Peter Macfarlane talks about ‘plain sight’ strategies for international private banking.

‘How to hide money offshore’ is not something many bankers or offshore writers would dare to choose as a topic these days. ‘Financial Privacy is Dead’ would certainly be a more politically-correct topic. Here at Q Wealth we sometimes push the limits, but we don’t have a death wish either… so let me make clear right now that this article is not about how to evade taxes. It is about the best ways to achieve financial privacy in 2011, assuming you are fully compliant with all applicable tax and reporting requirements, but you still want to keep your affairs private for asset protection or catastrophe-planning purposes.

We do not condone tax evasion. It is well known that we are not big fans of tax in general, but the fact is if you think you are paying too much tax there are plenty of ways to reduce your tax bill legally. We write about these techniques from time to time in general terms in The Q Wealth Report, but since we write for an international audience, and everybody’s circumstances are different, you need to talk to an expert who is familiar with the laws in your home country about your individual situation if you want to know how to reduce your tax bill legally. That much should be obvious. The most basic option to reduce your tax bill is to physically change your residence to one of the many countries in the world where you can live happily and tax-free. (And, only if you are a US citizen, you need to change your citizenship as well, which means starting the process of acquiring a second passport.) But I digress…

OK, so provided you comply with your tax obligations at home, beyond that it is your money and you jolly well have the right to do what you like with it, including hiding it. People have hidden valuables for centuries, simply because it is common sense – if you put your assets on public display it won’t be too long before someone tries to take them away from you.

There are dozens of reasons why an individual would want financial privacy. I would turn things around and place the burden firmly on the other side – if someone believes an individual should not have financial privacy, it is up to them to prove why. Many people have a moral objection to having their personal financial information shared internationally, with the presumption of guilt that is implied. One thing is to require individuals to report foreign bank accounts. If the individual consciously chooses to commit the fraud of not filing, he or she takes a big risk and should be aware of the consequences. But for governments to go on fishing expeditions based on mere presumptions is wrong.

Fortunately, despite what the OECD or the IRS want you to believe, financial privacy is far from dead. In fact, that’s why there’s so much fuss about it. If financial privacy were really dead, you wouldn’t hear about it, because it would be a non-issue. But scare tactics are very effective.

The fact is, most countries, even the USA and the UK, acknowledge the right to bank secrecy. Even now, the USA does a big business in secret bank accounts, especially for Latin Americans – famously refusing to turn over information on the secret bank accounts of wealthy Mexicans for example. For those banking in Switzerland, the alpine country strenuously guards the right to bank secrecy, even to the extent of agreeing to collect taxes anonymously for foreign countries like the UK and Germany. Others, like Panama and Singapore, prefer the path of least resistance, signing the Tax Information Exchange Agreements (“TIEAs”) required of them, well knowing that it only takes a few smart lawyers to figure out how to maintain total bank secrecy for their clients in spite of the agreements. I’ve written articles elsewhere on this topic, so won’t go into that now.

We get questions all the time from people who want to know how to open an offshore bank account in a jurisdiction that has not signed a tax treaty with such-and-such a country. For example, Americans are all in a panic about the TIEA signed by Panama with the US recently, and the latest trend seems to be to bank in Singapore instead. If they are choosing Singapore because it’s a financial hub in a growth area, or because Singapore banks are just more efficient and better at service than Panama banks, that’s fine. But if they are choosing Singapore simply because it has not signed a tax treaty with the US, they are making a mistake in my view. Singapore has already signed many TIEAs and there is every reason to believe they might sign one with the USA soon.

The trend is for more and more exchange of information. Eventually, those who keep moving every time a new treaty is signed will have to end up banking in somewhere like North Korea or the Turkish Republic of Northern Cyprus. The latter, a territory that is recognized only by Turkey, is already cashing in on that status but most of the banking industry there is less than reputable. You don’t want a bank account there, trust me. (The southern part of Cyprus is fine, however.)

So, where is the right place to hide your money? I think in plain sight. Here’s an offshore Private Banking and Wealth Management strategy in two easy steps:

1) First, for a layer of privacy you need a tax-neutral legal entity of some sort, like a trust or a corporation. The result of this is that the offshore bank or brokerage account is not held in your name, even though you might be the signatory or beneficial owner. This avoids your name leaking out to the rest of the world on wire transfers etc, and this step also effectively neutralizes most TIEAs at a stroke. If you are American, it also opens up a world of investments that are closed to individual US citizens.This is about the only way to open an offshore brokerage account for US citizens.

LLCs are good for this purpose as they are inexpensive and can generally be treated as simple pass-through entities for tax purposes. Trusts, controlled by a Private Trust Company, are good for slightly more complex situations, such as where you are seeking to pass assets on to your children, or for situations where particularly strong asset protection is necessary.

Of course, you should go ahead and report your ownership of this legal entity if you are required to. Will this raise a red flag? Not as long as you choose a country that is not blacklisted for your LLC or trust. I recommend for example Nevis LLCs, as described in my free Untouchable Wealth report. Major western countries do lots of international trade and it is quite normal for their residents to have business interests in other countries. This way your report will blend in with the masses and you are no more likely than normal to be singled out for audit.

2) You use your offshore entity to open a private offshore multi-currency bank account in a respectable country that is not known as an offshore tax haven, again to avoid raising red flags. The best foreign bank accounts for privacy are the ones in low-profile countries. Denmark and Spain, for example, are two good countries with accessible banking services for expats with foreign companies, that are not on the radar, and where offshore bank accounts can be opened without any need to travel there. Wire transfers to and from these countries will not be subject to the same level of scrutiny that would be found with say Panama or Belize offshore banks. You’ll also find European offshore banking services are generally better.

So it’s really quite simple. The right place to hide your money is a place where you won’t be asked too many questions. By filing the right forms, you will be fully compliant, and you’ll sleep soundly at night without having to worry about future TIEAs that tax inspectors goodness-knows-where might be cooking up. And your bank account will be well hidden in plain sight.

From there of course you can also take things to the next level – for example by buying precious metals in Switzerland. As an internal transaction within your entity, that doesn’t change the value in any way, you can avoid any additional reporting requirements.

If you are new to Q Wealth and would like to know more, check out our free five part e-mail course: Secrets of the Super Rich.

A question that comes up frequently is why offshore account opening procedures require so much information. As an offshore banking consultant, I get to see the account opening processes of many different banks in different jurisdictions, and how widely they vary.

I can see both sides of the equation – the bank’s perspective, and the client’s… and my job is to act as intermediary and make sure both parties understand each other. I’ve become quite good at that over the years, if I say so myself.

So, how do you open an offshore bank account? You will typically need your passport, one or more bank reference letters, and proof of source of funds. More on the practical aspects of complying with these requirements in part 2 of this article that I will publish here on the Q Wealth blog next week. But first, let’s look at why all these questions are necessary…

I can fully understand that if clients are seeking privacy, they may not feel comfortable baring their financial souls to their bankers. But there are good reasons why banks need to collect so-called ‘Know Your Customer’ information. And there are steps you can take as a client to manage your banking and to protect the confidentiality of information you hand over.

• The first and foremost reason is because the law dictates it. In all reputable jurisdictions, banks are required to collect certain information. Failure to comply would have absolutely dire consequences that may include closure of the bank and/or prison for its managers. You are looking for security – and dealing with banks that are prepared to bend, break or flout laws is not the way you are going to find security. There are only a few places in the world left where you can still open accounts without ID and – trust me – you don’t want to be banking in those places!

• Secondly, banks also have to protect themselves and their reputations, in order to protect their honest clients. If they take on clients who bring heat to the bank, it is bad news for you. So you should really be happy to deal with a bank that is quite picky about the clients it takes on. For example, if it turns out later that you were involved in white collar crime like running a ponzi scheme or any kind of unlicensed offshore investment activity, the bank will almost certainly be on the receiving end of a lawsuit from people who lose money. Sometimes scammers are very good at hiding their activities, and they look like honest, respectable business people. If the bank has never met you before, they really need to check you out.

• Thirdly, many people compare offshore account opening procedures to opening an account in their home country. This should be obvious, but it’s not the same thing. One thing that might have escaped your attention, though, is the extent of Big Brother databases that exist in your home country. Banks will automatically run a credit report when you open an account, even if you are not applying for credit. They can check you out online. Offshore banks, however, cannot run online credit checks. To do so would leave an electronic footprint that would generally be a breach of confidentiality laws. That is why they have to ask new customers for a lot more paperwork. Of course, it’s more convenient for the customer that the bank can verify everything online and doesn’t have to ask the customer for so many documents. But such online checks completely nullify any expectation of privacy in the relationship.

• Finally, it’s just good business for banks to know their customers. If they know a bit about who they are and where you are coming from, they can give you better quality advice and they can respond more intelligently to your requests. They can be proactive in offering services you might need, that you might not even know existed. Having a good relationship with your private banker is absolutely beneficial. That banker will be more motivated to look after you. Try to be a ‘perfect client’ for the bank – that way, if for some reason you really need a special favour from the bank at some time in the future, you are much more likely to get it.

Banking secrecy, as I’ve often said, is far from dead, despite the propaganda that would have you believe otherwise. I even believe now that the tide has turned. Bank secrecy is a basic human right, and is more necessary than ever. What is rather passé is trying to use bank secrecy for illegal tax evasion, by holding undisclosed accounts. By taking good advice, choosing the right banks, using international asset protection structures, and carefully managing your residence and citizenship, always staying within the law, you can still keep your finances completely and utterly private. Nobody is saying it’s easy… but you can do it, and it’s worth it.

So, as one of my banker friends is fond of saying, if you unilaterally choose to waive some of the account opening requirements, you will just be causing delays for yourself. Clients who try to avoid complying with requirements will be viewed as suspicious right away. Then, trouble ahead is almost a self-fulfilling prophecy.

Bottom line? If privacy is a concern to you (and it should be) do your homework and choose a bank where you can be confident that your information will remain private. Do your due diligence on the bank first. You should only do business with people you feel 100% comfortable with, and this applies to banks and any other business relationships. Anything less than 100% and you won’t sleep soundly at night. The Practical Offshore Banking Guide 2010 can help you do this due diligence. Once a bank has passed your own due diligence smell test, then be prepared to give them the truth, the whole truth, and nothing but the truth.

What will Ricardo Martinelli’s election as the new President of Panama mean for the offshore banking sector and Panama’s tax haven status? Will Panama IBCs and Corporations still be attractive tax planning vehicles? Will Private Interest Foundations remain inpenetrable?

The election of a self-made multi-millionaire as Panama’s new President this last weekend is good news for anyone thinking of doing business in Panama’s booming offshore sector. “Super 99″ Supermarket tycoon Ricardo Martinelli beat socialist Balbina Herrera who was intent on raising taxes and threatened changes to Panama’s traditional laissez-faire approach to government.

Martinelli is a business friendly conservative who understands the need for fiscal discipline, says Reuters. What we particularly like about him is his money is not from family or government. He is a self-made millionaire who has been there, done that, seen hard times and survived – the real archetypal tycoon.

He was almost bankrupted by looting at his supermarkets after the US invasion of Panama in 1989 but since then he has built up business interests also in real estate, hydro electric energy (very smart guy), and sugar. The Panamanian electorate has bucked the recent trend in Latin America towards left-wing governments, showing once again that Panama is a business friendly country.

Needless to say, Martinelli is keen to court the Obama administration, given the importance of US trade with Panama. In common with what’s going on in the rest of the world, Panama is likely to loosen up bank secrecy somewhat over the coming years. Despite their committments to the G20 and OECD, we know the Panamanians will deliberately move slowly on this. But it is coming.

On the other hand, a closer relationship with the US, which Martinelli is seeking in the scope of a Free Trade Agreement, also stands to benefit the offshore sector through increasing opportunities for legitimate international tax planning. (See yesterday’s article about the enormous tax benefits US tax law actually allows for offshore business, especially in the pharma and tech sectors, and for high net worth individuals)

Indeed, the anti tax haven crusade is already getting worried about this prospect and cranking up the publicity… something that can only be a good sign for supporters of the right for individuals to do what they like with their own money!

The Tax Justice Network, in a recent article called Grimy Panama, describes Panama as an “especially unpleasant secrecy jurisdiction,” pointing out that unlike most tax havens and even their bete-noire Switzerland, Panama does not have any tax or information exchange treaties. Furthermore, they point out, “The OECD notes that Panama made a commitment in 2002 to conform to international tax norms but since has completed not a single agreement to implement its promise.”

Another report claims that this Free Trade Agreement between the USA and Panama, which comes much closer with the election of Martinelli, would “undermine U.S. efforts to stop ofshore tax-haven abuse.” Apparently, these people have some problem with Panama trying to create a “comparitive advantage” for itself through regulation of financial services… while in the almost the same breath they suggest that the USA should seek to gain what could only be described as a comparitive advantage for itself, by putting up legal and fiscal barriers to American companies wishing to do business overseas. Finally, needless to say, they throw in accusations of money laundering on behalf of American International Group, Mexican and Colombian narcotraffickers.

Bottom line? The socialists are worried because events in Panama and the possibility of a Free Trade Agreement would give Panamanian companies better access to US markets on more preferential terms. That could open up exciting new possibilities for paying less tax legally.

We are pleased to welcome Ricardo Martinelli as the new Panamanian President, and take this opportunity to remind readers that we are now offering a free e-book “Eight Important Things You Should Know Before Doing Offshore Business in Panama.” Because the business culture in Panama is different, the way of doing things may not be what you are used to, and there are certain ways of getting things done (or conversely doing things the wrong way) that might surprise you.  Download your e-book by Peter Macfarlane now, here: Panama Corporations and Banking – Hidden Truths Revealed.

by Peter Macfarlane, Offshore Banking Consultant for the Q Wealth Report

One recurring question we hear almost every day in the wealth management business is “How Can I Open a Swiss Bank account?” Whilst a minority of those asking the question might really be candidates for Swiss private banking, the majority seem to have watched too many Bond movies! This article is a brief introduction to Swiss banking to help you decide which of these categories you fit into.

First of all let me point out that if you are looking for a secret bank account, there are places that are much more discreet, much more under the radar than Switzerland. You’ll find, for example, nine alternatives to Swiss banks which also have that “private banking feel” listed in the Practical Offshore Banking Guide 2009, which is available free to Q Wealth members. This instantly-downloadable pdf guide also explains the truth behind some of the services associated with Swiss banking like anonymous numbered bank accounts (yes, it is still possible to open numbered bank accounts legally as of 2009! – details in the guide)

But what if you have your heart set on a real Swiss account? Opening a bank account in Switzerland is in theory not too difficult – but like all banks anywhere in the world, Swiss banks do reserve the right to refuse customers. Needless to say the recent hoo-hah from the G20 and the OECD has not made it any easier to open Swiss bank accounts. All banks are scared of being accused of money laundering and this has made it much harder, especially for non Swiss residents, to open bank accounts.

Then, you need to choose a Swiss bank according your requirements. If you want traditional private banking service and a free lunch each time you visit your banker, expect to invest at least a million as your opening deposit. Some of these real Swiss private banks are so discreet they don’t even have signs outside their offices, let alone websites.

You can, however, open accounts at more run-of-the-mill Swiss banks with a very low opening deposit or minimum figure to open accounts. Swiss banks like Migros or Swissquote Bank (which is really more of a discount brokerage, E-Trade style) have no minimum opening deposits whatsoever and you can start the process all by yourself – no need to pay an intermediary. The disadvantage is that, well, there is no particular advantage if you see what I mean… this is not traditional Swiss banking at all! There is nothing private about these banks. Swissquote, for example, will require you to waive bank secrecy before you can even open account!

If you have a Swiss work permit and wish to open a local Swiss bank account, that changes things significantly. In order to pay your salary in, your employer will probably require that you have a bank account. But Swiss working papers make all the difference.  Some of the documents you will need, according to expat website AngloInfo, are:

• Passport or identity card
• Recent utility bill (electricity is best)
• Residence permit
• A copy of your work contract
• Cross border workers from France or Germany, a copy of your permis frontalier (cross border work permit)

It is not necessary to make an appointment to open a current account, says Anglo Info. Opening an account can be done in a day and means of payments (like cash cards) will usually arrive within a week to ten days of the account being opened.

In general banks all over Switzerland are open from Monday to Friday from 08:30 to 16:30, and are closed at weekends and on public holidays.

You may, however, not need a Swiss bank account at all. Household bills and invoices are more commonly paid through the post office, with a so-called Bulletin de Versement (bill slip). Bill slips are attached to each bill that you receive by the post.

Below are some links to major Swiss retail banks. Remember these are not the same as Private Banks. If you are a non-resident looking to open a Swiss bank account, you need to be looking at Private Banks since they are the ones that accept non-resident business. To sign up for our free newsletter on Asset Protection and Private Offshore Banking, visit our Q Bytes page.

Major Swiss Banks

• Banque Coop
• Banque Migros
• Banque Raiffeisen
• Crédit Suisse
• UBS SA

by Peter Macfarlane, Offshore Banking Expert for The Q Wealth Report

To judge from my inbox, the grandstanding by G20 leaders and the OECD is having its desired effect. In fact, it has two aims:

1. Publicity that portrays Brown, Obama and Sarkozy in a positive light while distracting voters from all the problems at home, caused by bankers in their home countries.
2. Scaring people off investing money in tax haven banks (ie, those banks in countries where banking secrecy is written into the law).

Of course, we cannot afford to dismiss the new OECD blacklists out of hand. But neither should we panic. And above all we should not be rushed into decisions that could cause problems down the line. Strategy for building wealth offshore should be well thought out for the long term. If you are one of the many who are concerned that your tax and offshore banking arrangements may not stand up to new scrutiny, then you should be taking some action now to put things right – but not panicking. We are happy to refer our readers informally to appropriate professionals.

Tax evasion through offshore personal bank accounts really is a thing of the past. It’s been passe for years. It’s not a particularly attractive business for any tax haven bank because it has the potential to cause lots of problems for relatively little reward. There are so many ways you can legally protect your privacy without having to rely on bank secrecy. For those who are interested, I’ve written a more in-depth article on the subject of the G20, the OECD and Banking Secrecy here.

We never have and never will promote tax evasion in The Q Wealth Report. We believe in full compliance with all applicable laws. That is what we write about consistently, and we have done so for well over a decade. Our view is that offshore banking is just one essential part of an overall long term strategy. Most of the clients I deal with these days are not motivated so much by tax (although that is obviously one of their concerns.) Most people are going offshore these days motivated more by security, asset protection, and the much better opportunities that exist offshore to profit from the recession. You can work, invest, retire or live in the world’s best tax havens.

My clients detest instrusive, Big Brother style governments. They subscribe to the view that attempts to redistribute wealth will simply end up redistributing taxpayers, who are increasingly voting with their feet. Our belief is that it’s much better to be living legally tax-free in a low-cost, healthy, tropical paradise… earning your living or managing your investments over the internet from a secure country where banking service and secrecy still go hand in hand. Meanwhile you can watch on TV as things get worse and worse in G20 countries, rather than watching from your window!

I’ve always written that if you need to rely on banking secrecy to protect yourself, you might as well give up. By that I mean that if you want to protect your assets, you should hide them where they cannot be found. You should take care to avoid any and all paper trails leading to them. If nobody knows where to find your stash of cash, nobody will ask your offshore bank about you. That is true secrecy. If the taxman knows where your money is, it’s already too late.

I imagine some people will be reading this article as first time visitors to The Q Wealth blog, who are keen right now to know what banks and countries are safe to invest in. Well my basic advice is to wrap everything in secure offshore corporate structures (for example, Belize or Panamanian corporations). Do this through reputable professionals who respect security – not through internet merchants competing to provide the lowest price, who just want to sell you a stack of papers and then move on to the next case (until it is time to charge your annual renewal fee).

If you feel that your financial arrangements are not watertight, then now is a good time to start taking a look at them. Offshore banking is one important aspect of any overall financial privacy and asset protection structure – it is covered in our free e-book The Practical Offshore Banking Guide 2009. Then, you should be looking at other wealth preservation and alternative investment strategies – for example, we have another free e-book covering Precious Metals Investments. Gold Bullion is one of the most secure, inflation-proof investments, and in the e-book we tell you how you can legally buy and store it offshore. Oh, and did I mention that there is absolutely no requirement to report gold bullion on your tax returns?

Then there are many other things you can do to protect your assets and help them grow. Consider second residency or even a second passport. By now we are getting more in to intangibles. Second passports can increase your security and flexibility. Then again, they could solve any OECD/G20 banking secrecy problems at a stroke! By changing your citizenship to a neutral country that does not tax its expatriates, you can give your asset portfolio and offshore bank account a new lease of privacy.

Of course, in this article we can only scratch the surface. The good news is that in our quarterly Q Wealth Report newsletter you will benefit from our first hand reporting and updating of news affecting your offshore investments. We don’t just get our information from the internet. I myself spent last week flying around Europe for a series of meetings with high level bankers and tax haven government officials, because I know the things they say off the record often mean more than the committments they make on the record.

As a subscriber to Q Wealth Report, not only do you obtain instant access to those two e-books plus a series of other special reports and white papers, but you will have access on an ongoing basis to this unique first-hand insight that I don’t believe you will find anywhere else. You will also have privileged access to our network of Q Wealth Experts. These are people located around the world who know and understand, live and breathe, freedom, wealth and privacy.

With the right team on your side, the latest OECD efforts really are “much ado about nothing.”