Enhanced Privacy Using a PPLI Holding Structure

Enhanced Privacy Using a Private Placement Life Insurance Holding Structure

Enhanced Privacy Using a PPLI Holding Structure

Many are attracted to Private Placement Life Insurance (PPLI) for reasons of tax savings and asset protection, but others are looking for enhanced privacy. Enhanced Privacy can come in the form of a structure to hold the PPLI policy. If you have a need for such a structure, look no further. Our firm is using one that has successfully shielded clients from unwanted reporting since 2017.

The first main driver of international tax reporting came from the US in the form of the Foreign Account Tax Compliance Act (FATCA) that was passed by the US Congress and signed into law by President Obama in March of 2010.

The second is CRS which stands for the Common Reporting Standard. It is a commonly used term for the Standard for Automatic Exchange of Financial Account Information (“AEOFAI”) in Tax Matters. CRS is published by the Organization for Economic Co-operation and Development (“OECD”), and supported by G20 countries.

Both FATCA and CRS take a very sweeping approach to how a client’s private financial information is exchanged. We are grateful to Mark Morris for the next several paragraphs where Mr. Morris succinctly analyzes how both FATCA and CRS compromise an individual’s right to enhanced privacy.

Mr. Morris has been acknowledged by the European Commission’s Directorate-General Taxation and Customs Union for his “proven deep knowledge of the issues related to management of private financial assets.”

“The US has undertaken automatic information exchanges under FATCA since 2015 and entered into intergovernmental agreements (IGAs) with other jurisdictions to do so. The Model 1A IGAs entered into by the US acknowledge the need for the US to achieve equivalent levels of reciprocal automatic information exchange with partner jurisdictions. They also include a political commitment to pursue the adoption of regulations and to advocate and support relevant legislation to achieve such equivalent levels of reciprocal automatic exchange.

The disproportionate nature of the automatic exchange of information requires financial institutions and tax authorities to exchange information independently of the existence of any indicia of tax evasion.

The CRS takes a blanket approach to data collection and exchange invalidating the EU data retention directive based on the European Charter on Fundamental Rights, limitations on the exercise of the rights recognized by this charter are subject to the principality of proportionality.”

The alternatives to achieving legitimate enhanced privacy have been shrinking dramatically. Two that have been popular in recent years are using the US banking system and placing assets in jurisdictions that are considered non-reporting for CRS purposes, such as Montenegro, Georgia, and Serbia.

The US Is Closing

Using the US will no longer work as on December 20, 2023 The U.S. Department of the Treasury’s Financial Crimes Enforcement Network (FinCEN) issued a final rule that establishes the framework for access to and protection of beneficial ownership information (BOI).

What will be collected?

Beneficial Owners Information (BOI) on (i) at least 25% ownership, and (ii) Persons, such as directors, who control any domestic or foreign entity that has registered with a State authority.

Treasury granting access to BOI by Foreign Requester Authorized Recipients

The foreign request for BOI must be on behalf of:

  • a law enforcement agency, or
  • prosecutor, or
  • judge of another country, or
  • behalf of a foreign central authority or foreign competent authority, and:

No international tax agreements are needed to grant access to foreign requests.

So virtually any country in the world can request access to the BOI. No restriction is mentioned.

John Doe Summons by countries receiving BOI information for residents that have not declared US accounts

  • This is the coup de grace, as the data provided from a John Doe Summons is 100 times greater than any equivalent FATCA reciprocal would provide. Far worse.
  • Easy for these foreign requesters to follow up with a John Doe summons to the IRS to obtain banking details from say the top 100 banks and insurance companies for the unfortunate person that got caught up in the BOI.
  • The Department of Justice and the IRS are committed to working with US international treaty partners to identify and stop individuals using hidden offshore accounts to evade tax laws.
  • The US does not tolerate offshore tax evasion, nor does it sanction tax evasion committed through U.S. financial institutions.
  • Norway, Netherlands, and Finland were the vanguard to legitimately exploit their Double Tax Agreements to obtain the identities of their residents with accounts in the USA.

Examples of John Doe Summons

  • The US petitioned the courts on 23 April 2019 to authorize the summonses at the request of the government of Finland under the income tax treaty between Finland and the US. One week later, the US Department of Justice announced that a US federal court had authorized the IRS to serve a John Doe Summons for Finland to several US financial institutions.
  • Similarly, an online search confirms a John Doe summons by the Netherlands for persons residing in the Netherlands who have debit or credit cards linked to bank accounts located outside of the Netherlands.
  • Concerning a John Doe Summons by Norway the Justice Department announced that federal courts in MN, TX, PA, OK, VA, and CA have entered orders over the past week authorizing the IRS to serve John Doe summonses on certain US banks and financial institutions, seeking information about persons who have used credit or debit cards in Norway.

Non-participating Jurisdictions Are Closing

Why would you move assets to non-participating jurisdictions when:

  • Reporting Financial Institutions in participating jurisdictions will deem any managed Investment Entity located in non-participating jurisdictions as a Passive NFE.
  • Subsequently, there is Due Diligence look through to reportable Controlling Persons, regardless of the status of entities in the ownership chain.
  • In plain English, the reporting FI maintaining the account will look through parents even if they are normally excluded reportable persons until reportable beneficial owners are found.

Why not use our enhanced privacy structures that use European jurisdictions, and have been successfully implemented since 2017? We look forward to serving your needs for enhanced privacy at EWP Financial. Please contact us today for an initial consultation.

by Michael Malloy, CLU TEP RFC.
CEO, Founder @EWP Financial

~ Your best source for PPLI and EWP

Michael Malloy-CLU-TEP

 

 

 

 

 

 

 

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