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Offshore
Banking FAQ
Q: What's
the main
advantage in having an offshore bank account?
A: Privacy
and security. Not many people realise that money in
a domestic account
is not really secure - at least, not secure from the
government. In any
case where you are deemed to owe money - either in
taxes, payment of
certain fees, or even (in some countries) child
maintenance payments -
then the government can actually "trawl" your
account and withdraw
funds - without your knowledge or permission. In a
sense, a domestic
bank account is an open wallet to anyone who can
persuade the
government that you owe them money for some reason -
even if you don't!
Q: Isn't having an
offshore bank account illegal?
A. No, it
certainly is not. However, some countries may
require that the
existence of such an account is reported. For
example, US residents and
citizens are required to report any offshore account
with a balance
exceeding $10,000.
Q: Are such banks
safe?
A: Most
definitely! In fact, the bulk of the world's private
wealth is kept in
offshore accounts. However, it still requires
prudence when sourcing
such banks on the internet - as there are a number
of smaller banks,
which may be ideal for transactions and pass-through
- but not ideal
for holding large amounts.
Q: What makes a
bank
an "offshore" bank?
A: That
depends entirely on where you live. Basically,
"offshore" simply means
in a country other than your own. So, if you live in
the USA, an
account in the Isle of Man would be offshore. And in
the same way, it's
possible for a person outside the USA, to open an
account there - and
treat it as an offshore account. However, for most
people, an offshore
account is in a country other than their own - which
also offers
increased privacy, as is the case with known tax
havens.
Q: How do I open an
offshore bank account?
A: The first
thing to realise is that offshore banks want your
business. The second
thing to realise is that since 9/11 there has been
an increase in the
level of disclosure required by such banks. But
opening an account is
still relatively easy. You should plan on having
around US$1,000
available as an opening deposit. Some offshore banks
will want more,
some maybe less. You will need to provide a
legitimate state-issued
photo ID - usually your passport. You don't send
your passport - but a
copy. However, most banks will require that this
copy has been
notarised by a Notary Public, or certified in some
way - to confirm the
copy's authenticity. Most banks will also ask for
some or all of the
following: a utility bill - to confirm your address;
a bank reference
from a bank you currently use; a statement as to
what you intend to use
the account for (if it's business or corporate
account); a statement as
to the source of funds.
Q: Does an offshore
bank operate the same way as my "onshore" one -
and does it provide the
same services?
A: There are
differences, however, depending on the bank you
choose (and there are
many), you should expect levels of service to be
equal - except for
some financial services. Don't expect to raise a
mortgage from an
offshore bank - because, like all banks, they
require security - and in
the case of property, they wouldn't be able to lend
funds on something
in another country. All offshore banks offer a range
of other financial
services, including various types of accounts, in
different currencies.
Sometimes they offer a full multi-currency account -
which means it can
accept any major currency, and you can wire out in
any major currency.
You can expect such a bank to provide debit and
credit cards - however,
with credit cards, they require a security deposit
which is greater
than your credit line. Credit is a bad idea anyway,
for a freedom
seeker, so you should not miss this.
Q: How can I use an
offshore bank account?
A: The
purpose of an offshore bank account is to allow you
to accumulate and
manage your funds in a more secure and discreet way.
You could use your
offshore account to fund an offshore brokerage
account - for the
purpose of investing. You could use your account to
receive and
distribute funds from a business - either online or
offline.
Q: How do I access
my funds in an offshore account?
A:
Obviously,
you can't just walk in and do business face-to-
face, unless visiting
that particular country. However, most offshore
banks have advanced
internet capabilities and various phone banking
services. You can wire
funds in and out of your account, and you can access
your funds using a
Visa/MasterCard debit/credit card or plain ATM card
(good for anywhere
in the world).
Q: Are these banks
more expensive?
A: Some are
-
usually in the area of monthly fees and/or the
charges they make for
wiring funds out of the account.
Q: If doing
business, should I have an offshore corporation?
A: This is a
very good idea - as it provides yet another layer of
privacy, and also
asset protection. However, unless you have a an
active business
concern, you shouldn't rush into setting up an
offshore corporation -
as you have to justify the set-up costs and
maintenance costs.
Q: How much does it
cost to open a bank account or form an
international corporation?
A: Most offshore banks will only require a certain
minimum opening
deposit. There are a few banks that charge an
account- opening fee -
usually in the $100 range. Some more exclusive banks
are not readily
accessible to the public, and operate through
agents. In cases like
this, you can expect to pay an "introduction fee" -
which could be
anything from $200 - $500. As for the cost of an
offshore corporation -
that depends on what country it is incorporated in.
Panama is one of
the cheapest and can cost from $600 up to $1,000. In
other
jurisdictions, you may need to pay up to $2,000.
Maintenance costs run
from around $150 to around $500 per year.
David MacGregor
Offshore
Banking
Specialist
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