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12 Offshore Banking Myths Busted

By: Doug Snarder
 

Offshore bank accounts are mostly used by spies and criminals -- It would be silly to say that this does not happen, but the reality is that most of the funds kept offshore are deposited by fortune 500 companies shielding their asset base as part of their risk management strategy. I personally know a TV personality that every person reading this knows, and He banks in Panama among other countries to reduce his risk and protect his assets.

Offshore banking is too complicated for the average Joe -- This is actually true if the average Joe were to do all the legal work himself. Typically an offshore bank account is created in conjunction with an offshore corporation due to many governments taxing worldwide income of individuals. This sounds complicated but a good lawyer will have the entire package done in less than a week.

Only a rich person can afford an offshore asset protection setup -- This is totally false. The basic package, which is adequate for 90% of clients, costs less than $2000 US. The basic package includes an offshore bank account and a Panama bearer share corporation. It has proven time and again to be a very solid protection mechanism for our clients and is very useful for tax planning as well.

9/11 has weakened bank secrecy -- This is certainly true onshore! Even though pretty much all the offshore countries are now in the MLAT treaty, this has not weakened bank secrecy unless the matter is criminal in nature. Even at that the issue must a crime in both countries. In Panama, for example, tax evasion is not a crime. As such a MLAT request for information based on a tax evasion case would be flatly denied by the Panama government.

You have to visit the offshore jurisdiction where the bank is located. -- This is not true. Everything can be done by phone, fax, email, and courier by an offshore banking professional.

Bank secrecy is useless now that all the offshore jurisdictions are in the MLAT (Mutual Legal Assistance Treaty). -- If you are a criminal there is some merit to this statement. If you are not a criminal, but just someone trying to protect your money this statement is false. For an MLAT request to be honored, it must be based on a crime in BOTH countries. If the offshore country doesn't consider the activity a crime, they will NOT comply with the request. A great example is tax evasion. This is a crime in countries like the USA and Canada but in countries like Panama for instance it is not a crime. MLAT requests for tax evasion are simply denied.

Tax information is shared between most countries now -- It is true that many countries have entered into tax treaties, but other more reputable offshore jurisdictions have not. Panama, for example, has no tax treaties with anyone.

The authorities will know if I use an offshore bank account -- That is simply not true. E-commerce and banking all over the internet today rely on secure online encrypted communications. The largest banks in the world use it and it is completely secure. It is impossible for anyone to see what you are doing. Companies like findnot.com can add a second layer of security for those who feel they need it.

Offshore banking doesn't protect me from a lawsuit because the judge will just order me to bring the money back. -- If you were to open a personal bank account offshore this would be true. However, an offshore bank account is typically owned by a bearer share corporation and or a foundation. In the example of a foundation, if you donated money to the foundation you cannot get the money back. The foundation can only give money to the purposes set in its governing documents. That does not include giving money to you. Basically the money is out of your control legally speaking and so you can't bring the money back.

If I move money offshore, someone will be able to track down where it went -- If you were to wire the money to its final destination directly that would be true. Clients concerned with this usually move the money to a intermediary bank in another offshore banking haven. For example, they will wire the money to an bank in the Cayman Islands, and then rewire the funds to Panama. Someone coming after the money would have to break the Cayman Island's bank secrey to find out the money is now in Panama. This is not likely to happen and you would likely have plenty of time to move the money to a third or fourth jurisdiction. Because authorities know that, tracing money is only done is high profile cases.

Offshore bank accounts can be used to do all the same activities as an onshore account -- This is almost true. The only exception is online bill payment. This popular feature doesn't make sense offshore and to my knowledge no offshore banks offer it. Typically, the money held offshore is not used onshore anyway. Having said that, most offshore banking clients have a bank card that allows them to withdraw funds anywhere in the world. The card only leads back to the corporation which owns the bank account (and would require breaking bank secrecy even to find that out). The corporation is usually a bearer share corporation which means that it's ownership is anonymous anyway.

Operating an offshore bank account is illegal -- Operating an offshore bank account is 100% legal and many fortune 500 companies do it everyday. In fact much of the money kept offshore is deposited by these companies to protect large sums of money from lawsuits. Most people don't realize that most major corporations are actually comprised of 50-100 smaller corporations. Many of these corporations in offshore banking havens, offering asset protection and tax advantages.

Article Source: Main Articles

If you have a business or have assets that you don't want to be taken by an ex-spouse or a legal battle be sure to read more of Doug Snarder's work on the Offshore Banking Account and Offshore Asset Protection
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