Hong Kong emerges as hub for creating offshore companies

In 2009, Jasmine Li, whose grandfather was the fourth most powerful politician in China at the time, donned a floral Carolina Herrera gown and debuted at a ball in Paris.
That same year, a British Virgin Islands company she would later come to own for USD 1 was born in an aging building in a red-light district of Hong Kong, just one example of the city's key role in helping the world's elite shuttle their wealth offshore.
The information about Li, who has not been accused of wrongdoing, comes from a tremendous cache of documents leaked from the Panamanian law firm Mossack Fonseca and published by the International Consortium of Investigative Journalists.

Those records highlight the central role Hong Kong has come to play in designing offshore financial vehicles.
Hong Kong brims with people expert at packaging and protecting wealth. The back pages of newspapers teem with advertisements for corporate formation companies, one-stop shops promising fast bank account opening, corporate compliance, tax and accountancy services.
Offshore vehicles are used to minimise tax, mitigate political risk and circumvent onerous regulations in China. And they are completely legal.

But Hong Kong's offshore financial machinery works so well, and so discreetly, that it can be abused by those seeking to hide illicit assets or evade taxes. As traditional havens like Switzerland cave to years of grinding pressure from European and American tax authorities, unsavory money is drawn to Hong Kong, which despite reforms retains its reputation for secrecy, non-cooperation, and a light regulatory touch, watchdog groups and lawyers say.

"Hong Kong attracts this type of hot money from across the region and globally, partly because of its perceived stability," said Iain Willis, a partner at Latymer Partners, a corporate intelligence advisory firm in London.
"'Light-touch' financial regulation, easy rules on company incorporation and limited transparency" add to its appeal, he said.
Hong Kong was Mossack Fonseca's go-to spot for financial intermediaries, home to 2,212 accountants, banks and other middlemen Mossack Fonseca used to set up 37,675 offshore companies for its global clients from 1977 to 2015, more than any other place in the world, according to ICIJ's analysis.
China's Foreign Ministry dismissed ICIJ's reports as "groundless," and the government has aggressively censored discussion of them.

Hong Kong tax authorities said in an email Friday that they would "take necessary actions" based on the offshore leaks, and work to "enhance the efficiency and effectiveness" of enforcement as required.