There are certain things you should know before opening an offshore bank account, things that can save you a lot of time and frustration. The following 7 facts about offshore banking offer a useful perspective and a good starting point for the process.
1. The Most Important Benefits of an Offshore Account
WG Hill, the author of the underground classic PT (The Perpetual Tourist), was quoted as saying, “Get your money out of the country, before your country takes your money!” And this hits the core of what offshore banking is. Give you an example. Let’s say you owe a tax bill that you are disputing. Now, in most modern Western democracies, it is very easy for the government to confiscate the funds in your national account. One day you have $10,000 there and the next day you don’t. And those nations also get the banks to collect taxes for them. This is done through the practice of automatically deducting a withholding tax on any interest earned. In this way, their national banks are fiscal agents and put the interests of the government above their own: the client.
Opening a bank account abroad puts your funds out of harm’s way. If you had $10,000 in an offshore account, your own government couldn’t automatically divert it. And if you bank in a place where interest is not taxed, then your funds grow faster, without any withholding tax being applied. An offshore bank account also gives you more financial privacy, something in high demand in this increasingly regulated world. Then there is the flexibility that comes with having more than one bank account, in more than one country. This strategy allows you to hedge your bets and keep your cash in scattered places.
2. Choose your jurisdiction wisely
Not all jurisdictions (countries) are the same. Each bank is governed by the laws of the country in which it is licensed to operate. It is also governed by a plethora of internationally applicable financial supervision standards. While some typical offshore tax havens seem ideal as banking jurisdictions, the truth is that they often are not, precisely because they have been, or are being, in some way subject to anti-money laundering laws or other financial restrictions on how They behave. business. You don’t want to end up in the middle of such a financial conflict.
Another factor to take into account is the geographic area in which the bank operates and the existence of information exchange treaties or tax collection agreements between the countries in that area. Where you currently live in the world affects where you can bank abroad. Remember, offshore simply means a place other than where you currently reside.
3. The truth about privacy and anonymity
Swiss banking has always been considered the pinnacle of banking privacy, and that is largely true, even though they are under increasing pressure to comply with international standards. The Swiss, however, have a vested interest in maintaining their USP (unique selling proposition), which provides the most secure and private banking in the world. But privacy in an offshore bank is conditional. Most offshore banks will be covered by privacy protection measures, which could include such things as making it a criminal offense for a bank employee to disclose details of any customer’s financial affairs. However, these laws can generally be violated by filing a court order issued on the basis of suspected criminal activity.
This is all well and good for those of us who aren’t criminals, and it usually means our privacy is pretty well secured. The problem is in the definition of the word “crime”. It is well known that certain banking jurisdictions have now succumbed to pressure to list tax avoidance as a criminal offence, which means that your account information could be disclosed under such a claim if it is part of a court order from another country. So you can also accept the fact that truly bulletproof private banking is hard to come by, and anonymous banking is a thing of the past.
4. The impact of KYC and FATF
Offshore banking has become much more restrictive since 9/11 as the US enforces strict regulations aimed at combating what it calls money laundering. This global approach means that sincere and honest people are forced to jump through hoops just to get started. Unfortunately, there seems to be no end in sight to this process, so all you can do is bite the bullet and continue.
When you first apply to open a bank account abroad, you will immediately feel the impact of KYC (know your customer) regulations. Banks have a way of making this requirement sound like it’s in your best interest, but they’re just trying to sweeten a bitter pill. In effect, the bank will want to know a lot more about you than it did a few years ago. Not only will they want to see your valid ID, proof of address, and business, bank, or personal references, but they’ll also want to know what you do and what kind of account activity to expect.
5. What you need to open an account abroad
Opening a bank account abroad does not have to be traumatic, if you know what to expect and what awaits you. You should carefully consider your banking requirements. Do you want a personal or corporate account? In most cases, a personal account is sufficient and is usually easier to open. Some offshore banks will only open corporate accounts in person, not online or by mail.
Of course, you’ll need to have a valid passport, and you’ll need to have it certified by a notary public (which you’ll usually find at the big law firms). This process involves making an appointment with the Notary and having him look at your passport, then make a copy and add your Notary seal and signature, indicating that he personally saw your passport. He will also need a utility bill or two as proof of residency.
The good news is, once you’ve gone through the mill and opened your account, you’ll find that the bank (like any business that wants to make a profit) will want to retain your business and keep you happy. A good banking relationship is like gold, so keep it.
6. The facts about offshore credit cards
Most offshore banks will easily offer you a debit card, you know, a simple ATM card like you have at your domestic bank. They are usually of the Cirrus and Maestro brand, although in EURO countries Visa Electron is quite popular. Now while these cards are very useful, the main function (when issued by an offshore bank) is to withdraw cash from ATMs.
This is where the desire and need for a full-fledged credit card comes in. However, due to the rules set by Visa and MasterCard International, such cards are generally only available to residents of the country from which the bank operates. So, for example, if you have a bank account in an offshore jurisdiction, your Visa card may only be available to local residents, not you.
A good alternative is a Visa or MasterCard debit card, which is directly linked to your bank account abroad. When you spend money using it, the funds are immediately withdrawn from your checking account. You cannot get credit with this card, but you do get the full functionality of Visa and MasterCard when traveling internationally, such as hotel check-ins, airline reservations, etc. These types of cards are not readily available abroad, but are issued to their international customers by some of the major offshore banks.
7. The advantages of multi-currency accounts
One of the benefits of offshore banking is the immediate availability of multi-currency accounts, where you can open more than one account at the same bank, each denominated in a different currency. Now why would you want to do that? The answer is simple: for coverage. In this volatile world, currencies are always changing in value. And as I write this, the USD is seen to be heading down in value over time.
Most offshore banks that offer multiple currency accounts will allow you to move funds fairly easily between them, when you see fit. So if you have a substantial amount of cash on deposit, spreading your cash risk by holding different currencies is a good financial decision, made much easier by having an offshore bank account.
Conclusion
Opening a bank account abroad might be the best thing to do. However, many people find the process daunting, especially because they need to overcome an irrational fear that their money will somehow not be as safe as banking at home. Of course, the truth turns out to be quite the opposite. If you bank with a reputable offshore bank, then your money will be much safer than before!
