Source: http://www.privacyworld.com/
Offshore Banking: Is it a Legitimate Option?
Offshore banking often conjures up visions of corrupt executives
avoiding taxation or drug dealers and other unsavory characters
using offshore accounts to keep their dubious dealings hidden.
But this is not necessarily the case. Certainly some people use
offshore bank accounts in unethical ways, just as there are those
who abuse loopholes in tax laws or engage in corrupt foreclosure
rescue scams, but having an offshore bank account does not
immediately brand someone a criminal. In fact, offshore
banking can potentially be beneficial for investors looking to protect
their assets, run a business while maintaining anonymity or avoid
unreliable banking systems at home.
Offshore banks are often, but not always, located in countries
providing no-tax or low-tax environments, known as tax havens. The
term "offshore bank" simply refers to a bank located in a country
other than the one in which the account holder resides.
Many people may legitimately open an offshore bank account. "It's
surprising how most people think [tax evasion] is the number one
motivation, but I'd say 80 to 90 percent of people who call are
interested in protecting their assets from lawsuits or some other
threat. Or they just want the privacy of banking [offshore]," Doug
Booth, a paralegal with Offshore Legal, a law firm based in Panama,
said.
Wealthy business people who want to get involved with a project and
remain anonymous may choose to do so through an offshore corporation
because of the privacy it offers. And diminishing confidence in the
local economy may also be encouraging U.S. residents to move their
money offshore.
Offshore account holders often want privacy and protection"As of late
we've been getting a lot of people coming along who are very upset
with the American banking system and they want to move their money to
another system," Booth said.
The primary benefits of an offshore bank account are privacy and asset
protection. Account holders can create offshore corporations, open
accounts in its name and make deposits and withdrawals through the
corporation, which can make it virtually impossible for the account to
be connected with the depositor. The IRS considers foreign
corporations to be a legitimate way to use offshore bank accounts, as
long as the corporation is used for "valid business purposes."
Swiss bank accounts have become so well known that Switzerland is
likely the first place to spring to mind when thinking of offshore
banking, but many jurisdictions offer such services. Countries such
as Panama, Bermuda, Costa Rica and the Cayman Islands are all used for
offshore banking. When selecting a bank at which to open an offshore
account, there are several things investors should bear in mind.
Being able to do online banking and to send and receive wire transfers
are critical when conducting one's affairs from abroad. Booth also
advises considering whether one prefers a multinational bank or a
local bank.
"A multinational bank has the stability and power behind it and has a
lot of conveniences. But...if pressure is applied you never really
know if they're going to hold up, given that they are located onshore
as well. Multinational banks have $20 to $80 billion in assets.
Banks only in Panama are around the $1 billion mark. They're smaller
banks...but you get the security of knowing no one can pressure them,"
Booth said.
Offshore bank accounts are not for everyone. "It's not as convenient
as banking down the street," Booth said. "You can't pay your North
American bills from your [offshore] bank account; you need to wire the
money in to pay bills, or use a card to pay for them."
Investors considering putting their money into an offshore account
should carefully weigh the pros and cons, as well as potential legal
issues, before deciding whether or not it is the right decision for
them and their money. Diverting and concealing income into offshore
accounts to avoid taxation in the U.S. is considered an abuse of
offshore banking; taxpayers and promoters of illegitimate offshore
arrangements could be subject to civil and/or criminal penalties,
according to the IRS.
"We specifically don't encourage people to come offshore for
tax-related matters," Booth said. "Panama has been a privacy
jurisdiction for a long time. It's built right into the culture, so
it's an authentic privacy jurisdiction and a lot of people...take
advantage of that. There are several sectors we don't take: Gambling,
pornography and pharmacy. Those areas we don't even touch."
When considering opening an offshore bank account, it is vital that
investors select a law firm in the country of choice to ensure that
everything is taken care of in a thorough and legal fashion. In
Panama, for example, Booth warns of so-called company mills. These
mills churn out offshore companies, but are not always reliable. "The
real problem with dealing with those people is you lose your attorney
client privilege," he said. "That means someone...has your
information and isn't held by attorney client privilege. All the
security in the world isn't going to protect you if the person talks."
Investors need to thoroughly research available options, as well as
the legality of the course they wish to pursue, before deciding
whether or not offshore banking is the right choice. Attorneys and
accountants can provide critical counsel during the process, and
investors should be as well-advised as possible before making any
decisions.
The above article courtesy of Cali Zimmerman |
