Last updated: 09:59 / Thursday, 17 March 2016
Interview with Martin Litwak

What Wealthy Families in Latin America Need to Know About Compliance Rules

What Wealthy Families in Latin America Need to Know About Compliance Rules
  • Compliance rules get tougher
  • FATCA and CRS information is scarce
  • HNWI look at offshore allocation for: privacy, tax optimization and succession planning

“Compliance rules have dramatically changed in the last few years, and the next two ones will be even more complicated or challenging for most wealthy families,” says Martin Litwak, from law firm Litwak & Partners who discusses how the new compliance rules are impacting private wealth management in Latin America.

According to the Lawyer, "there is a lot of information online about FATCA and CRS coming from banks and financial providers, but some families are not getting the best advice, from independent lawyers, on what to do or not do, how to manage the risks and the practical impact of these changes. It is not about filling out a new questionnaire. Families must make sure that the set of structures in place are in compliant with the new scenario. It is not just one piece of law that has changed; the whole system is now different."

Nowadays countries are cooperating for tax purposes, and the information on a family’s assets is available to authorities as well as to third parties. "Which is a bigger issue in a region like Latin America, where kidnappings take place and many governments are corrupt. The fact that information could exchange hands for very little money is very dangerous" he says.

In his opinion, families must have the right structures in place before all these new rules take effect. They also should report whatever they have or own. "If they do not like the consequences this reporting may have, they can move to a different country with a better tax system. If they are not prepared to do this, they may be able to save or differ some taxes and/or to reach some level of confidentiality at least vis a vis third parties other than governments by setting up trusts and/or private family funds."

Jurisdictions traditionally considered as offshore international financial centers have stronger protections of secrecy and privacy. "With offshore assets, it is better to structure them offshore too. Our clients usually pursue three objectives: privacy, tax optimization and succession planning. If they value secrecy the most, regulated  investment funds (perhaps with their shares being publicly traded) are better than trusts. If succession planning is more important, a trust structure might be the best solution. We try to identify what matters to them the most, but they must also understand what can and cannot be achieved in this new transparent world."

Litwak will be present at the marcus evans Latin Private Wealth Management Summit 2016 in Panama.