EFAM | Escape From America Magazine

The Best Offshore Banks: or Offshore Banking Demystified

Demystifying Offshore Banking

It’s in the interests of many parties these days to turn offshore banking into something of a mystery. The government doesn’t want you to know about it because they don’t want you to take advantage of potential tax savings. They infer, but don’t say outright, that it’s illegal. (Fact: it isn’t!)

Offshore banks themselves, keen to protect the discretion and secrecy they offer, are naturally shy of publicity. Although you will typically find the likes of HSBC or Citibank advertising offshore banking online, the best offshore banks from privacy-minded tax havens very rarely advertise.

Then there’s a third group, the offshore consultants, like me. Most of my colleagues make money advising people on offshore banking. Nothing wrong with that, of course… but it may well not be in their interests to tell you how to “do it yourself.” Basically everybody is out to sell something, and it is hard to find unbiased advice.

For these three reasons alone, many people who could benefit from going offshore, find it hard to decide what would be the best offshore bank for them and they simply give up at that stage. Offshore banking needs demystifying. And that is why I wrote this article!

A Few Misconceptions about the Offshore

First, let’s clear up a few popular misconceptions. Offshore banking and investing is not only completely legal, but more and more people and businesses are doing it. They are doing it because it is beneficial, profitable and legal.

That is why the mass media, spurred on by Presidents Obama and Sarkozy and British Prime Minister Gordon Brown, are dedicating a lot of column inches to the ‘crackdown’ on offshore banking. But due to the internet, people are getting wiser. They realize that offshore banking is not unstable or risky either – quite the opposite in fact. It is big onshore banks that have been collapsing recentl – not small, discreet private banks who would never have made such risky investments in the first place! And there is a good reason for this.

Offshore banking today is not about holding hidden, unreported accounts or failing to file the proper forms, as the media might have you believe. Modern tax planning is far more sophisticated than that. Tax is not even necessarily the main motivation for going offshore these days. Many people are scared about much deeper-running problems, like the decline of the dollar, or the Robin Hood legal system. Offshore you can find more sophisticated financial services that operate in many currencies, thereby hedging against the dollar collapse.

And by the mere fact of placing assets in offshore accounts where they are not visible to everyone and his lawyer, you can at a stroke avoid a lot of lawsuits where plaintiffs are simply hoping a jury will support them against “Mr Deep Pockets.”

Those are just a few of the many reasons why smart money is moving offshore these days. Is it something for you? I don’t know… but if you have read this far it probably means your circumstances justify you investing a little time to find out more. Equipped with the information in this article, you can start to make a shortlist of the best offshore banks for your individual circumstances.

Below, and in more depth in my free online course, you will find a brief introduction to Offshore Banking. (In the free course I will also tell you my personal story, so you can see where I am coming from and that I am qualified to write about this topic!) For now I’ve included some practical information that you can use to start protecting your assets and your privacy immediately – and a warning about the pitfalls that await you, especially if you are a citizen of the USA, the UK or another European Union country!

The Wonderful World Offshore

No doubt offshore has an emotional side. We’ve all seen the movies. Offshore banking conjures up images of touching down in light planes on remote islands rimmed by crystal clear blue seas and white sand beaches, or of driving high up into the mountains around hairpin bends. I’ve certainly tried both, and my career has taken me to some interesting places.

But these days, geography doesn’t really matter. A much more important emotional factor is what people around us think. There are those who suggest that taking advantage of other legal systems is somehow wrong. Personally I believe the opposite. Most if not all governments are parasites. As a writer, I am free to say that I don’t see anything immoral in tax evasion. If I say that to you when I’m working as an offshore consultant, however, I could go to jail. That’s one of the reasons I never work in the USA or the UK. That said, of course we must respect and operate within the laws of where we choose to live. After all, if we don’t like them, we can leave – voting with our feet is the ultimate exercise of democracy.

Still, overcoming this emotional factor is the first step on going offshore. And lesson number 1 is: Don’t tell anybody about it! If you want a secret offshore account, it has to be a secret from the very start. Don’t tell anyone, and don’t listen to those who will try to make you “conform” or to be a “good citizen” – whatever that is!

Choosing the Best Offshore Bank

Some people ask “will my new offshore bank be required to report that I have an account with them?” Although there is a lot of variation between countries, the usual answer will be “no.” There are two important exceptions that I promised to warn you about and here they are:

  • If you are a US citizen or resident many offshore banks, if they will open an account for you at all, require you to sign away all your privacy rights, and they will report your accounts to the US authorities.
  • If you are an EU citizen or resident, then you are subject to the EU Savings Tax Directive, a law that stretches its tentacles well beyond European borders to encompass offshore havens like the Cayman Islands or Curacao. In this case, you won’t even have to sign anything, and your offshore banker may well not warn you about it. The reporting is automatic.

Don’t worry! Most of our readers in fact are US and EU citizens, and there are plenty of legal ways to circumvent these requirements, that I will come on to soon. But you should be aware of them from the beginning, and plan accordingly.

Provided you take care on these two points, the best offshore banks (by which I mean you should choose your bank carefully) will not report anything about your account to anybody.

The Three Main Types of Offshore Banks

Basically all of the top offshore banks specialize in some or all of the following three distinct offshore market segments, rather than trying to be everything to everybody. When searching for the best bank for you, you should consider which type of bank will suit you best:

  • Private banking: This basically means catering to rich individuals, including their personal investment companies, foundations etc and their families. Also known as traditional Swiss style banking.
  • Small commercial/retail offshore business: for those who don’t have sufficient balances to qualify for private banking. Examples might be the banks in the Channel Islands that advertise their services to British expats, or – ironincally perhaps – the US banks in Miami that advertise non-resident bank accounts to Latin Americans.
  • International commercial banking: for international businesses requiring trading services. These are the banks that are the motors behind international trade, such as containers of goods moving around on the high seas.

Choosing the Best Offshore Bank for You

In choosing the best offshore bank (or in some cases even two or three banks) to work with, a lot depends on your own profile as the client. Some of the things that you should take into consideration are:

  • Your citizenship, residence and domicile
  • The proposed investment or business activities
  • Bank charges and interest rates
  • Bank’s expertise in geographic regions and types of business
  • Languages in common – for example to does the bank staff speak good English?
  • Preferences of the client: for example -  to do most business online or for a more personal service.
  • Amount of funds the client expects to deposit with the bank

You should think about all these factors one by one, and take them into consideration as you review different banks. If you don’t immediately find the answers to the above questions as they relate to a particular bank you are interested in, then don’t be afraid to e-mail the bank and ask directly.

How to Open an Offshore Bank Account

So, you’ve navigated around the reporting requirements, and selected a bank. Opening an account offshore may appear to be a very paperwork-intensive process. But don’t despair. People sometimes forget that banks are in business to receive deposits. The main thing constraining them from doing business with you is bureaucracy and so-called reputational risk. Banks do want new clients and they will look for ways take your deposit if they possibly can do so, within the regulatory framework they have to abide by.

The more money you will be depositing of course, the more accommodating they will be. By this I don’t mean that banks are corrupt. Quite the opposite. I mean that if you want to invest a thousand dollars, bankers naturally have to apply a systematic, cookie-cutter approach administered by low-level personnel who are trained to behave like robots. On the other hand if you have a hundred thousand or a few million to invest, they will take the time to look more fully at your personal circumstances and can afford to dedicate more high level staff time to dealing with you. That’s why sometimes it’s better not to ‘start small’ by opening an account with the bare minimum intending to build it up later. A larger deposit demonstrates from day one that you are a serious client.

What Documents are Required to Open an Offshore Bank Account?

Banks are under enormous pressure to conduct detailed and ongoing due diligence on offshore clients. Typically to open the account you will need:

  • A reference from your existing bankers
  • Certified copy of passports of all signatories
  • Proof of residential address (typically a utility bill)
  • Letter stating expected activity, with supporting documentation if available
  • Documentary evidence of source of funds to be deposited

You can start preparing and getting these documents together all the while you are going through your checklists to work out what bank you will finally choose for your account opening.

Offshore Bank Introduction Services

If you search on Google, you’ll see that “bank introductions” have become quite an industry these days. A famous offshore writer once wrote sarcastically about this that he “would be happy to sell introductions to Sears and Roebuck.”

The point, of course, is that in theory – even to this day – you can just walk in to a bank, or even contact them over the internet, and open your account directly. No need to pay any “consulting fees” to intermediaries. Not only that, the fewer people who know about your account, the more private it remains.

The reality these days, however, is that opening true private accounts just by walking in off the street (or off the internet) has become extremely difficult. Banks do feel more comfortable with an introduction from a professional who is known to them, such as a lawyer, accountant or company formation agent. The banks particularly like these introductions because then if anything goes wrong the bank can pass the buck to the professional who made the introduction.

Probably the biggest advantage of going through a good intermediary is simply time-saving. Time is money. The professionals are already familiar with how the banks work – not just the written rules, but the unwritten ones too. You can also ask hypothetical questions that you might well not want to ask an unknown banker directly for fear of “putting your foot in it.” The intermediary can be your personal confidant and guide.

There are, of course, good intermediaries and bad ones. An advantage of going through a good, reputable consultant is that they will also have done due diligence on the banks first. To give you an example, I never ever recommend a bank to a client if I have not sat in the bank’s offices, talked to senior management there, studied their annual report in depth, and used my gut feeling to test them out.

Features to Look for When Opening Your Offshore Account

Here are some ‘basics’ you should look for in any offshore financial institution. All the banks I personally refer clients to, for example, tick all these boxes:

Accounts can be opened in all major currencies

  • All have secure and comprehensive internet banking facilities (including the possibility to send international payments in various currencies through the online interface)
  • All offer credit and/or debit cards to their offshore clients
  • All are familiar with offshore and international business in general
  • All routinely offer service in multiple languages
  • These banks are familiar with and supportive of my philosophy of freedom, wealth and privacy

Opening Offshore Bank Accounts by Mail

It is usually possible to open accounts without visiting the bank. But different banks have different procedures for this. My advice, however, is that clients should visit their banks if and when they have the opportunity. I call this your “KYB” policy (Know Your Banker) Good KYB makes for an easier and smoother long term banking relationship.

If you can’t visit your bank, you may find it is possible to arrange for bank officers to visit you, or to meet you when they are in a convenient city nearby. Private bankers tend to travel extensively, and often banks will assign certain staff to deal with clients from specific countries, to which they travel frequently.

With the above information, you should have a better idea where to get started in finding the best offshore bank for you! If you would like to read the full unabridged version of this article, and the following part in the series that deals with Offshore Asset Protection and Estate Planning, please sign up now to receive my free five part e-mail course, Secrets of the Super Rich.

About the author: Peter Macfarlane is an offshore banking and asset protection consultant representing high net worth clients from all over the world. For more than a decade he has been writing articles for The Q Wealth Report. This article is an abridged version of part one of a free five part course offered by Q Wealth, named ‘Secrets of the Super Rich.’ If after reading the article you would like to receive the full detailed version without any cost or obligation, please enter your e-mail address in the sign-up box.

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6 Comments

  1. kev March 25, 2010 at 12:28 pm

    Well… based on all the press regarding the “secrete” bank accounts of US citizens in CH, I would think perhaps it’s not a great idea to hide assets, you have to report overseas accounts even if the bank has no agreement with the USA. Like Switzerland…

  2. Walter Smoot June 24, 2010 at 10:25 pm

    I have done and a lot of reading on offshore bank account and investing. I must addmit I am unsertanton this subject. I would like to ask you what you think about Panama banking? Is that place safe for my money or not. I h
    ave read a lot on Panama. I even though about moving over their. Jest what is your take on this?

  3. Tony October 13, 2010 at 8:19 am

    After many years researching the best way to protect hard earned assests, my personal view is you must
    not stand out on paper or own very expensive items as this will make you a target.
    Remember a small moving target is much harder to hit !

  4. devon May 7, 2012 at 2:02 pm

    could you please send me the information man thanks from the uk

  5. luke February 2, 2013 at 4:18 pm

    Ok firstly i think you are wrong about regarding Switzerland banks. they do not report if you request they don’t they will then make anonymous payments only on interest and investments not deposits. As part of the tax directive.

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