The modern world is seeing a rapid shift in the meaning of privacy. As technology advances and world superpowers extend their surveillance systems across the globe, it has become increasingly difficult to maintain true anonymity. Offshore bank accounts are not exempt from this trend.
Recent decades have seen developments such as relaxed privacy policies in Switzerland and increasingly broad surveillance by the U.S. However, knowing some more about the limitations of privacy in offshore banking can help you make sure you keep your assets protected.
Why do people want anonymous bank accounts:
Most people still looking to open anonymous bank accounts are looking for privacy. If you live in a country that has a weak rule of law and has corrupt government officials and institutions you and your assets are at risk.
Professionals, doctors, lawyers, high profile citizens or anyone that has wealth is prone to attract creditors, angry ex-spouses and greedy neighbors looking to make a quick dollar.
If you have assets that are tied to your name then it's easy to be targeted by creditors or by shady characters trying to get a piece of your wealth.
Protecting your wealth by securing your assets in a country outside of where you live in an account that is not open to public scrutiny is the first step in any international diversification strategy.
While just about everyone who has come into money will be looking for the best way to keep it and reduce their tax burden.
Anonymous banks however are not the answer to tax avoidance. While there are proper ways to internationalize your tax structure hiding money from your government is illegal, and you will get caught.
Offshore banks generally make the privacy of their customers a top priority. They are, after all, competing for the business of people who want to bank securely and confidentially; breaking their clients' confidentiality under any but the most pressing circumstances would not be in their best interest.
The circumstances under which an offshore bank will break confidentiality with a client depend on the laws of the bank's jurisdiction.
Most offshore financial centers are well-known for laws and regulations which protect banking clients' identities in almost all circumstances. Even if clients are facing legal action in their home jurisdiction or are entangled in complex divorce or estate matters, banks in offshore financial centers will shield clients from inquiries into private affairs.
The identity of an offshore account's owner, transactional information, and other personal details are securely protected from civil actions.
Panamas Banking Secrecy laws make it a criminal offense to reveal customer banking information. Criminal investigations, however, will trigger a different treatment of private financial matters.
Most governments in offshore banking centers must be presented with compelling evidence that funds originating in their country have been used in a serious crime before they will release private information to third parties.
The amount of evidence that will constitute 'compelling evidence', the seriousness of the alleged crime, and the amount of information that can released will vary by jurisdiction.
Offshore financial centers benefit greatly from providing top-level security to investors who open bank accounts in their countries. Because the consequences of relaxing their privacy policies could be severe, most governments will go to the utmost lengths to protect the private information of their countries' investors.
However, when faced with a criminal investigation into a bank or a client, offshore countries are generally legally obligated to turn over relevant information to the authorities.
Although some levels of confidentiality and secrecy that can be found circumstances have definitely changed in the global banking industry and with it so too has anonymous bank accounts.
There have been a number of changes in the last few years in regards to banking confidentiality. The introduction of the American FATCA in 2010 as well as the 2014 implementation of the Common Reporting Standards (CRS) has radically changed the nature of financial reporting amongst foreign banks.
The new set of laws put forward by the Organisation for Economic Development (OECD) have sought to create a series of Automatic Exchange Agreements in which tax authorities are able to receive financial account information about citizens foreign accounts held in banks overseas.
This automatic exchange of information is then done without the need of any formal request and gives governments the ability to see bank accounts and transactions conducted by citizens on all accounts that have their name on it.
Banks have also stepped up there Know Your Customer (KYC) and Anti Money Laundering standards as a result of the pressure applied by foreign western governments and the OECD who seek to stem the flow of capital from high tax jurisdictions to low tax financial centers.
While the new regulations certainly spell an end to the notorious anonymous Swiss numbered bank accounts, it does not entirely eliminate client and customer confidentiality.
There are still a number of ways to keep your name hidden, although a lot of your ability to do so will depend upon where you live and the passport you hold.
If you live in a country that is a signatory of the CRS (which as of now is 102 countries) then you will not be able to have 100% anonymity as financial transactions can ultimately be traced back to their ultimate beneficial owner, even with a multi-jurisdictional arrangement and corporate accounts.
Completely anonymous bank accounts are largely a thing of the past due to the tightening of AML, KYC as well as for the implementation of CRS and FATFA.
What all these agreements mean is that you can no longer get away with tax evasion. However, while anonymity from governmental scrutiny is more difficult you can still remain anonymous to the public and if you take it one step further may still find complete anonymity.
If you live in the US or a country that is a signatory of the CRS you must move house.
While using measures such as offshore corporate accounts and having several corporate entities in different countries can prevent the public from getting access to your personal information it can still be tracked by the government where you live.
In order to sever those ties, you need to would need to move to a country that is not a signatory of the CRS and get a tax residency in a no-tax jurisdiction.
Other tools such as using shelf companies with pre-existing accounts, third party nominee services, and lawyer signatory services are all still viable in some way or another. However, their use as a means for anonymity for tax avoidance is a delicate line to walk.
Nominee services are still available for use though they do not entirely remove ownership and are not to be used for evasion. Signatory services have similar powers, that can remove your name from transactions, however, they both must be carefully applied and their use will depend upon the passport you carry, where you live and the foreign jurisdiction you intend to open an account in.
The most effective way to reduce your taxes and achieve anonymity entails moving abroad. By moving to a country overseas and establishing tax residency in a tax haven or no tax jurisdiction, you will be freed from the need for reporting to your home government. This would free you from any tax obligations.
If you are an American and decide to establish residency overseas you would still be obligated to file FBAR and any income under 107,600 USD through the Foreign Earned Income Exclusion (FEIE) is tax-free. Though as an American you still are still legally obliged to report earnings as well as your accounts to the IRS.
If you are a UK citizen for example and decide to move overseas and establish a tax residency in Panama you would be free from needing to report any earnings as you would not be liable to taxation in the UK but would be liable in Panama. And since you chose a country that has no capital gains, dividends or personal income tax all income that is generated worldwide or outside of the borders of the state is not liable to any form of taxation.
Similarly, by establishing residency in any territorial taxation country, you are free from needing to pay any taxes on all foreign-sourced income. Many countries around the world have territorial taxation such as Costa Rica, Hong Kong and Panama.
Although moving residence is not for everyone, it is a viable alternative depending on what your ultimate goals are.
Whatever you are looking for there is an offshore solution that just needs the right plan in place.
Why You Need A Plan B
Threats to Your Assets
Global Diversification Planning