|
|
|
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.
Establishing
an Offshore Bank Account
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
money laundering.
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.
Is
is Legal for a US citizen to have an Offshore Bank Account?
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.
For
Additional Information Regarding the Use of a Foundation and other vehicles
for asset protection, please send us an Email.