There are more offshore banking
havens than you can shake a stick at. Nicholas Pullen tells you how to
separate the wheat from the chaff, and make sure the haven you choose
is really a safe-house for your money.
There are definite and strong advantages to placing some of your hard-earned money in offshore bank accounts:
First of all you get protection against your government. Nobody knows
what a government will do next, anything is possible. But, unlike funds
held in your home country, wealth stashed offshore is greatly protected
against any negative actions your government might take, or legislation
it might introduce, tomorrow.
Secondly, you get protection from predators and parasites. Offshore
wealth is shielded from the attentions of asset hunters. Avaricious
litigants, thieves, fraudsters, conmen, blackmailers (disgruntled
ex-business partners and ex- spouses) who all seek to pinpoint, target
and eventually attack individuals with visible wealth. These sharks
have weapons at their disposal, and they use them. They routinely run
asset searches to identify just who has what worth targeting. But
offshore assets are safe. Asset searches won't uncover offshore assets,
these remain totally invisible and safe from attack.
Thirdly,
with an offshore bank account you are insured against the unknown
events tomorrow might hold. You never know when you might be mighty
glad of offshore cash reserves. If circumstances at home make it
impossible or unwise for you to stay, or impossible to access your
domestic funds, your offshore funds provide you with a financial
lifeboat.
"Not all banking havens are suitable, safe, or secure."
Finally, you can rest secure in the knowledge that you have a secret
nest-egg. You can build and grow a private stash of cash beyond the
gaze of anybody in your home country.
The first thing you need do,
to enjoy the benefits of an offshore bank account, is to select a good
offshore banking haven where you can open your accounts. This is easier
said than achieved. You aren't short of choice, from the Bahamas to
Vanuatu, Cyprus to the British Virgin Islands, Switzerland to the
Cayman Islands. Countries the world over are in the market for, and
only too happy to accept, as much foreign capital as they can get their
hands on.
However, you must bear in mind that not all banking havens are
suitable, safe, or secure. Some are excellent. Others are ticking time
bombs. If you open an account in the wrong country, it can prove very
costly in more ways than one.
What you need to do is to find out how particular banking havens
measure up before you lodge any of your cash or assets there. This will
require you to perform some research and investigation. This is well
worth doing, and thoroughly. Mistakes avoided at this early stage save
time, trouble and money further down the road.
I suggest you
measure the quality of any haven which interests you by subjecting it
to my Ten-Point Suitability Test. Satisfy yourself on all points
crucial to your particular requirements.
1. Location,
Location, Location? Where is the haven located? Do you want to visit
your cash regularly? If so, is it convenient or practical to have it
stashed in a banking haven thousands of miles away from where you live?
Can you access your haven by air - directly or indirectly? Is it a
problem getting entry to your haven? Will you need to queue for an
entry visa every time you want to visit?
Also, be aware that making
regular, visible (visa records are a paper trail) trips to a known
banking haven is like waving a red flag at any government snoop who
might be taking an interest in your affairs and movements.
Give some consideration to time
differences. Can you manage your financial affairs efficiently if it's
midnight in your haven during business hours at home? Are you happy to
wait up until the early hours to speak to financial managers?
2. Do You Speak The Language? Effective, smooth-running financial
management depends on fluent communication. Do bankers and
professionals in your haven speak English or some other language with
which you're familiar? You may need to discuss complex financial
matters in technical detail. It could cost you dear
if things are confused or compromised by language barriers.
3. How Easy Is It To Stay In Touch? Are there sufficient and reliable
telephone and fax lines? Are email facilities available? Is airmail
delivered quickly? How efficient is surface mail delivery?
If
your banking haven is deficient in these areas, it may become difficult
to maintain regular and instant contact with your advisors and account
managers. Is this acceptable?
4. Is The Tax Situation Right
For You? Ensure your haven provides the exact tax treatment you need.
Mistakes can prove expensive. Some havens impose withholding tax" on
foreign-held bank accounts. Are you satisfied that this is fair
exchange for the benefits your account will deliver.
5. How About The Legal System? Are the laws in your prospective haven
based on English common law? Is the judiciary of a high standard? Is it
independent? Is the Court system effective? Are there rules to resolve
conflicts of law? Are the banking regulations stiff? Or is there ample
opportunity for a fly-by-night merchant to slip through the nets?
Are banking services registered with regulatory organisations that uphold professional standards and procedures?
Satisfy yourself that the haven has local laws and legal practices
which provide adequate protection of your funds and investor rights.
6. Is Your Haven Financially
Stable? Check your prospective haven's financial stability, by
calculating what percentage of its Gross Domestic Product is
represented by foreign aid. Foreign aid is as high as 70% of Gross
Domestic Product in some havens. The Cook Islands, Nauru and Vanuatu
being recent examples of this.
A haven's confidence in its liquidity can be judged, at least to some
degree, by its willingness to put in place solid depositor protection.
Enquire of financial institutions in the haven whether or not depositor
protection exists.
7. Is The Haven Free Of Trouble? Will It Stay That Way? Does the haven
have a trouble-free history and a secure culture? A country which has
experienced only moderate political, economic and social change, and
where political and social violence is uncommon, is a trouble-free
country. A stable past is a good predictor of a stable future.
On the other hand, countries with a history of civil war, military
coups and civil unrest are definitely not right for banking purposes.
Cash held in a banana republic is high- risk. Future flash points in
volatile regions can render your cash lost or worthless.
Look at the human rights record of the haven's government. A government
with high regard for its domestic population is likely to regard you
equally highly. A government which treats citizens like cattle to be
reared, milked and slaughtered is likely to come to view you in the
same casual manner. In such a climate private wealth may suddenly
become government property.
Check if there's a strong
socialist political faction in the haven. Overtly socialist governments
can't be trusted to look after your nest-egg. Political upheaval, new
ideologies and attendant legislation can change a haven's
attractiveness overnight. Ensure there's little likelihood of an ultra
left-wing political party sliding into power in the foreseeable future.
Is the haven free from racial tensions and other social problems? These can trigger crisis which may affect deposited funds.
What about the prospect of foreign invasions and war? These are slight
for an isolated country. But keep an eye on the treatment your haven
receives in the international press. Areas and regions seldom become
hot spots overnight. Look at recent political developments and events
in the haven to establish if there is any potential trouble.
"A stable past is a good predictor of a stable future."
Consider local attitudes. Is there wide local support for the financial
services and banking industries? Does the local population appreciate
that international banking operations are effectively supporting the
country's economy? Or does the presence of foreign capital breed
resentment? Is there a foreign-bashing agenda?
Be sure to keep abreast of events and the socio-political climate in
your haven. Subscribe to newsletters covering such developments. Read
the local press. The writing is often, literally, on local walls in the
form of graffiti, for months before anything actually happens which
might affect your bank accounts.
8. Does Your Haven Provide A
Back Door For Your Government? Make sure your banking haven doesn't
provide your government with a back door into your accounts. For
example, some traditional tax havens
are existing or former British colonies, such as Bermuda, Cayman
Islands, the Channel Islands, and the UK government is exerting
pressure on authorities there to release information relating to UK
account holders.
British citizens should find out if their prospective banking haven has
tax treaties in place with the UK. If so, be aware that the treaty
allows for the free sharing of information between the authorities in
the two countries.
9. Does It Offer Enough Freedom For
Capital? Are you free to take money in and out of the haven? If there
are severe restrictions, the haven is no use to you. Even if there are
no exchange controls in operation now, check that the haven doesn't
have a history of exchange controls. You don't want your cash trapped
in a country which is effectively stemming flight capital.
Make sure you have adequate guarantees that you'll be able to do what
you need to before opening accounts in the haven. For example, are
there restrictions on converting foreign currency into local currency
and visa versa? Are reports filed on each occasion? Ask financial
institutions in the haven.
10. Does The Haven Offer Sufficient Privacy? Seek out banking havens
which recognise and actively promote solid banking privacy. Many havens
claim to do so only on an informal basis. Under pressure bank managers
and financial advisors may sacrifice you to the sharks. Does your
haven, and/or the institutions operating there, have a history of
rolling over when exposed to external pressures?
Check whether
banking privacy is tradition or actual binding legislation. Check
whether a professional in a particular haven is breaking the law if he
passes data relating to you and your financial affairs to a third
party. Be aware that "confidentiality" laws allow local government
access to your account details (although they can't pass the data on to
a third party).
Solid banking privacy legislation is the best
protection for your cash. A strong, secure haven will have banking
privacy legislation which carries stiff penalties (financial and
custodial) for any professional who breaches them and passes data on to
third parties.
Beginning Your Research A very good place on the Internet to begin your investigations of suitable tax havens is
http://www.escapeartist.com
The Offshore Journal is a useful
e-publication which frequently reports on relevant events and changes
in banking havens around the world. Subscriptions cost 15 per year.
Subscribe athttp://www.rpifs.com.
About the author:
Find this article of interest? Visit The Freebooter website athttp://www.freebooter.com
or contact Henry Morgan at henrymorgan@freebooter.com and take
advantage of pointers, tips and articles to help you to remain free.
Subscribe for free to The Broadside, his monthly Privacy Tips Newsletter, by mailing mailto:admin@freebooter.com or at the Web
site.
