Any person whose job involves collecting and keeping other people’s personal information (such as a medical doctor, a lawyer, an accountant, etc.) would not be able to offer professional services without protecting confidentiality of personal data. The same requirement applies to credit and insurance organizations as well as brokers and financial companies. As far as legal entities are concerned, they are interested in keeping their information secret from competitors and fraudsters that could do harm to their companies if they gained access to some corporate information.
Confidentiality of corporate information is best protected in offshore jurisdictions. These jurisdictions have special legal norms that guarantee confidentiality of business data. Unauthorized disclosure of sensitive information leads to serious legal and financial consequences for the person or organization guilty of spilling the beans.
Confidentiality is one of the main reasons why many entrepreneurs register companies in offshore zones. If you would like to keep your business data confidential, you should consider the opportunity of establishing an offshore company.
People disclosing the information about offshore company shareholders, directors, or ultimate beneficial owners face legal prosecution. Thus, they will certainly think twice before doing so.
You have to realize, however, that some offshore jurisdictions have public registers of company owners and directors. In this case, you can protect your anonymity by hiring nominees.
The essence of data confidentiality agreements
Even though making a data confidentiality agreement is rather easy, protecting yourself from breach of the agreement terms and conditions may become a challenging task. The most optimal legal remedies to use when your confidential information has been disclosed include the following ones:
- Enforcement of an unfulfilled obligation including the obligation to keep the information confidential specified in the confidentiality agreement;
- Obtaining a restraining order on further use of confidential data including publication of these data;
- Laying a claim for damages that have been caused by the violation of the confidentiality agreement;
- Submitting a statement of income that has been obtained by the opponent as a result of publishing confidential data or using it in some other way.
We have to note that in some offshore jurisdictions, all these legal remedies are used at a time. Besides, many offshore jurisdictions see breach of trust as a breach of law. Therefore, breach of trust will have legal consequences there too.
Even though a data confidentiality agreement has legal force and it is signed in the framework of the legal system of the offshore jurisdiction, each particular case of agreement violation has to be treated individually. A confidentiality agreement can be violated in a number of different ways.
It would also be a good idea to specify the consequences of agreement violation when wording the confidentiality agreement that you are going to make.
International bank secrecy provisions
Banks have the most valuable and the most exhaustive information about their corporate clients. Legislations of most offshore jurisdictions guarantee banking secrecy. They specify the liability of banking institutions that disclose confidential information to third parties without authorization. If a bank is found guilty of violating the banking secrecy requirements, it may well lose its license and face other unpleasant sanctions.
It is important to realize, however, that offshore banks do their best to remain attractive for foreign clients. All offshore jurisdictions take legislative measures to make their national banking systems more popular in the world. For this reason, you should expect that confidentiality of your banking information will be safe if you bank offshore.
Private individuals look for banking secrecy because they want to conceal their wealth and their banking operations from other people, which is only natural. Legal entities want their financial information to be unknown to their competitors. However, if a client of the bank – an onshore or an offshore one – is found guilty of money laundering, financial fraud, or financing terrorism, the bank has to disclose his/ her confidential information in accordance with the law.
Legal grounds for disclosing confidential information
Banking secrecy ceases to be a top priority and confidential information can be disclosed in the following situations:
- In order to prevent criminal activities on the part of the bank client;
- Within the framework of state supervision of banking institutions by regulatory authorities;
- In order to prevent insider trading, combat false markets, and increase transparency of the securities market;
- In order to obtain evidence of violations of the law on the part of an individual or a corporate bank client;
- Within the framework of a corporate governance review of financial institutions;
- In case of bankruptcy of a company that has occurred due to some fraudulent activities.
Even though there are multiple agreements on exchange of financial information signed between national states, the information is shared only with the state bodies and it cannot become available to any third parties.
Confidentiality regulations in some offshore jurisdictions
Below we list several offshore jurisdictions that are popular with international entrepreneurs due to their ability to keep things secret.
Belize
The legislation of the country as well as its court system efficiently protect confidentiality of information about locally registered companies. Belize was especially attractive when it did not have a public register of company UBOs and did not require any reporting.
The situation changed in 2019 and now resident companies have to have economic substance in Belize. At the same time, some types of companies are still tax-exempt in the country.
Cayman Islands
The laws of this offshore jurisdiction do not only protect banking secrecy but they also protect confidentiality of the information related to trusts registered there. Unauthorized disclosure if this information will lead to criminal prosecution and only a serious breach of law on the part of the company owner or the trust settlor/ trustee can serve as a reason for disclosing the information.
British Virgin Islands
Criminal penalties for unauthorized disclosure of confidential information are especially severe in the BVI. A person found guilty of that may face a fine of up to a million dollars or go to jail for 20 years.
The legislation of the jurisdictions makes it mandatory for resident companies to keep records but the information in these records is not available to third parties. It can be disclosed only on a court order.
Nevis
Any activities that have led to disclosure of personal or corporate information will result in a prison sentence in Nevis. You also have to bear in mind that criminal penalties can be applied not only on residents of Nevis but to residents of other countries as well.
A person found guilty of disclosing confidential information may face a 5-year prison sentence or a fine of US$ 50,000 in Nevis.
Information confidentiality is an issue that is taken extremely seriously in offshore jurisdictions. If you open an offshore company or set up an offshore bank account, you can be certain that your personal information will remain secure. To make sure of that, you simply have to abstain from breaking the law.
