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A Looming Dark Ages: Nation States Threatened By Offshore Banks

By Elizabeth L. Bennett, Esquire


I have been a lecturer on hidden assets for the American Bar Association Family Law Section

Is there a darkening of our age? Will nation states become meaningless shells? Will international mobsters and corporations prevail creating feifdoms without land? Will international highway robbers leave women and children destitute? Will the middle class become W-2 serfs to corporate lords? Will those W-2 serfs be the only taxpayers?

The key piece in this evolving scenario is the role of offshore banks in the destruction of the power of the nation state. Offshore banks are used by individuals to avoid the judgments of our courts, the regulations of our government, and the payment of taxes, not to mention to launder the fruits of illegal activities. Money laundering activities divert illegally gotten gains and capital from our own country as well as fledgling democracies in the Near East and Africa, not to mention Russia. Lawyers who help set up offshore accounts should, this author believes, be seen as breaching their professional ethical obligations because their efforts are prejudicial to the administration of our courts, depriving our courts of tax revenues and undermining the enforcement of court judgments.

The IRS estimates that there are $70 billion in lost tax revenues because of offshore accounts. The W-2 serfs are estimated to be paying ten cents of every dollar of tax to make up for unreported offshore income.

Corporations avoid our government's laws and regulations by setting up corporations offshore. As an example, many corporation have self-insurance subsidiaries located offshore which cannot provide American citizens with the protection that would be provided were they regulated under American laws. Moreover, the profits from those businesses are not taxable by the United States nor are they likely to be taxed in their offshore locations.

Russian mobsters have laundered tens of billion of dollars skimmed off of the fragile Russian economy by laundering those dollars through the island of Nauru. Drug lords and gun runners routinely launder money through offshore banking locations. American property owners take rental income, or the proceeds from refinanced mortgages and divert those dollars to offshore locations in abusive trust schemes which are hard to find and difficult to track.

South Africans, who have accrued substantial wealth from the apartheid system, immigrate to this country leaving their dollars offshore and are permitted by our own laws to never pay taxes on the income from those offshore accounts. What kind of citizenship is that?

Not just nation states are affected, family stability is eroding and children's security is jeopardized when unsophisticated spouses lose their marital rights as a result of sophisticated "divorce proofing". Wiley fathers escape support court and marital assets are sequestered in offshore locations where offshore trustees, the "flight" clauses provided in the trust documents and banking secrecy laws create insurmountable barriers to obtaining and distributing those offshore assets and income the family may need. As in the dark ages, women and children are more vulnerable to highway robbery.

How is the nation state harmed? If a nation cannot tax its citizens, it cannot provide services. If it cannot enforce its laws, its laws are meaningless. If it cannot defend itself from international criminal elements, it cannot provide security for its residents. If the government cannot compel the obligations of parents, families disintegrate creating burdens and disruption of society. If the haves escape their responsibility to the community, the have-nots become disenchanted, critical, and, ultimately, rebellious.

There are international banking arrangements which are legitimate. Multi-national joint ventures should be able to pick neutral banking locations with reliable courts, arbitration and financial services. More discussion is required to distinguish productive multinational banking arrangements from those which promote criminality and erode national identity and coherence. The United Nations has had various task forces which have called for a worldwide effort to stop international money laundering. We, in the United States, need to take a closer look at this issue. Patriotism needs to be redefined in the context of the temptation worldwide to escape the rights and obligations of citizenship.

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I conveniently represent clients in the Bucks, Chester, Delaware, Montgomery, and Philadelphia Counties, the towns of Wayne, Radnor, Philadelphia, King of Prussia, Paoli, Devon, Berwyn, Newtown Square, Villanova, Bryn Mawr, Haverford, Ardmore, Lower Merion, Media, Wallingford, and Swarthmore, and throughout Pennsylvania.


© 2015 by Elizabeth L. Bennett, Esquire. All rights reserved.


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