This advancement has come with its challenges and risks as internet fraudsters took advantage of the technology loopholes to defraud unsuspecting customers of their hard earned money. Blocking these loopholes has been the major headache of stakeholders due to the growing e-payment channels and as transactions through such means grow.

According to the Nigerian Inter-Bank Settlement Scheme (NIBSS), the value of total transaction made on the two major electronic payment platforms of NIBSS Instant Payment (NIP) and National Electronic Fund Transfer (NEFT) stood at N35 trillion in the last three quarters of 2016, an equivalent of transaction value on all various electronic payment platforms in 2015.

In the last quarter of last year, the industry recorded N13.246 trillion transactions. While NEFT was N3.657 trillion, NIP recorded N9.589 trillion transactions.

Within the first two quarters last year, over 60 million units of transactions valued at N21.837 trillion were made on the two platforms according to report,

Combined with transaction value and volume on other platforms, which according to NIBSS, includes E-bills, mobile money and cheque transactions, it is obvious that the amount of money that daily exchanges hands electronically among individuals, Small and Medium Enterprises (SMEs), multi-national companies and Ministries, Department and Agencies (MDAs) is on the high side, hence, the rising trend of electronic fraud (e-fraud).

Also in 2013, NIBSS revealed that 822 cases of electronic fraud were recorded with an attempted value of N19.15 billion, while the actual loss to the online scam stood at N485.19 million.

Reported cases of fraud moved up by 78 per cent in 2014 to 1,461.  While attempted value reduced to N7.75 billion, the actual loss was N6.216 billion.

The trend, however, subsided in 2015 following efforts by stakeholders. In 2015, about 946 attempted e-fraud cases were recorded on the networks of banks, Other Financial Institutions (OFIs) and Mobile Payment Operators (MPOs), resulting in an approximated  loss of N5 billion, compared with N6.216 billion record of 2014.

Deputy Governor, Operations at the CBN, Mr. Adebayo Adelabu who was a special guest at a forum recalled that the NeFF had in the last five years proven to be a formidable stakeholder in securing this ecosystem, through a unique and critically important role of creating a platform for collaboration amongst stakeholders in payments system but more still needs to be done as the trend becomes more potent.

Adelabu who was represented by Mr. Taiwo Oladimeji, his Special Assistant, said, “The challenge of securing the Nigerian payments system will always be a daunting task, for with ease of payments, comes greater adoption, and with increased adoption, the lure of cyber-criminals who seek to convert either digital assets or resources or both to their own becomes greater.”

Mr. Dipo Fatokun, Chairman of NeFF and Director Banking and Payment System Department of the CBN explained the successes recorded so far by the forum and gave an overview of the plans for the New Year, among which is the organization of a workshop that would “highlight the challenges inherent in the Cyber-Crime Prohibition Act 2015 and its possible effect on e-commerce and use the recommendations to engage the Attorney-General of the Federation and the Office of the National Security Adviser on reviewing certain aspects that could affect the effective operationalization of the Act.”  

He said efforts to establish a Dedicated e-Payment and Card Crime Unit in the Nigerian Police Force has gained momentum awaiting the approval of CBN’s Committee of Governors, expressing optimism that the unit would take shape in the coming year. 

Fatokun however said a robust awareness programme for members of the public and staff of organizations that operate within the payments space would be carried out in 2017, saying, “It is important that our awareness programme starts in 2017 as this would help the industry reduce cost of fraud through increased vigilance and detection abilities”.

Stanbic IBTC Bank, FCMB, Citi Bank and the Standard Chartered Bank were co-sponsors of the dinner with their managing directors well represented at the forum. The bank stakeholders were unanimous in their pledge for more collaboration to effectively nip the trend of e-fraud in the bud and safeguard the integrity of online transactions. 

According to the Chief Risk Officer of Stanbic, Mfon Akpan, 2016 has been a challenging year for bank. Worse still, she said, the industry continues to witness ingenuous activities of fraudsters. Though their activities have been frustrated to some extent, Akpan noted that more still needs to be done by stakeholders because “a porous banking industry will not engender trust in the public”. 

She also said the introduction of the Biometric Verification Number (BVN) has helped to reduce the extent of fraud but the industry is surrounded by powerful syndicates including insider threat. “We need to raise the bar, sharpen the saw, no need for complacency. We need collaboration among banks, telecommunication sector, internet service providers (ISPs) to identify the perpetrators with speed”, she said.

Soji Adeniyi, Chief Auditing Executive at FCMB also corroborated Akpan on the need for collaboration with Telcos and the Nigeria Communication Commission (NCC) to minimize the fraud. “We need constant forum to educate law enforcement agents and judicial officers among other players in the electronic payment system.

Providing insight into the electronic fraud challenge in the 21st Century banking system was the Head of Cyber Risk Services at Deloitte West Africa, Mr. Tope Aladenusi who spoke on “Disruptive Technology and the Future of Secure Payment”.

 

 

 

 

Contrary to what is said, do not expect to incorporate an offshore company and automatically slash your tax bill to 0.

It is not that simple.

Implementing an offshore company strategy without planting the proper tax residency flag can lead you to several issues and it might not have any upside from a tax standpoint.

For instance, let’s say that you are a Spanish tax resident and you incorporate in the Seychelles. You will enjoy some benefits related to asset protection and achieve a certain degree of privacy, but you won’t have any tax benefit.

This is due to CFC (controlled foreign companies) laws, which we discussed in previous letters, and corporate tax residency laws.

If you are resident of a country with CFC laws, profits retained in your offshore company may be attributable and taxed, even if they have not been distributed.

Often, corporate tax residency is not only deemed by where a company is incorporated, but also by its place of effective management.

Following the previous example, if you manage your Seychelles IBC from Spain, it can be considered a resident for tax purposes and therefore subject to the Spanish corporate income tax rate of 25%.

Incorporating offshore only is not the magic solution to minimize your tax burden.

Also, depending on the nature of your business, incorporating in the wrong jurisdiction can lead to serious headaches and negative effects.

However, having a proper offshore corporate structure tailored to your circumstances and the nature of your business can make a phenomenal difference.

It can take you near to the 0% promised land, legally reduce your compliance burden while protecting your assets and allow you to grow your business exponentially.

For instance, if you provide online professional services, you can incorporate your company in the British Virgin Islands.

An international company in the British Virgin Islands is free from all kind of taxes, that is, you will not have to pay a penny in corporate taxes.

In addition, reporting requirements are minimal. You will not have to file your accounts and there is no public record of shareholders or directors, so your privacy is assured.

Since the British Virgin Islands has a reputable regulatory environment, banks of jurisdictions such as Singapore might be willing to work with them.

Opening a corporate and personal bank account in Singapore (one of the most reputable financial and banking centers worldwide) will allow access of 1st world banking options. Your clients will be able to wire you money issue-free too.

You could establish your tax residency and managing your business from Thailand, and ensure that your BVI Company is not considered a resident for tax purposes.

Thailand only considers companies incorporated in Thailand as tax residents and does not have CFC laws.

Furthermore, at the personal level, foreign-source income is only taxable when is remitted to the country the same year in which it is accrued.

Therefore, if you only remit money to Thailand to cover your daily expenses or you remit profits after one year, you can reduce your total income tax significantly, in some cases close to 0%.

This is a simple high-level example of how implementing a correct offshore strategy may increase your net income significantly. This is not legal or tax advice, consults with a professional to assess your strategy according to your personal circumstances.

If you want to market your products online in Europe and need a payment processor such as Stripe or PayPal, you might want to incorporate a UK LLP, a neutral tax entity with which it will be easier to get a payment processor and its income will flow tax-free (as long as you do not have UK clients) to parent offshore companies, which in turn are not subject to taxes.

If you start your fintech business and need financing, Singapore or Hong Kong might be valid options for you as they have attractive tax schemes and pro-business regulations for start-ups and a great angel investor and venture capital scene.

If you are seeking a logistic hub, with affordable energy costs, a strategic geographical location for trade, a solid financial sector and a vast network of trade agreements and tax treaties, you might consider incorporating your tax-free company in a UAE free trade zone such as Jebel Ali (Dubai).

Or you might want to look at Malta or the UK to establish your holding company for your European investment subsidiaries as there is no withholding tax and dividends received and distributed by the parent company might not be taxed at the corporate level, subject to certain conditions.

It might also make sense to structure your business combining an offshore company with an onshore entity.

Setting up an onshore company has its benefits. You may establish your physical headquarters and offices, taking on loans or venture capital, hiring staff, health insurance, greater reputation and potential for M&A or exit opportunities, and compliance with local laws and regulations.

Establishing onshore may allow you to immigrate, get a work permit and tax residency. In addition, doing business with an onshore entity removes the stigma or difficulty of offshore business.

With the right corporate structure, you can benefit from both the onshore and offshore world.

If you combine an onshore company with an offshore company, and is properly structured with transfer pricing standards, you might still benefit from a 0% or low taxation but with greater reputation, more options and ease of doing business.

As we can see there is no one size fits all solution and what works for another may not work for you.

Also, tax laws and regulations change periodically and you want to be well-informed when making a decision.

At Flag Theory we design a holistic and customized offshore strategy considering all factors and caveats to find a solution for each one of them.

We are at your disposal to have a call and discuss your options according to your specific circumstances and goals.