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Offshore
Banking
About
Using
Offshore
Trusts
The
Bahamas
Dominican
Republic
Forming
a Panama
The
Panama Offshore
Is
it Better in
Investing
With
About
Y2K
The
Premium
The
Stock Exchange
Dominican
Republic ~Secret Tax Haven
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There are quite a number of people that are interested in hearing more about offshore banking, tax free bank accounts, and related matters. The problem really is a lack of information on the subject. In addition, most Americans especially, want to know if some sort of FDIC insurance exists and if offshore banks are secure. To be sure, this is certainly a valid concern. The first step is to understand the difference in US banking to offshore banking and to examine the FDIC issue. Since the majority of people are primarilly concerned about bank safety and insurance, let us explore this area first. Almost all countries, whether a tax haven or not, have some form of central banking system in place. In addition, jurisdictions such as Panama, the Dominican Republic or the Bahamas, also have some very stringent government oversight of the banking industry. The system may be slightly different that the US system, but that does not mean that strength of the banking industry is compromised as a result. Many countries also have very strict laws in place, that also threaten a bank's management with considerable jail time if funds are mismanaged or if the bank develops certain kinds of probelms. I make this point as a stark contrast to the savings and loan debacle in the US a few years back. Many bankers that did outright stupid things with depositor funds went off to play golf, while the FDIC and the American taxpayer picked up the bill. Most people do not know that a large number of zero coupon bonds had to be issued in order to prop up the insurance fund people have come to believe in. These bonds will be coming due and your taxes are paying for it, not the people that created the problem. Americans often want to compare a foreign banking system to their own by asking if bank insurance is in place in the country where they wish to do business. Some countries do have formal government insurance programs, while others address this issue by requiring that the banking institution keep a deposit on hand with the central bank (which often is calcualted as a percentage of customer deposits). Let us compare this to the American FDIC program and other US requirements. Most people do not know that the reserve requirement was actually lowered, not raised, in order to free up more bank funds and offer additional liquidity to the banking system. While you may think this is a good thing ~ would you prefer to bank in a country where less than 2% of your money is put aside for safekeeping (that the bank cannot use for loans or otherwise) ~ or would you prefer to bank where the government has mandated that up to 7% of your funds are put on deposit with the central bank? FDIC insurance also may not be what you
think it is. As an insurance program, it was a very good idea for
the protection of depositors. As an insurance company run by the
government, the rules that apply to private insurance companies are not
applicable. For example, private life insurance companies in the
US are required to have assets or deposits equal to 102% of their liabilities.
This means if an insurance company has 10 clients, each with a $100,000
life insurance policy, they must by law set aside or prove that they can
pay the claims of their clients ~ stated another way ~ 102% of one million
dollars. If you think that the FDIC has liquidity right now to pay
off the depositors in the event that say just 15% of all US banking institutions
failed next week, think again. This is not an attack on the FDIC
program. Again, it was a good idea, but it is more of a psychological
security blanket than a financially sound reality. Since you read
your life insurance or other policy to know your coverage, why not read
the FDIC insurance policy from your local bank. As a depositor, you
have the right to see the policy and read it. It is almost guranteed
that most people do not. If more people did read it, I am sure when investigating
offshore banking ~ they would not ask if an offshore jurisdiction had FDIC
coverage ~ but instead ask if the banking requirements from a particular
jurisdiction are in fact better.
Banks if many offshore juridictions do offer a number of services that you are currently accustomed to, plus some additional services as well. For those investors seeking time deposits in foreign currencies, foreign exchange, and the personal attention of a bank officer that may be in a postion to help with more than just banking ~ then an offshore banking relationship is ideal. Most offshore banks look for references
from your existing bank in order to establish a relationship. In
addition, since your relationship will most likely be a very personal one,
many require that you visit the bank to sign signature cards and
other account forms. Some banks may permit an account to be
established by mail, but the majority have taken the cautious route after
being forced to due so under pressures from the US regarding money laundering.
The truth of the matter is, this pressure seems to be more of a tactic
to make it more difficult for the average person to move their funds offshore
(with regards to taxes) than to combat illegal activity. Regardless,
this is the current situation for many banks in tax haven countries.
Since the majority of individuals are honest and hard working people, it
is hard to imagine that the goal of any client is geared in this direction.
This is why we say, its about taxes, not
Even though it has become more cumbersome
to establish an offshore bank account, it is not really as difficult as
you may think. Also, in conjunction with an offshore foundation ~
trust or IBC structure, it is a must if you want true asset protection
and tax advantages.
We often get this question and the answer
is Yes
~ it is perfectly legal for a US citizen to own an offshore bank account,
offshore annuity policy or offshore mutual fund. The only stipulation
is the folks at the IRS want to make sure they know about it, so you can
pay taxes on the interest or earnings. Since many offshore banks
or investment firms do not report customer account information to foreign
tax authorities (or their own government for that matter), it is the responsibility
of the account holder to do so.
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