Section 16 of the Securities Exchange Act of 1934 prohibits anyone with "material nonpublic information" from engaging in the purchase or sale of any security on the basis of that information. Unethical corporate insiders
who fear being caught engaging in Insider Trading sometimes utilise offshore companies to do their dirtywork.

These corporate criminals hire offshore corporate service providers to form tax haven companies, act as titular officers and directors, and send and receive international communications with broker dealers to effectuate the suspect trades. The offshore frontmen purport to be the beneficial owners of the corporations, and make the trades, acting pursuant to the orders of the corporate insiders.

Compliance officers whose banks number as clients senior officers at publicly traded corporations may want to
take note of these special red flags which may indicate that the customer is engaging in covert offshore insider trading:

• Does the client, who is an officer of a domestic US company, wire funds in and out of tax haven banks, and do these transactions involve corporations, corporate service firms, or law firms at the other end ?
  

• Does the client liquidate assets regularly, and then engage in international funds transfers ?
  

• Does the client, from time to time, make substantial cash deposits ? Remember, he works for a corporation that pays him by check or via direct deposit.
  

• Do other bank clients that are also employed by the same company also wire transfers funds overseas, on a regular basis, to recognised offshore tax havens ?
  

• Does the client deposit cheques drawn on offshore banks, or onshore correspondent accounts of such banks  into his personal account ?
  

Whilst one positive response may also be indicatative of  "asset protection" measures, continued funds transfers with tax haven jurisdictions suggest potential insider trading through anonymous offshore companies. This is most likely not in the category of willful blindness, but it could result in reputation damage should the bank's role in an offshore insider trading scandal hits the newspapers and other media.