.
 |
Offshore
Banks and Offshore Bank Accounts
.
John
Schroder answers some commonly asked questions about offshore Investments
and Banking
|
.
.
|
...
How
Do I Know that My Money is Safe?
..
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.
.
However, 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. While it would appear that scandals and problems with such
banks in the past have forced some of the English speaking Caribbean islands
to clean up their account, a new group of rogue banking jurisdictions have
sprung up. Some in particular that are noteworthy (to be very cautious
of) include many of the former communist nations in Eastern Europe, such
as Macedonia (previously part of Yugoslavia, now a separate and independent
nation). Others include small and obscure places like Vanuatu.
..
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.
..
About
Offshore Banks and Offshore Bank Accounts
.
As we already
have stated, many people are under the impression that banking offshore
is somehow dangerous, or perhaps illegal. Nothing could be farther
from the truth, although to be fair, there have been some problems with
some select financial institutions in the past. However, all things
considered, investors often do find a world of new services and opportunities
banking outside of their home country, including privacy and tax benefits.
.
To explain
this a bit further, it is important to note that ALL countries are really
in competition with each other for investment capital. As a result,
many nations have local laws or regulations in place that allow bank account
interest to be locally tax-free for foreigners. In some cases, local
bank account interest might be tax free for both local citizens and foreigners
alike. In any event, it is important to note that banking offshore
could simply mean banking outside of your home country, and not necessarily
in what could be called a tax haven jurisdiction. So, banking in
Austria, Hong Kong, Chile, Costa Rica, the Dominican Republic and a number
of other places, not normally thought of as being tax havens, could also
be included in our definition of offshore banking.
.
Considering
that banking offshore could mean banking in another country other than
your own, this could also mean that investors have the opportunity to bank
in other currencies, taking advantage of higher interest rates or currency
exchange rates as well. In addition, since LOCAL interest rates may
be different than what they are in your home country, this could also mean
that even interest rates for your home country currency (perhaps the US
Dollar or Euro, as an example) could be higher (and tax free) as well.
Stated another way, interest rates investors earn are in part a function
of supply and demand, just like anything else. So, while you own
country might be experiencing and economic recession at the moment, and
interest rates low as a result, this does not mean that the entire world
is experiencing the same thing. To illustrate this, countries such
as the United States might be in a recession, while other nations, such
as Australia, Chile, the Dominican Republic, and so on might not - or in
the least might still be experiencing positive economic growth.
.
However, we
live in a different world today, or so we are told. The result of
this has been increased scutiny by banks and bankers across the board,
especially for foreigners, when it comes to establishing a new bank account.
Americans especially should also be aware of the pressures placed on non
US banks and investment companies, in terms of accepting or not accepting
new accounts from Americans. Stated another way, the IRS and US Government
in general has placed so much pressure on foreign financial insititutions,
that many will not accept accounts from US citizens as policy, even though
there is legally no problem in them accepting accounts from Americans,
and even though of course Americans are certainly legally permitted to
own and operate non US accounts (under US law) as well.
.
For additional information regarding
tax-free offshore banking, please contact us.
.
Contact
Us Via Our Reply Form
|
©
Copyright 2002 - 2003 Ascot Advisory Services
|
