There are indirect victims that emerged from the Panama Paper saga. But what had Mossack Fonseca done to deserve such an attention?
Over the next few postings, we will share and discuss the structures that were used by Mossack Fonseca.
One of the structures that are used by Mossack Fonseca was to incorporate a BVI company with bearer shares. As a corporate service provider, we are aware that there are jurisdictions that allow bearer shares structures. This structure is useful but at the same time is outdated. Why is that so? It is impossible to open a bank account with a bearer shares structure. After Panama Papers and 1MDB sagas, banks have tightened their KYC practice. The Monetary Authority of Singapore ordered BSI Bank to shut down its operation in Singapore and a few banks were given warning as well.
We felt that there is no wrong to use bearer shares structure. If it is illegal, the jurisdictions which allow bearer shares structure should be guilty as well. Certainly, we will not advise our clients to use bearer shares structure as it is impossible to open bank accounts. However, if the offshore company is used to hold assets that are not cash, it may make sense to use bearer shares structure.