Offshore
Banking:
A Guide to Offshore Banking
Offshore banking has often
been associated with the underground economy and organized crime, via tax
evasion and money laundering; however, legally, offshore banking does not
prevent assets from being subject to personal income tax on interest.
Except for certain persons who meet fairly complex requirements , the
personal income tax of most countries makes no distinction between
interest earned in local banks and those earned abroad. Persons subject to
US income tax, for example, are required to declare on penalty of perjury,
any offshore bank accounts—which may or may not be numbered bank
accounts—they may have. Although offshore banks may decide not to report
income to other tax authorities, and have no legal obligation to do so as
they are protected by bank secrecy, this does not make the non-declaration
of the income by the tax-payer or the evasion of the tax on that income
legal. Following September 11, 2001, there have been many calls for more
regulation on international finance, in particular concerning offshore
banks, tax havens and clearing houses such as Clearstream, based in
Luxembourg, being accused of being a crossroads for major illegal money
flows.
An offshore bank is a bank
located outside the country of residence of the depositor, typically in a
low tax jurisdiction (or tax haven) that provides financial and legal
advantages. These advantages typically include some or all of:
* Strong privacy
* Less restrictive legal
regulation
* Low or no taxation (i.e.
tax havens)
* Easy access to deposits
(at least in terms of regulation)
* Protection against local
political or financial instability
While the term originates
from the Channel Islands "offshore" from Britain, and most offshore banks
are located in island nations to this day, the term is used figuratively
to refer to such banks regardless of location (Switzerland, Luxembourg and
Andorra in particular are landlocked).
What type of services are
available from offshore banks? The same as the services from any high
street bank, plus the extremely confidential Swiss style numbered
accounts. Many of the offshore banks listed on this site are respected AA
credit rated international banks, that everyone has heard of before. They
have simply set up an offshore division or branch division within a tax
haven to attract a share of the enormous international trade, and offer
almost the same services as any domestic bank. Such as the following:
* Personal and corporate
current/checking account
* Personal and corporate
savings accounts
* Secure internet banking
facilities
* Anonymous numbered
accounts (extremely confidential)
* Debit and ATM cards,
which are accepted globally
* Credit cards
* loans
* Mortgages
Going offshore in simple
terms means placing your savings, investments, assets or business concerns
outside of your home country, within one of the many tax havens. A tax
haven is a country that has very favourable tax advantages, which means
that your savings, investments, assets or business profits can grow free
of almost any taxation. Although taxation is only one reason why many
decide to go offshore.
Privacy
To protect the free flow of
your personal information and dealings. An offshore entity has no
obligation to release your personal or business information, affording you
with a great deal of privacy & confidentiality. In general terms your
personal information will not be divulged to any governing body or tax
authority unless suitable evidence can be shown to prove that you have
been involved in criminal activities, such as money laundering or drug
trafficking.
Financial privacy is
becoming a thing of the past. Almost every single transaction made at a
bank or ATM, by law, must be recorded and filed. Consumer credit agencies
maintain databases full of sensitive information that is used and shared
by other organizations and agencies. Asset collectors routinely advertise
their ability to locate bank accounts, brokerage accounts, and real estate
and business holdings. Should asset collectors find substantial wealth,
the individual or corporation becomes an easy target for a lawsuit.
Unless ethical and legal
steps are taken to insure privacy, sensitive and confidential information
could easily get into the wrong hands. Placing your assets, investments,
savings bank and brokerage accounts offshore will keep them off the asset
collector's radar screen. Consumer credit agencies and government
departments do not have access to foreign account records or transactions.
Domestic property may be held in the name of a foreign corporation (IBC)
or trust. This insures that asset collectors and agencies cannot locate
it. By taking advantage of these methods an individual or corporation
becomes a smaller target and the likelihood of being sued is reduced.
Utilizing offshore tools to protect privacy could mean the difference
between keeping and losing what is rightfully yours.
Tax
Efficiency
As stated above, your
savings, investments, assets or business profits can grow almost free of
any form of taxation. This does not mean tax avoidance, it simply means
whilst your assets are held offshore they will benefit from very
favourable tax advantages. There will for many however, be a potential tax
liability when you look to repatriate your assets to your home country.
This will depend on your nationality and your country of residence at the
time of repatriation.
Asset
Protection
There are many methods in
which to protect your assets using an offshore structure, in the form of
an investment product, an IBC (International Business Company) or a
offshore trust, or even a simple offshore bank account. These will protect
your assets from:
* Protection from invasive
bureaucracy
* Protection against
lawsuits
* Protect your assets from
seizure
The simplest form of
protection offshore is the nature of the offshore privacy rules. What
isn't known can't be attacked. The basic form of offshore privacy combined
with a IBC or Trust is a very secure method to legally protect your assets
from prying eyes.
Lawsuits are filed every
week. Ex-spouses, ex-business partners, disgruntled employees or predatory
lawyers may file a suit if they believe a potential defendant is an
attractive target. Losing such a lawsuit could cause a lifetime's worth of
savings, investments and real estate holdings to be lost. In light of
this, placing assets offshore is a wise and effective means of protection
from frivolous lawsuits.
Once your assets are held
offshore they are unreachable by domestic courts. In the event of a
lawsuit, a defendant may be forced to forfeit domestic assets, but
offshore assets will remain untouched. Offshore courts do not recognize or
carry out domestic judgments. This insures that assets sent offshore will
remain confidential, secure, and permanently in the hands of their
rightful owners. Moving assets offshore will create peace of mind that
what's yours will always be yours.
Regulatory Advantages
The regulations in force
within most high tax countries, are there to protect investors, and
rightly so. However, due to the very strict nature of these regulations,
fund managers feel as if they are wearing a financial straight Jacket. It
is difficult for them to compete with the returns of their offshore-based
partners who enjoy less restrictive regulation. Many offshore
jurisdictions have very mature regulatory systems in place, often based on
those present within the US or the UK, yet they allow fund managers great
freedom to add value for their investors. This is why offshore funds
nearly always outperform their onshore equivalents. Within the high
regulation onshore countries, excessive rules and bureaucracy often plague
domestic businesses and operations. Valuable resources are diverted away
from the productive process in order to monitor compliance as a result of
the restrictions imposed. Curing this problem is as simple as moving to
friendlier shores. Offshore jurisdictions are intentionally
business-friendly and have regulations that are straightforward, simple to
understand and inexpensive to comply with. Moving a business offshore and
enjoying a more pleasant business climate may require nothing more than
forming an offshore corporation and transferring assets from the domestic
corporation to the foreign one.
Is all
of this legal?
Do you trust your current
bank or investment provider? Chances are that they too have an offshore
operation; most of the world’s major banks and investment companies have
an offshore present. Do you honestly believe that a triple A credited
rated investment company or bank would operate in an illegal activity?
Companies such as Merrill Lynch, HSBC, ING Barings, UBS, Barclays,
Deustche bank, ABN Amro all have offshore operations. It is not the
offshore industry itself that is illegal, it is only the devious
activities of certain individuals who may give the offshore industry a
poor reputation. It is also true that the due diligence, and money
laundering checks performed by offshore companies is increasing,
especially after the 911 terrorist attacks. Which will ensure that it
becomes difficult for criminals to abuse the offshore industry.
Thomas
Crown is an American financial advisor currently living and working in the
Grand Cayman Islands. He currently runs the website
www.offshorecash.net which is a
Beginners Guide to Offshore Banking. The site covers a wide range of
topics; Offshore banking laws, Types of services offered, A large data
base of banks, A pros and cons of using offshore banks, Guide to starting
your own offshore bank.
All of the information at
www.offshorecash.net is listed
for free, their is no charge for anything on the site.
