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What is an offshore bank account?

An offshore bank account is a term that refers to any bank account opened outside of the account holder's usual place of residence.

More often than not, people open an offshore bank account in one of those countries that specifically attracts non-resident depositors by offering banking secrecy, a tax-free environment, legal protections against overseas civil court actions and a sophisticated array of private banking services.

An offshore bank account can be opened in the name of an individual (personal account) or a company (corporate account). Many people form an offshore company solely for the reason of holding a bank account as this can substantially enhance their confidentiality.

Some offshore banks will open a so-called numbered account. A numbered account will offer a degree of additional privacy protection as it is maintained under a number (or a fictitious name) only; the actual account holder's name is protected by the bank and is never released on any correspondence, wire transfers, etc. Numbered accounts may be held by both individuals and corporations.

Offshore banking is not as troublesome as some people think. The majority of offshore bank accounts can be opened by mail; visiting your chosen banking haven in person is rarely necessary. Thereafter, most offshore banks will accept instructions given by phone or fax. Nowadays, many will even let you operate your offshore bank account online.

What are the benefits of offshore banking?

Offshore banking has become a hot topic in recent years. Once an exclusive preserve of the mega-rich, even the moderately wealthy nowadays want a piece of the offshore banking action.

No wonder. Offshore banking services, once shrouded in mystery, are today advertised virtually everywhere -- from lifestyle magazines to the Internet. Gone are the days when clients would be horror-struck to see the name of their offshore bank in print. Today, virtually every offshore banking haven -- and each individual offshore bank -- competes aggressively to attract even modest deposits.

Opinions vary as to whether or not this state of affairs is preferable, even desirable, when compared to the "good old days." There is no doubt, however, that offshore banking remains a powerful mechanism through which to assert one's financial freedom and privacy.

If you don't already own an offshore bank account or two, note that there are at least three good reasons why you too should consider moving at least a portion of your assets to a good offshore banking haven:

- to protect,
- to preserve, and
- to increase.

Assets held domestically are subject to political and social factors that you cannot control. Your home administration may suddenly raise taxes to fund a failing economic experiment. Local courts may be encouraging a culture of legal actions aimed at asset confiscation. The prevalence of divorce, malicious prosecution, and our unstable political world make their own argument each for relocating assets offshore.

The unrestricted offshore environment, on the other hand, delivers freedom from excessive taxation and freedom from red tape. Moving your assets to a tax haven bank will allow them to benefit from the offshore fiscal sunlight and grow at a faster rate than back home under the dark shadows of bad financial planning.

Offshore banking, however, isn't only about saving taxes. Offshore banking also equals access to investment products and opportunities that might not be available from your domestic bank, as well as effective asset protection and a level of privacy/secrecy usually unheard of "onshore."

In short, doing at least some of one's banking offshore makes financial sense. Isn't it time you tried, too?

What is private banking vs. offshore banking?

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What makes a good offshore bank?

The following are some of the issues to consider when selecting an offshore bank:

Offshore bank secrecy

First and foremost, a good offshore bank should protect your privacy. This point is not as obvious as it seems.

Bank records are considered private, to a greater or lesser extend, in virtually all countries, offshore and onshore alike. Attitudes vary though.

For example, the issue of bank secrecy is unlikely to rank high in the mind of your local banker. Walking into your hometown bank and quizzing the staff as to the confidentiality of your account will raise an eyebrow at best. A review of your account by a compliance officer might follow. ("Why is he/she so worried about secrecy? What does he/she have to hide?")

A good offshore bank, in contrast, must be much more accommodating.

While effective legislative provisions -- i.e. strong bank secrecy laws -- are imperative, they are not nearly enough. You need a banking haven -- and a bank -- with an established and accepted tradition of secrecy. Your offshore bank must understand that privacy ranks high on the list of client priorities. To put it another way, your offshore banker should not shy away from openly discussing the issue with clients, and should be willing to assure clients of the bank's committment in this regard.

A good offshore bank will fight your corner if the confidentiality of your account should ever be tested.

Efficiency and quality of customer care

A good offshore bank is an efficient and customer-friendly bank. Forget call centres, busy phone lines, or voicemail. Expect your calls to be answered by your account officer -- a real person familiar with you and your needs.

Expect your instructions to be acted upon promptly. If a payment needs to be made in 24 hours and you ask that it be so, then it should be so. If you need funds at short notice, your offshore bank should go out of its way to make it happen. This is the essence of traditional private banking services.

Note that the new era of e-banking solutions -- or Internet based account management -- has prompted many banks to radically alter their business model and cut back on the personal touch. An excellent offshore bank will offer a combination of the old and the new.

Also beware some of the new breed of European "private banking" departments which, in return for a set of inflated banking fees, offer little more than a cup of coffee in glass-fronted designer offices. A fake Rolex watch is a fake Rolex watch, even if bought in Switzerland. Be sure to get the real thing.

Stability of the offshore bank and jurisdiction

This is the bottom line. Either go for a well-known, established offshore banking haven, or at least look for a jurisdiction with prudent regulation regarding financial solvency of banking institutions.

Admittedly, potential instability was more of a concern in the nineties when many countries willingly granted bank licences to inexperienced and/or not especially solvent entrepreneurs. Lessons have been learnt and regulation has become much more stringent across the whole industry since then. Nevertheless, you should still exercise a degree of caution, especially if you are new to offshore banking.

A single-branch bank in an offshore haven you haven't really heard of before probably isn't the best home for your money. Common sense dictates the same is true about banks that rely on the Internet alone to attract clients.

If unsure, get impartial professional advice or do a few background checks yourself. How long has your prospective offshore bank been in business? How do they compare in terms of size to other banks in their jurisdiction? What is their network of correspondents like?

Which is the best offshore banking haven?

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What kind of offshore account do I need?

It depends. The choice of offshore accounts worldwide is fairly extensive, and the jurisdiction, bank and the type of account best suited your individual needs all depend on a number of factors. Consider at least the following:

Level of confidentiality needed

To begin with, a personal offshore account -- i.e. an account held in the name of an individual -- will satisfy people who seek a moderate level of confidentiality. Naturally, sound bank secrecy legislation is something to look for when choosing the haven where your offshore account is to be maintained.

An offshore numbered account, or an account held in the name of an offshore company, will offer a further layer of protection.

At the other end of the scale, anonymous banking facilities usually make use of appropriately-structured offshore corporations and nominees to completely shield the identity of account owners.

Account purpose and activity

Just about any offshore bank can provide all the standard banking services you are used to at home, such as sending and receiving wire transfers, clearing cheques, issuing bank drafts and more.

Any half-decent offshore bank will also offer a good range of medium- to long-term investment products and services, for example certificates of deposit, bonds or mutual funds.

Frequent or time sensitive investing and trading, such as in commodities or currencies, calls for a choice of bank that can handle client instructions with particular efficiency.

If you anticipate your offshore account to be used for frequent banking transactions with the outside world, it is not just efficiency, but also your preferred bank's willingness to maintain such an account that must be taken into consideration. Many offshore banks favour private asset holding and investment accounts over those used for commercial trading operations.

If convenient access to funds held in your offshore account is a concern, look for a bank that can issue a credit, debit or ATM card for cash withdrawals.

Amount of deposit

The size of your deposit will also influence the choice of an account. Although "going offshore" with less than a hundred thousand dollars rarely makes sense (value your time, effort and costs), a standard personal or a corporate offshore account can be opened with a mere US$ 5,000.

A few banks will open a numbered account for clients with as little as US$ 25,000 -- although most expect a far more significant amount of deposit. Individually managed investment accounts are usually available offshore to clients with at least US$ 250,000 - 300,000.

What is an offshore numbered account?

Offshore numbered account has become a fairly wide term over the past decade, and it has become increasingly difficult to correctly define its meaning across the variety of offshore jurisdictions. Nevertheless -- whatever the banking haven, whatever the bank -- the term "numbered account" always carries with it a sense of increased privacy for the account holder.

Many people will be familiar with the famed Swiss numbered account. Although the traditional Swiss numbered account no longer exists, Swiss banks still offer numbered accounts. Confusing? Let's look at the history of numbered accounts.

Until 1992, it was possible for an attorney to open a Swiss bank account on behalf of a client, without revealing the client's identity to the bank. Effectively, the bank had no idea whose money it handled. The same practice continued in Liechtenstein until 1999.

Because the bank had no information as to the account holder's identity, there was no way to refer to the account except by its number -- hence the term numbered account.

But the meaning of "numbered account" has shifted since the disappearance of this practice. Nowadays, we wouldn't call the original Swiss numbered account "numbered". We would go further, and use the term "anonymous bank account" to describe the fact the the account holder was unknown to the bank.

The Swiss have kept the term numbered account, not least because it makes good marketing sense. But these days, a Swiss numbered account is never anonymous; Swiss banks are required by law to know the identities of account holders.

Nowadays, the term numbered account usually suggests an account where the bank takes additional steps to protect the account holder's identity. A typical numbered account, in Switzerland or elsewhere, will offer some or all of the following features:

• The bank's computer records deliberately omit the account holder's name, or any other details that might reveal the account holder's identity. A numbered account is referred to under a number (or a code name) only. Consequently, most bank employees have no idea who such an account belongs to. The identity of the account holder is only known to senior bank management.

• As a result, no paperwork produced in relation to the account, such as account statements, will give any clue as to the account holder's identity should it end up in the hands of a third party.

• The account number alone, or a code name (if available) is sufficient to route wire transfers into the account. This protects against paper trail as sending banks do not learn the name of the recipient.

• Outgoing payments made from a numbered account do not give the name of the account holder away either. Most banks just indicate "one of our clients" or similar as the sender.

• Third-party investment products are purchased in the bank's name and not in the name of the account holder.

• Mail is typically held for collection, and should your banker ever need to reach you, he/she will intentionally disguise the purpose of the call if ever speaking to a third party or leaving a message. You do not need to worry about seeing your Swiss bank's letterheaded paper coming out of your office faxmachine, either; a discreet hand-written note is the norm.

Although Switzerland perhaps deserves the credit for the term "numbered account", there are other places to go for the kind of discretion outlined above. Banks in Liechtenstein, Switzerland's tiny neighbour, as well those in Austria, also open numbered accounts, as do banks in many offshore tax havens around the world.

Most banks expect a significant deposit from anybody asking to open a numbered account, as well as an annual maintenance fee. Is it worth it? Opinions vary.

Some offshore professionals claim that numbered accounts are past their sell-by date and are used as a gimmick by bankers to convince depositors that their funds are safe from prying eyes.

It is certainly true that a numbered account helps protect against paper trail and any incidental release of information. However, it is also true that numbered accounts are subject to the same legislative provisions as standard accounts. A court action -- if successful -- will still result in the account holder's identity being revealed. This is in contrast to an anonymous bank account, where a bank can never reveal the account holder's identity simply because it doesn't know it.

It should be noted that an account opened in the name of an offshore company will provide benefits similar to those of a numbered account. In the case of a numbered account, your name is deliberately detached from the account, or replaced by a code name. In the case of an account in the name of an offshore company, your personal name is replaced by the name of the company. The discretion achieved is much the same.

Can I get an anonymous bank account offshore?

Yes and no. Once upon a time, there was the legendary Swiss numbered account, which was about as good as an anonymous bank account gets. Nowadays, the Swiss still call some of their accounts "numbered," but they are no longer anonymous, because Swiss banks are now under legal obligation to verify account holders' identity.

The so-called Sparbuch is another example of an extinct anonymous bank account. Sparbuch was a simple anonymous savings account, available primarily in Austria and neighbouring countries. No name or ID was needed to open or use one. Instead, deposits and withdrawals were recorded in booklet that was attached to the account. Anybody in possesion of the booklet (and the correct code-word) was considered the legal owner of the account.

Both the Swiss numbered account and the Sparbuch were discontinued. In general, anonymous banking facilities are much harder to obtain today than once was the case.

Anyone seeking to open an anonymous bank account, offshore or onshore, will come up against legal requirements compelling banks to identify the account holder. This is mainly the result of a campaign led by the FATF (Financial Action Task Force), an organisation that has claimed that an anonymous bank account -- of whatever kind, wherever in the world -- is a useful tool for the laundering of illicit funds.

Although the days of the quick-fix anonymous bank account are over, the practice of anonymous banking itself is not. However, modern-day anonymous banking is the privilege of the knowledgeable few; it requires careful legal planning on a global scale.

An offshore company (one or more) always plays a central part in the construction of any anonymous banking facility. Familiarity with legislation concerning beneficial owner disclosure is also imperative. Many offshore banking havens require that banks identify the actual beneficial owner of any account, so putting a nominee in charge of any account-holding offshore company doesn't always do the trick.

What is an offshore credit card? How do I get one?

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I want to open an offshore bank account. How do I start?

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M O S T   P O P U L A R   D O C U M E N T S


People who in the past visited Offshore Fox to learn more about
offshore banking found the following documents useful:

Offshore Banking:
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