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About
Offshore Banking.........
What Does It Mean to "Bank Offshore"? Is My Money Safe? What type of Services or Benefits can be Expected? |
| There
are quite a number of people that are interested in hearing more about
offshore banking, tax free bank accounts, and related matters.
The problem really is a lack of information on the Subject.
. A good number people are under the impression that such an idea is only for the very wealthy, CIA types, or even criminals. The fact is, you do not need to be a millionaire, in order to be treated like one. Many banks will allow you to establish a savings account in US Dollars for $2,500 (and often much, much less). In addition, you will gain access to three things I am sure you do not have at the moment: Privacy guaranteed by law, Ability to enjoy interest free from local taxation, and Personal attention plus banking services beyond your expectations. Today's offshore banking industry is highly regulated yet private, physically far away yet very accessible via e-mail - fax or telephone, attentive yet discreet about your affairs. In addition, access to your money is always possible with a bank or Visa debit card that is accepted world-wide. . Banks if many offshore jurisdictions do offer a number of services that you are currently accustomed to, plus some additional services as well. For those investors seeking time deposits in foreign currencies, foreign exchange, and the personal attention of a bank officer that may be in a position to help with more than just banking ~ then an offshore banking relationship is ideal. Contrary to popular belief, such services are not always expensive either. Competition has meant that more services than ever are available to banking clients, with fees that are highly competitive. . Most offshore banks will look for references from your existing bank in order to establish a relationship. In addition, since your relationship will most likely be a very personal one, many require that you visit the bank to sign signature cards and other account forms. Some banks may permit an account to be established by mail, but the majority have taken the cautious route after being forced to due so under pressures from the US regarding money laundering. The truth of the matter is, this pressure seems to be more of a tactic to make it more difficult for the average person to move their funds offshore (with regards to taxes) than to combat illegal activity. Regardless, this is the current situation for many banks in tax haven countries. Since the majority of individuals are honest and hard working people, it is hard to imagine that the goal of any client is geared in this direction. This is why we say, its about taxes, not money laundering. . Even though it has become more cumbersome to establish an offshore bank account, than it was in the past, it is not really as difficult as you may think. Also, in conjunction with an offshore foundation ~ trust or IBC structure, it is a must if you want true asset protection and tax advantages. The truth is, like any other banking relationship, an application form (and copies of your incorporation documents) is really all it takes. . This is probably the number one question that we hear, and quite frankly an understandable one. For US citizens especially, this concept of FDIC insurance is one that makes them fearful of banking in another country or jurisdiction. In reality, most modern banking jurisdictions have very strict and stringent regulations in place to ensure liquidity, and the safety of depositors. These regulations or systems may be different than what exists where you are doing your banking now, but that does not mean that the protection is less. As a case in point with both the Dominican Republic and Panama, two banking markets we know the best, a central banking system exists to regulate local banking and to ensure stringent accounting practices. In both cases, a banking license is not so easy to obtain. Banks must prove certain reserve or capital requirements before they can even open their doors to the public. In addition, special reserve deposits are maintained with the central bank at all times. . This is often in contrast to some other jurisdictions, where "Brass Plate" banks may be permitted. The meaning of a "Brass Plate" bank is, a bank that perhaps is legitimate, but is operating from an obscure location with just a few employees and a bare minimum of operating capital. This is the type of bank most people are fearful of, and is also the type of bank that has caused problems for investors in the past. It is ironic, but the majority of "problems" of this kind have all seemed to have surfaced in English speaking - Common Law jurisdictions. Jurisdictions which "sell" banking licenses for a less than the cost of a bay front condo in Miami........ . How do you know the difference? . For starters, we suggest you look for a local bank that is operating as a regular full service bank. In other words, a bank that has local depositors (not just foreign clients). Since in some jurisdictions, bankers actually go to jail if they mismanage customer or the bank's funds, you can be well assured that a bank which is serving the "locals" is one that will be well scrutinized. This is especially true if local businessmen, and government officials, have their money on deposit. Local depositors and businessmen are no less concerned about the safety of their money than you are. So, just because the front door to a bank located offshore does not say "FDIC" on the window, it does not mean it is unsound or unregulated. Often enough, it is more secure if it is located in a country that takes regulatory responsibilities seriously. . I contrast this to the recent "savings & loan" scandal which had taken place in the US. Many of the bankers ended up playing golf, with the US tax payer footing the bill for the bail out (see our article in the "Offshore Journal" about REFCO funding bonds issued in the US, which will be coming due soon). Depositors were paid, some after two years of waiting and plenty of paper work (and after the government raised additional "account insurance money" from the sale of bonds to cover the huge short fall in the old FSLIC - The Federal Savings & Loan Insurance Corp., the sister insurance company to the FDIC). A safety net for depositors is only as good as the material it is made from.....or the people managing it. . We look for, and suggest, local full service or commercial banks to our clients that meet certain standards. In truth, size is not as important as is the quality of management, accounting practices and services. There are a number of very large banks, or banks with that seem to be "good" because they have many branch offices, that we in fact stay away from for this very reason (lack of quality or competence in one or more of these areas).. . We often get this question, and the answer is Yes ~ it is perfectly legal for a US citizen to own an offshore bank account, offshore annuity policy or offshore mutual fund. The only stipulation is the folks at the IRS want to make sure they know about it, so you can pay taxes on the interest or earnings. For Canadian citizens, it is interesting to note that while offshore accounts are still exempt from Canadian tax liabilities, Revenue Canada now wants you to start reporting what you have offshore.......Hmmm. . Since many offshore banks or investment firms do not report customer account information to foreign tax authorities (or their own government for that matter), it is the responsibility of the account holder to do so. |