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Cape Town - Just because an offshore finance centre is used, does not necessarily make it illegal, Tim Mertens, chair of Sovereign Trust, told Fin24 on Tuesday.
He said it is very important to keep this in mind when putting the information contained in the so-called Paradise Papers - leaked by an offshore law firm - into perspective.
"The Paradise Papers puts in the spotlight once again that people could potentially be hiding funds. Yet, it does not necessarily mean all these transactions are illegal.
"It is legal to put your money in one of these offshore finance centres," Mertens explained.
"The most important thing is whether or not the investors have made a proper disclosure about it and paid the relevant taxes."
At the same time those who have been breaching the law could now be showing up in the leaked information and might trigger the interest of tax authorities.
Bloomberg reported earlier this week that the leaked information could expose the wealthy's hidden riches and show the workings of companies and hedge funds in order to avoid taxes.
EU finance ministers have, for instance, already vowed to take action following the leak.
Glencore is one of the companies in that showed up in the leak of confidential information from offshore law firm Appleby Global Group Services. It includes information on Glencore’s operations in the Democratic Republic of Congo and Australia.
"The vast majority of people who take their allowance out of SA and invest it somewhere else very often might land in some of these offshore finance centres.
"Just because you have an account like that does not mean you are in breach of the law," said Mertens.
"People might now say the rich are just getting richer as can use these service providers in these offshore jurisdictions to their benefit.
"The rich are then able to pay less tax by using these services and jurisdictions and the divide between rich and poor is just getting bigger."
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