Opening an Offshore Bank Account

Offshore banking is one the areas of finance that remains steeped in mystery for many.

In popular culture, the US film industry has done its part to create an aura of criminality surrounding tthe offshore bank account. The holder of an offshore account is variably either a terrorist, kidnapper, arms dealer, narcotics trafficker, or corrupt politician.

The reality, however, is that offshore banking accounts, often opened in legitimate tax havens have been a vital part of international financial planning and tax minimization almost as long as there have been taxes.

Furthermore, while the media has done its part to try to villianize those that would attempt to reduce their domestic liabilities and tax burden, the offshore bank account and offshore banking services are more popular than ever among international corporations and are vital in their overall tax avoidance strategies.

And yet, it's "different" for the individual.

Ironically, at a time when interest in financial privacy is growing, the list of available locations that actually observe any semblance of bank secrecy laws is shrinking. Recent turbulance in both the banking and financial world, and the geopolitical strains have given high-tax regimes the excuse they were looking for to go after low tax havens and offshore financial centres.

As demand for truly private offshore banking services is growing, the available supply is shrinking. In addition, generally speaking only those who can consider themselves accredited investors, and high net worth individuals receiving wealth management and asset protection services have been exposed to the benefits of opening a personal offshore bank account, or incorporating their offshore company in a tax haven and opening a corporate offshore bank account in a jurisdiction with bank secrecy laws intact.

So how do you go about choosing, and then opening, an offshore bank account?

Well, the short answer is that it's different than the rules for choosing an "onshore bank" - or it should be - and below I will attempt to explain why:

In the past, the rules were very similar. You wanted a large, well-capitalized bank with a long history of operations preferrably in a well-known tax haven or offshore financial centre.

Under this scenario, a few of the most well known offshore banking jurisdictions received most of the business. In Europe, Swiss Offshore Banks (and swiss offshore banking) received the lion's share of non-resident account deposits along with some other well known EU havens, such as Austria, Andorra, Monaco, Liechtenstein, San Marino, and Gibralter.

In the United Kingdom, the channel islands, including the Isle of Man and Jersey and Guernsy were popular destinations for offshore accounts, and in the Caribbean many of the UK dependencies received most of the offshore accounts. These included, of course, the Grand Cayman Islands, the Bahamas, and several of the other better establish islands with long standing offshore banking industries.

However, in the last several years, this has all changed. High profile offshore financial centres have come under increasingly intense attack -- first by the US an the Internal Revenue Service (IRS) and treasury, later by the HMS in the UK and lastly by the European Union (EU) tax authorities with an incredibly public case blowing up most recently between Liechtenstien and German nationals avoiding taxation by stashing deposits there.

The truth is, nowadays, believe it or not, you want to look for a banking jursdiction that is not so well known. The OECD and several of the economic unions publish "blacklists" of countries who have proven less than cooperative in their sharing of information on their banking clients with the respective governments tax authorities of the client's home countries.

In fact, even Switzerland lately has given up and begun sharing interest earned information with governments of the EU for all EU resident depositors -- and even this has not appeased the high tax countries in the EU who want Switzerland placed on a black list.

The truth is, you want one of the few remaining countries who respect bank secrecy and will not raise suspicions when dealing with these countries. Two such countries that I'm most familiar with are Panama and Uruguay.

Panama and Uruguay both have some of the strongest bank secrecy laws in the world and penalties for breaking their bank secrecy laws involve prison and fines. In Uruguay, the only way that the veil of secrecy can be broken for a foreign depositor is if a real crime has been committed in attaining the monies -- and that crime has to also be a crime in uruguay. Tax evasion does not fit under this rule, and thus is not a reason that bank secrecy can be broken.

Panama supports a better infrastructure for international business and more flexible offshore company offerings, however, it is getting increasingly harder to open a non-resident bank account in Panama. Some of the better strategies involve using a formation agent to create an offshore trust or offshore corporation in another country and an offshore banking account in Uruguay or Panama. There are a few companies that will even allow you to open your offshore banking account entirely online without needing to visit the country in question.