Wealthy Latin Americans have been banking in Uruguay for decades, but it is less well known as an offshore banking centre in the rest of the world. That could be good news for your privacy, says offshore banking commentator Peter Macfarlane.

Uruguay has acquired a nickname, “the Switzerland of South America” due to its discreet Swiss style private banks and its low profile participation in the offshore finance business. Although it’s not generally known as a tax haven, Uruguay was one of four countries that acquired a higher profile than they wanted for their offshore financial sector businesses this year, being blacklisted by the OECD / G20 summit as a non-cooperative tax haven. However, in a very civilized manner typical of South America’s most stable country, Uruguay was also one of the first to be removed from the offshore banking blacklist. So what’s the story?

Uruguay today has two different categories of banks. There is the domestic banking system, dominated by two government-owned banks, the largest of which is Banco de la República Oriental del Uruguay (BROU). Founded in 1896, BROU previously performed many of the functions of a central bank. Today it is posible for foreigners to open accounts in the domestic system, but Uruguay Residence will typically be required, and it is hard to open offshore corporate accounts for foreign corporations.

Of more interest to non-residents of Uruguay are the so called ‘S.A.I.F.E.’ These are local Uruguayan entities that are wholly owned by established foreign banks. Their offshore status means that they are prohibited from doing business in the local market: for example they cannot do business with Uruguayan residents, and they cannot offer local checking accounts. They can however provide a full range of commercial and private banking services to foreign, non-resident individuals and companies.

The idea of allowing foreign banks to participate ‘offshore’ in Uruguay was originally to stabilize the local system with the resulting influx of foreign capital. Despite drug money scandals in the early nineties and the fallout from the Argentine financial crisis, Uruguay has managed to maintain a clean, under-the-profile radar – and this is one of its main attractions today.

We frequently introduce our paid-up members to a couple of these foreign banks operating in Uruguay. One is located in the capital, Montevideo, while the other is located in the trendy tourist resort of Punta del Este. A personal meeting is required, but need not be held in Uruguay. For example if you choose to work with one of the Swiss or European private banks with a S.A.I.F.E. in Uruguay, the meeeting could be held at the European headquarters and then the paperwork would be sent to Uruguay to get the account open.

If you would like to know more about how to open an account at one of these offshore banking institutions in Uruguay, check out our Practical Offshore Banking Guide which is available free for download in our Members’ Area. (If you are not yet a member, you can join online right now)

Uruguay, it should be said, respects offshore banking and its bank secrecy in its constitution – definitely a positrive sign.  Notwithstanding inevitable partial piercing of bank secrecy in recent years, the right attitude remains.

Following the OECD G20 blacklisting, for example, furious articles like this one (in Spanish) appeared in the local press condemning attacks on Uruguayan sovereignty by larger nations abusing their powers. Some of the convincing arguments from that article, translated into English:

- The OECD text says that tax havens should bring themselves in line with “international standards” for tax-information sharing, as if it were a UN convention or some other multilateral agreement signed by Uruguay. Really it’s an OECD convention, of which Uruguay is not a member and has nothing to do with.

- Why are they doing this? Because over several decades OECD countries have been expanding and complicating their systems of taxation – out of all proportion with the return these administrations give to taxpayers. In other words – it’s their problem. What does Uruguay have to do with it?

- How does bank secrecy benefit Uruguay? In reality the question isn’t being put the right way. Bank secrecy is consecrated in the constitution. Of course there are limits and norms to bank secrecy, but these aren’t pre-requisites. In other words… it doesn’t matter if it benefits Uruguay or not, it’s a right. Full stop.

Thank you for the translations to offshorenet.com

Finally, any mention of Uruguayan banking on the internet would probably not be complete without a mention of Capital Conservator Treasury Services, a high profile player in the international offshore banking business. Capital Conservator originally set up as a Uruguayan entity but a few years ago they decided to change their place of incorporation, keeping only back office functions in Montevideo.

Q Wealth continues to be your one stop shop for offshore banking and asset protection information. We offer impartial advice you won’t find elsewhere, together with a high level of personal service – including our Q Wealth Events. If you aren’t yet on our list, sign up now and receive our weekly Q Bytes e-mail newsletter as well as our free five part course ‘Secrets of the Super Rich’ covering offshore banking, international asset protection, freedom, and wealth creation.

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.”