I refer to the report ("Hong Kong and HSBC under scrutiny as US cracks down on American tax cheats", January 5).
It made reference to an investigation by the US Internal Revenue Service into Sovereign Management and its US-based clients.
We wish to make it clear that the Sovereign Management referred to has no connection whatsoever with Sovereign Trust (Hong Kong) Limited or its associated companies within The Sovereign Group.
The Sovereign Group is fully compliant with the IRS' requirements under the Foreign Account Tax Compliance Act and is not aware of any of its companies being the subject of any investigation.
This article does, however, bring to light the necessity for tightening controls for corporate service providers and trust management companies in Hong Kong.
Hong Kong has long promoted self-regulation and enjoyed the freedom of a laissez-faire economy. However, with the taxation landscape continually changing and the increased difficulty in opening up bank accounts for companies owned and operated by foreigners, tighter regulations could well help give banks the confidence that corporate service providers are a perfectly acceptable source of business for the banks.
This is the way it tends to work in the many well-regulated offshore financial centres.
Should Hong Kong continue to prefer minimal regulation, we recommend clients use professional directors from reputable corporate services providers who apply rigorous anti-money-laundering policies (often because they are licensed and regulated in many other jurisdictions).
Banks should welcome this approach, as when professionals are in control, they can and do provide a first line of defence for the prevention of money laundering and tax fraud.
Hong Kong-based banks, in our view, should open bank accounts only for offshore companies when these are managed by professionals.
Banks in offshore financial centres such as Guernsey and the Isle of Man do not open accounts for client-operated companies.
In the absence of government regulation, enhanced self-regulation of the corporate services industry can only be good for clients and Hong Kong.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.
