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The Organization for Economic Cooperation & Development (OECD) white paper, entitled Resumption of Application of Substantial Activities Factor to No or only Nominal Tax Jurisdictions, which details the specific Substantial Activities factors that a multinational corporation has to meet to justify its presence for tax purposes, in a zero tax jurisdiction, appears to be causing large corporation to exit the tax havens where they have been reaping the benefits, and to move their corporate domicile to low tax jurisdictions, lest they run into tax problems with the EU.
The Substantial Activities test includes making a showing that a corporation has trained and duly qualified employees working full-time in the jurisdiction where domiciled for tax purposes, that it maintains real offices there, actually conducts business there, makes expenditures, conducts decision-making there, conducts marketing and branding activities, and maintains necessary equipment on the premises.
Since Fortune 500 companies are reportedly exiting the zero tax jurisdictions of the Caribbean, for safer waters, the question becomes whether entities owned and controlled by criminal elements, whose holdings include laundered liquid assets, will fear that they may come under scrutiny, if they remain, and start looking, like the legitimate entities, to relocate, so as to again hide among a large crowd. They cannot pass the Substantial Activities test, for their shell companies have no actual physical footprint onshore, only attorneys' offices and transparent fronts, none of which will withstand any serious scrutiny.
We are bringing this up to alert compliance officers to be aware that, between now and 2020, they may see the movement of all the assets of large, but opaque, offshore corporate entities, out of the Caribbean Tax havens. Do not be the bank that facilitated such transfers without first identifying the Beneficial Owners, and confirming that the company is not a shell or front with no legitimate business activities that would be expected to generate that amount of capital over a specified period of time. Don't help the money launderers do their jobs.
Readers may access the complete text of the document here:
Resumption of Application of Substantial Activities Factor to No or only Nominal Tax Jurisdictions
Chronicles of Monte Friesner - Financial Crime Analyst 
Contributed by Kenneth Rijock - Financial Crime Consultant
