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WHAT IS THE OFFSHORE SYSTEM?

The offshore system allows wealthy people to follow another country’s financial regulations even if they don’t live there. They can shelter their wealth by paying financial services providers to set up companies and other offshore arrangements to hold those items.

These entities take a variety of forms, including trusts, holding companies and shell companies, but most operate in the same general manner. They’re often set up in a way that obscures who benefits from the wealth, where it came from and, sometimes, the fact that it even exists.

WHY DO PEOPLE HOLD THEIR MONEY AND OTHER ASSETS OFFSHORE?

Offshore companies provide a way for wealthy people to hold their money with greater privacy than might be afforded by financial institutions in their home countries. This discretion can offer those who want to hide their assets a way to shield their holdings from taxes, civil lawsuits, creditors and investigators.

IS IT LEGAL TO USE THE OFFSHORE SYSTEM?

Offshore providers are typically established according to the laws of the country where they are located. But some clients have used offshore services in ways that are not legal.

Offshore jurisdictions write laws that offer benefits including secrecy and low or no taxes. While the person who benefits from an offshore account may be required to pay taxes in a home country, it is often difficult for authorities there to discover that an account exists or to know whether there is illegal activity because of a lack of cooperation from the offshore government.

MATT DUNHAM/ASSOCIATED PRESS An exterior view of 30 Harcourt St. in the Marylebone district of London is pictured Monday. The property is featured in the “Pandora Papers,” which is a new report that sheds light on how world leaders, powerful politicians, billionaires and others have used offshore accounts to shield assets collectively worth trillions of dollars over the past quarter-century.