Organised avoidance – the Jyske Bank

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I've had my attention drawn to the Jyske Bank in Denmark. It says of itself:

Jyske Bank employs a staff of more than 4,000 and operates 119 Danish branches, which makes it the second largest independent Danish bank. We offer a full range of financial solutions to retail as well as small and medium-sized corporate clients.

So it might be. It also runs the Jyske Bank Private Banking service. This makes some of the more extraordinary claims that I have read from what is apparently a mainstream bank for some time. For example, in their introduction to the EU Savings Tax Directive they say:

The Directive is intended to counter tax evasion by providing for the automatic exchange of information between Member States.

Which is true. But they then suggest:

An EU resident may wish to consider several options if he does not wish to have the provisions of the Directive applied to him. In principle, a payment from a financial operator which is established outside the EU and the countries which have agreed to adopt equivalent measures will not fall within the remit of the Directive. Alternatively, individuals may also wish to consider the types of product they invest in, particularly with respect to collective investment funds, life insurances, offshore companies, trusts and Grandfathered Bonds.

One wonders why they think that an EU resident might wish to do that in view of their preceding comment, but they give no hint of such questioning in their 'values' section. Instead they offer products to facilitate avoidance of the STD. For example, they describe 'insurance wrappers' as an 'exciting opportunity' and say of them:

As demand for this type of investments has increased since the verification of the EU Savings Directive, we have co-operated closely with insurance companies to develop solutions for our clients - onshore as well as offshore. Right now we can introduce two options from a Liechtenstein insurance company.

Again, one has to wonder what they think so special about a Lichtenstein offering, and what unique contribution it might have to offer. Perhaps the answer is to be found in their enthusiasm for promoting the use of offshore companies and trusts:

Companies and Trusts have been used, for many decades, to minimise tax and ensure confidentiality.

Today many individuals wish to retain their financial affairs private and confidential. This is possible to achieve sensibly and legitimately through the use of a company.

In addition, it is possible to structure a company so that on your death your wealth passes to your family, without the need for probate. Probate is the official process to establish who the inheritors of the deceased are.

They do, of course, omit to mention that in places like the UK probate is not granted until Inheritance Tax liabilities are agreed. The oversight appears unusual for a bank seeking to offer responsible advice to their clients. Maybe it is explained by the fact that the say:

By using a company confidentiality is maintained.


There are many jurisdictions available for establishing the appropriate company. .... Most of the jurisdictions do not charge tax on income. However, some jurisdictions do require the filing of the names of the directors and shareholders, their residential addresses, occupation and nationality and also the preparation and or filing of the company's accounts. These jurisdictions are for these reasons more expensive. Gibraltar, Jersey and Guernsey and the Isle of Man fall into this category.

In contrast, Belize, British Virgin Islands, Panama, Nuie and Samoa do not require disclosure of directors and shareholders at their Companies Registry nor the preparation and filing of accounts making these jurisdictions more cost effective.

Cost effective for what, one might ask? Perhaps their opinion can be deduced from their discussion on the direct ownership of assets where they say:

This may be undesirable particularly where taxes are high

OK, so how do they suggest getting round all this tax and disclosure? Their solution is the use of discretionary trusts:

Transferring money and investments to a company
As an example, say an individual who today holds money in a bank account or an investment portfolio with a bank, transfers these funds into a BVI company. The Company Manager on receiving the appropriate forms and due diligence alocates (sic) a company to Mr A. and opens a bank account for the company usually with Mr A. as signatory. In this manner Mr A. retains day to day control. So, Mr A. presently has EUR 100,000 in a bank account and EUR 250,000 in investments. These funds can be transferred to a newly formed company and Mr A. can own the shares in the company. For confidentiality reasons, Mr A. chooses the option to hold the shares through nominees.

If Mr A. is married, the shares could be held for Mr A. and Mrs A. jointly so that in the event of either of their deaths the survivor would automatically become the sole owner of the company. This can be extended so that if Mr and Mrs A. have 2 children all four can hold jointly.

Whilst joint holding can save costs, it is more appropriate for such shares to be held by a trust. With joint ownership Mr A. or Mrs A could not for example if one of their children became dependent on drugs or addicted to gambling, remove the children from joint ownership.

With a trust Mr A. and / or Mrs A could name the children as beneficiaries but alter their wishes from time to time specifying who will benefit and the proportion each child will benefit without the need for probate.

The result is that a major European bank is offering on its web site to use its "Company Manager" to set up an offshore trust and company for people resident in the EU which will enable them to hide behind that structure to avoid their obligations to pay tax. Nowhere does it mention that in some countries, at least, this might be a tax offence constituting evasion. Nor is it made clear that if the trust and its assets remain under the control of the settlor the trust is a bare trust and therefore void for tax planning in most countries. Such doubts are not even hinted at. Such blatant promotion of aggressive tax avoidance brings the entire banking sector into disrepute. I do hope that someone is giving serious attention to this bank's activities. They deserve it.