Invest and Bank Offshore
Corporate-owned vs. Personal Accounts/Structures
If your primary reason for going offshore is for more secure, more private, safer and more varied banking and investment options, then the first thing you need to consider is the formation of one or more offshore structures. Without thinking, many people assume they can simply open a personal account in their name and, because that account exists in a country and bank that still observes strict banking secrecy, their identity will be protected by the bank and that nation’s privacy laws.
The problem here is that every time you want to make a payment into the account or out of it, your name will be, in effect, broadcast to the world as the owner of that account. This is because the so called numbered accounts of the past are no longer available anywhere. Any incoming or outgoing payment from the account will always have your name associated with it on the bank-to-bank routing instructions. Therefore, it is imperative that the account be opened in the name of a company, foundation or possibly a trust rather than your personal name. Yes, as signatory on the account you will be still known to your bank, but your account will be anonymous to the world, so long as you bank in a country that still does not routinely share information with foreign governments and private investigators.
That way, any payment into and out of the account is not automatically linked to you personally, because the name of the company, foundation or trust will now only be on the inter-bank payment instructions and nothing else about the account will be visible. This concept of the “corporate shield” is one of the most important aspects of forming a foreign company, even if you do not plan to conduct any business other than banking and investments. The company (or foundation) becomes a separate legal entity with its own life and rights under law. It is the whole basis behind the asset protection features of a foreign company formed in a country. like Panama, with corporate laws favourable to the ordinary person who merely wishes to shield their assets from predators. Read the Panama Corporation section for more details of an example.
We have had some potential clients assume they could not form a company because they were not planning on operating any type of business. Anyone can form a company, for any purpose, whether it be for a business or personal use. Additionally, for personal purposes (rather than business) a foundation is an increasingly popular tool, especially when coupled with a company as its shareholder. (A trust can also be formed for personal purposes and can even be specially structured for business, however, we do not usually advise the designing of a trust in this way). Please see our offshore banking section for more specific information on opening bank accounts, including different types of accounts, best countries and paperwork requirements.
Professional Signatory Account Management
This is an option for those that do not want to be a signatory on a corporate, foundation or trust account but prefer to use a professional such as a lawyer or accountant to act in a fiduciary capacity with respect to the account. The reason for this is that some countries (especially the U.S.) require quite extensive reporting of any accounts with which one has signatory control over and the penalties for non-reporting, which until recently were rarely enforced, are now quite fearsome and are being enforced more aggressively in the wake of the UBS case. For many to go ahead and report them defeats the whole reason for going offshore but they don’t want to take the risk of non-compliance.
This is all about keeping an “arms length” from assets while still giving you the ability to make decisions on their deployment. One of our lawyers from our firm agrees to act as signatory and your wishes for them are followed. Visit our professional management page for more information.
Bank Account linked vs. Stored Value (“Pre-Paid”) Debit Cards
Debit cards have become a very popular way to access offshore funds. Having a debit card linked to your account can be a great convenience, but can be dangerous since your privacy can be compromised because the card can be sourced back to your bank account to which it is linked. Also, if the card is stolen, the account could be potentially drained depending on how alert the bank’s security department is.
A much better option is to use non-linked “pre-paid” debit cards that can be conveniently funded from your bank account for a small fee, but cannot be linked in any way to the bank account itself because the two are completely different and maintained by different banks. These cards are so called stored value cards that, in effect, act as a personal numbered account that can also receive funds from third parties, as well as funds from your own account(s). Once the card is loaded with funds they can only be spent by withdrawing from any ATM or wherever a credit card can be used, such as at a store or online.
Also these cards have the advantage of not having your name on the card, either imprinted on the front or magnetically encoded on the back so no paper trail is left behind when you use them at physical retail establishments. If the card is stolen only the funds actually on the card are at risk rather than your entire bank account. Additionally, the daily cash withdrawal limits are usually several times higher on these cards then on a bank account linked card. Visit our Sovereign Gold Card site for more information.
The concept of an online discount brokerage with low transaction fees is unheard of in privacy and tax haven countries. Expect to pay at least double what you are used to paying in transaction fees domestically. However, the brokerage firms with whom we assist clients in opening up accounts have all the latest online trading platforms available. Just about anything you can do with your domestic brokerage account you can do with your offshore account, but more importantly, if you structure things properly, you will have absolute privacy and will be able to compound your profits free of taxes. Those advantages for most people are well worth paying the higher transaction fees.
It is important to remember that, when opening a non-bank brokerage account, they will require funds to only be remitted in (or sent out by them to you) from a personal account under your name or a bank account under the same company/foundation/trust name. Since you will not want to use a personal account, as a general rule, to send or receive funds from the brokerage account, a bank account operated by the same entity will be mandatory. Some offshore banks offer their own in-house brokerage accounts. Except for a few notable exceptions, these are inferior in service, fees and online trading options to the dedicated non-bank brokerage firms.
If you are a U.S. person, you will find that there are many investments that are closed to you, because many companies chose not to go through the SEC registration regulatory hassle. Since they are only available through an offshore brokerage account, a corporation- or foundation-owned brokerage accounts in a jurisdiction like Panama is the ideal answer. You will have access to a wide variety of investments that cannot be sold in the U.S. For example, many of the highest performing mutual funds, mostly known as unit trusts, are not available to U.S. investors; however, when you invest through an offshore brokerage account owned by an offshore corporation, foundation or trust, they are.