by Peter Macfarlane

There’s a lot of misconceptions out there about offshore banking and investing. Newer readers especially may believe a few of the myths exploded below! Even if you’re an old hand at offshore banking, I thought you might enjoy this brief list of some of the most common offshore banking myths…

1. Offshore banking is illegal. The Facts: Granted there are a few countries in the world that outright prohibit their citizens from holding accounts abroad. But very few – even those with strict controls like South Africa, Venezuela and Russia don’t ban their citizens outright from holding offshore bank accounts. Most countries do however have laws insisting that you report your offshore bank accounts to the tax authorities. You can easily verify these requirements with a local professional.  For sure there are some illicit funds deposited in offshore banking havens, but they constitute a small percentage of total criminal proceeds held in banks within high-tax jurisdictions. Bank secrecy laws these days definitely do not protect criminals. The idea of associating offshore banking with crime is all about trying to persuade people to leave their funds where their governments can get their hands on them!
2. Offshore banking is only for tax evasion. The facts: Recent campaigns by major governments and left-wing think tanks try to tar everybody with the same brush. Most people who bank offshore these days are not evading taxes. They are looking for legal tax planning and asset protection strategies – for example: currency diversification, and protection against political risk factors.
3. To have a bank account offshore you need lots of money. The facts: Yes, there are many obscure but very good private banks that won’t be interested in a relationship under a million or two. But there are also plenty of banks, large and small, that are still interested in the regular middle class customer.  At some of the best offshore banks in the best offshore banking countries, you can easily open a bank account with a deposit of $500 or less. There are plenty of options and you will find details in the Q Wealth Practical Offshore Banking Guide.
4. Offshore banks are situated in remote corners of the world or obscure islands, thereby making it difficult to manage the account. The facts: While many offshore jurisdictions are indeed small islands, they are all connected by fiber optic cables! Today, the physical location of the bank is not really important. You can deposit funds electronically and manage them over a secure internet connection. For withdrawals you can wire money out using the internet banking, or you can have an internationally recognised debit or credit card like Visa, Mastercard or American Express.
5. You have to travel to the bank personally to open an account. The facts: The best offshore banks do not require this. They have procedures in place to open accounts either entirely by mail, using copies of documents certified locally, or you can open accounts through other representatives or offices that may be closer to you. Often, if you pay the travel expenses or you are investing a larger amount, you can even have a bank officer travel to visit you.
6. Offshore banking is tax-free. The facts: In most cases you don’t have to pay taxes in the bank’s jurisdiction. The notable exception is Switzerland, which does charge Swiss withholding taxes on the income of foreign account holders. What you do have to remember is that many high tax countries tax the worldwide income of their residents, and one – the United States of America – taxes the worldwide income of their citizens even if they are not resident.
7. Offshore banks open anonymous numbered accounts. The facts: It is still possible in some banks to open numbered bank accounts. Most Swiss banks, for example, offer this facility for a small annual charge. A numbered account is where your name does not appear on the title of the account. However, they are not technically anonymous, since the bank will still need to know who you are. Normally your real identity will only be accessible to a few high-ranking bank officers, and your passport copy will be held in a paper file in the bank’s vault, rather than on a computer where a data or identity thief could potentially download it. So whatever account name or number you are assigned, you will not remain fully anonymous to the bank. It is also no longer permitted to send or receive wire transfers without fully identifying the legal account holder.

Further resources:

For further reading you might enjoy learning about the best offshore banks. If you would like to know more about offshore banking and more generally how to protect assets through international investing, check out our free five part ‘Secrets of the Super Rich’ course. We will be happy to send it to you free and with no obligation whatsoever. We also guarantee not to spam you – we hate spam as much as you do. To receive your free course, sign up here right now: Free Secrets of the Super Rich course

The following item was published in Saturday’s edition of Q Bytes. We consider The Brussels Agreement (also known as the EU SWIFT Agreement) to be an especially important topic so we are reposting to the blog. To ensure you receive useful information like this in future in a timely manner, simply sign up for your free subscription to Q Bytes. We hate spam as much as you do, and will respect your privacy. Of course, you can unsubscribe at any time.

THE BRUSSELS AGREEMENT MAKES ALL EU BANK ACCOUNTS AN OPEN BOOK TO THE US AUTHORITIES
by Peter Macfarlane, Offshore Banking and Asset Protection Consultant

With remarkably little fanfare, the first of this month saw the entry into force of an important agreement between the USA and the European Union known as the ‘Brussels Agreement.’ This I would regard as the final blow for already weak banking secrecy in European Union countries.

Quite a few astute readers have however noticed this press coverage and e-mailed me questions about it. To answer these questions, I will first reveal below more about the agreement, and then look at its impact on banking privacy. On a positive note, banking secrecy remains alive and well outside the European Union.

The ‘Brussels Agreement’ gives the CIA direct, on-demand access to all bank accounts held in the European Union – period. It also goes under the name ‘SWIFT Agreement’ in European Union papers.

This treaty is an extension and formalization of an existing CIA effort set up shortly after the terrorist attacks in New York in 2001. That program granted the CIA access to data held by SWIFT, the Brussels-based co-operative that processes nearly all international bank transfers. The operation was run covertly until the press found out about it in 2006.

The scope of the Brussels Agreement is, quite frankly, utterly amazing to anyone who cares in the slightest about civil liberties or due process. Far more wide reaching than any Tax Information Exchange Agreements (TIEAs) or Mutual Legal Assistance Treaties (MLATs), and of much greater significance than the recent US attacks on Swiss banking secrecy, the Brussels Agreement simply requires that all 27 EU member states grant requests “as a matter of urgency” for banking information made by the United States under its terrorist finance tracking programme. The records will be kept in a database run by the CIA in Langley, Virginia, for five years before being deleted.

Needless to say, the Brussels Agreement grants US authorities much more scope to consult our bank accounts than that granted to domestic law enforcement agencies in Europe. In the UK and most of Europe a judge must authorise a specific search after receiving a sworn statement from a police officer. In the case of requests from the USA, this due process is completely bypassed.

The USA can also, under the agreement, request so-called “general data sets” perhaps better known as fishing trips, based on broad categories such as “relevant message types, geography and perceived terrorism threats”.

One of the reasons for rushing through this new agreement is that SWIFT at the end of 2009 moved part of its systems architecture to Switzerland, away from its existing computing bases in Brussels and the USA. This would have placed a lot of data outside EU and US jurisdiction, a change apparently demanded of SWIFT by Swiss banks and others concerned about the privacy of their clients’ information. A number of banks had threatened to stop using the SWIFT system altogether if additional privacy protections were not put in place.

We can see that this agreement was rushed through in Europe while attempting to avoid both legal and public scrutiny, because negotiation of the agreement on the EU side was mandated back in July 2009, based on legal provisions in the old Maastricht Treaty that expired at the beginning of December 2009. The agreement was reached just before the deadline, at the end of November. It is limited to nine months duration, but EU documents make clear that this is simply a ‘breathing space’ to keep the program alive while a more permanent bank account information sharing agreement is agreed under the legal auspices of the new Lisbon treaty.

Certain elected representatives in Europe are none too happy about the way the agreement was bulldozed through by Brussels bureaucrats, directly attempting to circumvent normal mandates and procedures. A Bloomberg article just published on BusinessWeek entitled U.S., EU Terror-Finance Data Deal Should Be Vetoed, Panel Says has more information.

Of course, certain safeguards are put in place – the most important of which is that the information is for counter-terrorism use only. If the CIA wishes to reveal information to other US agencies such as the Treasury Department, IRS etc, a European judge must rubber stamp this first. Frankly, however, if it were my information being passed around – which it isn’t because I don’t bank in the EU – this safeguard would give me little confidence. Who is realistically going to trust the CIA?

The actual agreement, a classified document obtained from the EU, is here

An ‘Information Note’ on the subject released by the European Union, is here

IMPACT OF THE BRUSSELS AGREEMENT ON OFFSHORE BANKING AND ASSET PROTECTION

From a banking secrecy point of view, perhaps the most concerning thing is that this agreement has a higher legal force even than national constitutions such as Austria, which protect confidentiality. The CIA can look straight into bank accounts in some of the best offshore banking countries like Austria, Luxembourg, Latvia and Estonia, as well as other EU member states where banking confidentiality has traditionally been less of an issue.

The enormous scope of this agreement also makes minor tax information exchange agreements and the like look insignificant. We would not only not trust the CIA to refrain from sharing this information with other US government agencies. They are likely also to share it informally with their colleagues overseas. The precedent for this would be the UKUSA agreement, for example, where the UK routinely spied upon US citizens at the request of the US, because the CIA was technically prohibited from spying on Americans.

However, let’s not panic either. In fact, this process has been in place since 2001, so it’s nothing new. It’s only new that we are learning about it and it’s being subjected to the democratic process.

The other thing to note is that the EU is the only area where the USA has been able to obtain such ridiculously wide-ranging access. Traditional offshore best banking countries like Switzerland, Singapore and Panama are not covered by this agreement, though you should be aware of transactions that might pass through USA or EU correspondent banks. Switzerland in particular has an excellent clearing system of its own which bypasses SWIFT on Swiss Franc transfers.

The usual message, worth repeating in this case, is that by following the offshore banking advice in Q Wealth you can sleep soundly at night. To recap in a nutshell:

• You should make sure all your structures are legally compliant. Just because I say that banking privacy is NOT dead, and I believe privacy in financial affairs is a basic human right, doesn’t mean you should use banking privacy to hide money. You either get this distinction – or you don’t. Secret bank accounts as a tax evasion tool will not work long term. If you conduct your offshore business in a proper manner following guidelines in my articles, your account will not appear on the radar and your assets will be protected.

• Compliance with your home country’s rules is still easy and possible. Plan your second passport (citizenship) and residence with a professional… considering basing yourself, not just your business, offshore. For Americans this is unfortunately more difficult, since the USA is the only country in the world that taxes its citizens on worldwide income. Americans should therefore consider acquiring a second passport and renouncing their first.

It is perfectly possible and legitimate to protect your assets against the inevitable coming devaluation of fiat currencies, by using offshore multi-currency bank accounts. We have talked recently for example about Norwegian Kroner and Swiss Francs being good investment-grade currencies. Both of these currencies are strong, and they clear outside the EU so they are not affected by the Brussels Agreement.

If you would like to learn more about this, and are not yet a member of Q Wealth, subscribe today to gain access to the wealth of resources in our Members Area.

Better still, come to Cancun next month. We still have a few slots available on our ‘Strategies for Success’ event in Cancun and a few spaces available for one-on-one personal consultations. If you have bank accounts in European Union countries like Austria or Luxembourg and would like them to remain private, this should be a wake-up call. If you haven’t yet moved assets offshore but are considering doing so, also contact Frederick in the Q Wealth Office to set up a personal meeting with Peter Macfarlane in Cancun next month.

Just a quick reminder that close of business tomorrow is the deadline to qualify for the Early Bird bonus on entry tickets and personal consultations at our offshore wealth creation event in Cancun, Mexico.

Why would you attend this event?

• To learn more about which offshore corporate structure, foundation or trust is right for you. A Belize IBC, a Panama Foundation, a New Zealand offshore trust or something completely different?
• Learn about the best offshore banking countries and the best offshore banks. Peter will be explaining why countries you’ve possibly never even heard of may be the best offshore banking jurisdictions in 2010.
• Learn how to live offshore and run businesses internationally. If you are into consulting, writing, offshore e-commerce, online video etc you should attend this event. Likewise if you see one of these businesses in your future.
• Learn how to protect your assets. It’s all very well paying an attorney to do it for you, but lawyers are more interested in their fees than your well-being. We teach you how to do it yourself.

Above are just a few of the reasons you might want to attend our Cancun event in March. But there’s another reason too….

For the first time we have decided to offer discounts on offshore corporations, foundations etc ordered from Peter Macfarlane & Associates S.A. at this event. Our reasoning behind this is simple: explaining offshore structures to a group is much more time-efficient than explaining it individually over the e-mail or phone. Savings in time equal savings in money.

With the above discounts, your attendance at the event and your personal one-hour consultation can work out basically free if you decide to go ahead and set up an offshore structure for yourself.

We are also looking for long-term relationship building. You look us in the eye, we look you in the eye. In my view, that is the best form of due diligence.

If you are reading this before December 23rd, it’s not too late to take advantage of our early bird discount. Contact Frederick and he will get back to you with the necessary information: events at qwealthreport.com  (Replace the at with the @ symbol – we do that to deter spammers)

See you there!

“When the facts change, I change my mind. What do you do, sir?”  Keynes’ comments are very relevant to the fast changing world of banking where we do business today. Investors more than ever have to keep on their toes, keep themselves informed, and not be complacent.

Which are the world’s safest or best offshore banks? Where is the best country to open a bank account? Which is the best offshore tax haven? Is it still a good idea to open a bank account in Switzerland?

These are the type of questions I get on a daily basis as an offshore wealth management editor and consultant. For example, in recent months I have seen a lot of the fallout of the UBS scandal in the United States. Swiss banking giant UBS has closed thousands of  bank accounts based in their Swiss branches where American residents or citizens were involved as signatories – even accounts that had been open for decades. Many investors believe that Credit Suisse could be next on the hitlist and are beginning to think that ‘small is beautiful’ when it comes to private banking.

The answer, as I always have to explain, is that there is no ‘best offshore bank’ nor even ‘best offshore banking country.’ A whole range of individual circumstances come in to play. Investors have many different motivations when looking for a new bank. Often these days, the level of service, privacy, and asset protection are far more important than the tax implications of a secret offshore bank account.

For example, your citizenship is very important. If you are a US citizen your options are more limited, as many offshore banks no longer accept US citizens as clients. Canadians or Australians for example will have fewer problems in this regard. But the traditional wisdom is that for the best level of privacy, choose a bank that does not have offices or branches in your home country.

If you are a citizen of a European Union country (including the United Kingdom of course) then the European Union Savings Tax Directive comes into play, and you might prefer to hold your offshore bank account in one of the tax-haven type banking countries that is not a signatory to this treaty. That rules out Switzerland, Andorra and the Cayman Islands for example – and brings into play other prominent financial capitals a little further afield, like Panama or Singapore.

But there are also other nuances to look out for besides citizenship and residency. What kind of services are you looking for? Do you want one with the best online trading technology or the one with the highest level of personal service? Generally, those two are polar opposites.  Traditional private banking is expensive. Whereas for online trading in the financial markets, maybe you don’t even need a bank account these days.

Most offshore banks offer debit and/or credit cards, and internet banking – two essentials for the modern expat bank account. But again from here, services vary widely. Will it be a Maestro ATM card or a an American Express Platinum? If you are mainly interested in cash withdrawals using an offshore card, then Maestro might be better. But other clients want the prestige and service level afforded to those Gold and Platinum level clients – not to mention perks like airline miles offered on HSBC’s Panama Platinum Mastercards (that can be very valuable if you are conducting serious business through your offshore company.)

Ultimately, then, there is no correct answer – the best offshore bank account for one person is completely different from the best account for somebody down the road. If you would like to read more about this, you will find 40 or so pages of easy to read advice in my Practical Offshore Banking Guide 2009. This report is available instantly for download in pdf format, and also includes contact details of ten offshore banks we can particularly recommend that are suitable for most of our readers.

The guide is FREE OF CHARGE if you are already a member of The Q Wealth Report. If you are not yet a member, you can sign up online right now for the price of a good lunch ($87 to be precise) and get instant access to this information, together with our no-quibble money back guarantee of satisfaction. Or, if you are not ready just yet but would like to stay in touch, sign up for our Q Bytes online newsletter and get a free five part course on offshore banking and asset protection.

by Peter Macfarlane for The Q Wealth Report