Safe Offshore Banking Tips: How to Choose and Open an Offshore Bank Account

Keep Your Money Safe in an Offshore Bank Account

By: Dan P.

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The banking sector in the U.S. isn't looking quite as strong as it has always been fabled to be—after all, the FDIC only has several billion dollars to insure several trillion in deposits!
That scenario has a lot of investors and savings holders worried, and as a result, a lot of people are resorting to offshore banking as a discreet, safe solution. Despite the association that most people make with organized crime, offshore banking in and of itself is a perfectly legal practice; it's when you fail to report such activities to the IRS that it becomes a legal problem.
Following are some of the pros and cons of offshore banking, followed by a small list of resources for those interested in opening up an offshore bank account.

The Benefits of Offshore Accounts

Generally, people that look into opening an offshore savings account are searching for some or all of the following benefits:

Increased privacy when it comes to the treatment of their funds and personal information.
A more preferable—or simply absent—tax burden.
Easier access to their funds.
A more stable political and financial atmosphere in which to keep their funds.
Higher interest rates.

Most offshore banking destinations offer one or all of these features. Generally, nations that have developed a reputation as offshore sites have gone to great lengths to deregulate their financial sector, meaning that not only are taxes low or non-existent, but furthermore the respective government's ability to inquire about who you are, how much money you're keeping on their shores, and other sensitive info is virtually zilch. Consequently, the bank's ability to give you generous returns on your investment is significantly greater than in a more heavily regulated jurisdiction. This is one of the foremost reasons for offshore banking: higher interest rates. In the same vein, there are certain banking options commonly available in offshore accounts that aren't available bank here in the U.S. (or most developed, regulated jurisdictions), like anonymous accounts, for example.

Proponents of offshore banking claim that the tax competition that results from these low tax or tax free offshore money havens is good for industry overall, as it allows companies to pick and choose a particular mix of duties and benefits that suits their needs. Lastly, offshore accounts offer all the convenience of modern telecommunications, and can be set up over the net or over the phone, and of course, in person if desired.

Drawbacks to Offshore Banking

Offshore banking may give a bad image.
Money in offshore accounts still needs to be declared in your tax statements.
Some offshore bank accounts do not offer the strict privacy protection that they claim.
Taxes lost in your home country by sending money overseas, damages your country's well being.

First and foremost, there's the issue of image: offshore bank accounts are automatically stigmatized by the general perception of society at large. In keeping with the old adage, “A person is judged by the company they keep,” and the company in the offshore community isn't that cute and cuddly. From drug-traffickers, to the mob, to outright terrorists or dictators, there has been a long history of shady dealings in the offshore banking community. However, guilt by association should not be—and isn't—the biggest drawback to keeping your deposits offshore.

The most common mistake in offshore banking is the assumption that you don't have to declare the money in your tax statement, and that's where most people run into trouble. Beyond this mistake (which doesn't technically count as a drawback), there are other issues to keep in mind. For instance, the privacy that offshore proponents so vigorously tout has been seriously drawn into question, as after the September 11th terrorist attacks in the U.S., the CIA and the Treasury Department have begun a serious effort to identify and scrutinize offshore holdings, as part of the Terrorist Finance Tracking Program, which has cast serious doubt on the sanctity of offshore bank secrecy. Lastly, there is the altruistic concern among many critics of offshore banking that the taxes lost by the sending of funds overseas damages the home country's wellbeing, perpetuating class differences and other socioeconomic barriers...a whole other can of worms.

How to Open an Offshore Bank Account

Each individual will make their own appraisal of whether or not opening an offshore account is in their interest, and if it is a practice they are comfortable with.

In reality, many citizens have already taken the steps to do so, all the while remaining perfectly within the bounds of the law. In today's modern atmosphere, opening an offshore account couldn't possibly be easier. If you have the name, telephone number, or website of an offshore account that you have been recommended by a trustworthy source, a phone call or email will probably be enough to get the process under way.

Choosing an Offshore Bank Account

The word-of-mouth process is one of the only ways to walk into the offshore banking process with a relative degree of security and calmness about your actions, as there are many scams out there that prey on overly-confident, unexperienced customers. However, not everyone knows somebody with a safe offshore account, so consider visiting CapitalConservator or DeltaQuest as places to get familiar with the industry.

In practice, it's best to do some research on individual countries' tax laws, and choose the one you consider to be the strongest. Generally, the consensus is that countries like Switzerland, the Cayman Islands, the Bahamas, and Luxembourg are customer favorites; however, Uruguay, Panama, Belize and Barbados also have strong reputations. Check out the following list of countries that are considered standard destinations for secure offshore banking (in addition the the aforementioned): Antigua and Barbuda; Bermuda; British Virgin Islands; Channel Islands; Cook Islands; Cyprus; Dominica; Gibraltar; Ghana; Hong Kong; Isle of Man; Malaysia; Liechtenstein; Malta; Macau; Mauritius; Monaco; Montserrat; Nauru; Panama; Saint Kitts and Nevis; Seychelles; and Turks and Caicos Islands.

The Next Step

All in all, if you have reason to believe that your funds are at risk—especially if they are not FDIC-insured—in a US bank, what with all the bank failures that have been hitting the sector in the last year, then an offshore savings account could be a perfect, easy way to achieve a little peace of mind. A lot of people have taken that step; how about you? Go to ReviewCenter/ Offshore for an overall review of offshore banking, and to get reliable opinions on the issue today.

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