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.

One offshore low tax zone we don’t hear much about is the Netherlands Antilles, a group of islands in the Caribbean that were colonised by the Dutch. However, they have long served as an attractive offshore base for European and other multi-nationals, as well as quite a number of offshore banks including First Caribbean International Bank and Maduro & Curiels. Interestingly, some major reforms are underway there that may be of interest to our readers.

Bucking the worldwide trend, and thankfully disproving the naysayers who would like to suggest that offshore havens have no future, the Netherlands could have a zero corporate tax zone and an attractive, better regulated offshore banking and asset protection system, as of October this year.

In that month, the current political entity known as the Netherlands Antilles will be broken up. The various Caribbean islands that currently make up the Antilles will get a new political status. Curaçao and St Maarten will become ‘autonomous territories’ within the Kingdom of the Netherlands, the same status that Aruba has right now.

The other three islands of the Netherlands Antilles – Bonaire, St Eustatius and Saba, together called the BES islands – will become special municipalities of the Netherlands. More details about the Netherlands Antilles and the political changes taking place can be found on Wikipedia.

The BES islands will get their own tax code, and the current proposal does not include a corporate income tax. (Distribution of dividends to shareholders will be subject to a ‘revenue tax’ of 5%)  With this special tax code, and highly privileged access to the European Union via their status as municipalities within the Netherlands, these islands will become very attractive offshore financial havens.

The Ministry in the Dutch capital writes: “The proposed system for corporate and dividend taxation for the BES islands strengthens the relative competitive position of the BES islands in the Caribbean region.”  The reference group studied for this purpose includes Bermuda and the British Virgin Islands, whose governments are reportedly none too happy about the proposal.

To qualify for the no-tax zone, companies do have to meet certain economic substance conditions. In other words, mere shell companies or IBCs will not be permitted. The companies must utilise at least half of their assets for business activities on the islands, and will be required to employ at least three locals. Still, considering that these islands are attractive places to live, comparing very favorably with the best of the Caribbean jurisdictions, I don’t think most people would consider these requirements unduly burdensome.

In practice, say local experts, the new tax code might not make big difference. Right now the BES islands have so-called e-zones ór free trade zones where the corporate tax rate is just 2% .  The greatest beneficiary of the current system is probably Valero Energy Corporation, a US oil trading giant, which maintains an oil terminal on St Eustatius.

So what will become of Curaçao and St Maarten? These two islands will maintain their fiscal autonomy, but they are bound by the EU code of conduct on business taxation.

Want to learn more? We will be monitoring this subject in Q Bytes, our free newsletter, over the coming months. By signing up you will receive lots of free useful and valuable information on offshore banking, asset protection, second passports and much more. All with our no spam guarantee. Sign up for your free Q Bytes today!

At this time of year when we have a chance to take a few days off and spend time with family and friends, we would like to wish you and yours a very special and magical Christmas. Whether you are deep in snow or on the beach, may you enjoy the beauty of this time. Thank you for supporting Q Wealth during the past year. And we hope that 2010 will be your most prosperous New Year yet, when all your dreams will come to fruition!

In January we will be launching the updated 2010 edition of the Practical Offshore Banking Guide, our new Computer Security Report, and the next issue of the flagship Q Wealth Report. We have lots of other goodies in store for you too! These will all be available free in the Members’ Section.

If you are not yet a paid-up member but have been thinking about it, now is the time to sign up because we are offering you a special Christmas gift! Sign up before the end of the year (before 31st December) and receive $20 off your first year’s membership… bringing the price down to just $67. I know you have lots of expenses at this time of year, but what price do you put on your freedom, wealth and privacy in 2010? Simply enter the promo code XMAS09 on the signup form, and the discount will be applied automatically. You will be granted instant access to the Members Area. The signup form is here.

If you are already a member, thank you very much for your business and the confidence you have shown in us. If we haven’t already talked whether by e-mail or in person, I do hope we will have the chance to do so soon, possibly at our Cancun ‘Strategies for Success’ event in March that is selling out fast.

Kind regards
Peter Macfarlane
Joint Editor

and all the Q Wealth Team!

Peter Macfarlane reporting from West Cork, Ireland:

I’m writing this update for Q Wealth’s Offshore Banking and Asset Protection blog from my hotel room overlooking beautiful Bantry Bay in West Cork, Ireland. After waking to beautiful blue skies and morning sun shining into my room, I was served a hearty Irish breakfast with a large pot of delicious coffee. That will keep me going until tonight I think, when we are holding a welcome dinner for the delegates coming here to the ‘Meet the Men’ event, which will start tomorrow.

Time now to answer some client e-mails, a conference call on a secure communications line with a Swiss banker about a client who is buying some gold bullion over there, and then a walk along the beach to work off some of those carbohydrates from breakfast before Richard comes over!

I must say that travel is one of the pleasures of working in the offshore industry, and particularly in my work where I am in regular contact with clients, offshore banks, lawyers, asset protection specialists and the like. Frequent business travellers know that travel is not always as glamorous as it might appear, but I do feel I am privileged that my work takes me to so many interesting places.

For some reason I often end up in tropical places which I generally love, sleeping in top class hotels near the beach! But nothing could have been more beautiful than the cool mist over Bantry Bay this morning. It was a great way to wake up relaxed and refreshed after my long journey yesterday, and I was immediately reminded of Richard Cawte’s expression “your ships come in over a calm sea.” In other words, a calm and relaxed state of mind is probably the most important thing when it comes to creating wealth offshore (or anywhere for that matter)

But although I still enjoy travel and waking up somewhere new, there is one thing more important: and that is the people I meet. I’m looking forward to tonight, meeting the line-up of delegates I’ll be spending the next few days with. We always have such a wide variety of interesting people, with many differing interests but a common theme: the desire to achieve freedom, wealth and privacy in a decidely unfree world.

Quite frequently, clients tell me they don’t want to come to these events for fear there will be government agents present. To that, I answer that we would sniff them out immediately. Yes, of course if you go to offshore banking events with hundreds of mainly US-based delegates present, the IRS will be taking an interest. They can and do buy seats and there is no way to avoid that.

Our Q Wealth Events are different, however, because we have much smaller groups – usually about a dozen people. Of course we respect privacy, but we like to get people to open up and talk. And somehow I have a very good sense of whether people are telling the truth or not. Tax collectors generally believe they are doing something good as that is the way they have been indoctrinated. They have been taught that the fruits of the labour of wealthy and productive people should be redistributed to the poor – or used to fight wars to help the elites.

Most people are attending our offshore wealth events not really because of tax issues, but for more ideological reasons than that. We have people from all over the world (New Zealand being the furthest away this time I think) who are getting together because they hate to see what is going on in the world, with our financial and privacy rights being eroded. People are genuinely sad to see the US dollar collapsing due to the US government’s policies, for example. I am too.

But the ones who come to our events are in the minority who are not going to stand by, watch the TV drivel and see things collapsing around them. They are the brave people who are actually doing something about it for themselves, as individuals and for their loved ones.

Although we call this event ‘Meet the Men’ I really prefer the description ‘Meeting of Minds.’ Many people are genuinely scared to go offshore, after all the hype and negative publicity. They realise it is not only their legal right, but only common sense and duty to their families to diversify risk internationally in turbulent times. But still, there is often that little voice at the back of their heads telling them to be careful. And quite right too.

So attending offshore events like this is a relatively harmless way of dipping your toes in the water slowly. Talk face-to-face with people who have been there and done it. Make lasting friendships with like-minded individuals from around the world. And over several days, even if you don’t take in all the information, you will learn so much and get a much better impression of the way things work offshore. (I’m comparing for example to personal meetings where I meet clients in a hotel somewhere for a couple of hours)

Once the events are over, we always allow time for personal consultations so you can put together your own plan. There is, however, no obligation… and of course it will be up to you and you only to follow through with your plan.

That’s why I think Q Wealth Events are such an important part of our services to members. If you are considering going offshore, attend one of our events as part of your decision making and due diligence process. You are too late now for this one, but we will shortly be announcing dates for the next events, early next year. Please make sure you are on our free Q Bytes mailing list if you would like to be kept informed. No obligation at any time of course.

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.

China’s banking system has twenty-five times the reserves of the US Federal Reserve. The USA’s power to dictate international monetary policy is lost as the rest of the world views the US dollar as a liability. People ask me every day about the “dollar collapse” – why do I keep predicting it, and why has it not happened yet? The answer is to be found in China.

For those of you who have already read How to Prosper from the Coming Shift in Power, module 5 in our free five part Secrets of the Super Rich course, I thought the following guest article by Keith Fitz-Gerald of Money Morning would be of interest. Keith is an investment analyst who lives part of the year in Asia. Here’s what he has to say…

Most Americans will view China’s effort to dethrone the U.S. dollar as the world’s main reserve currency as one of the biggest economic threats that this country will have to face.

But the reality is that this tectonic shift in global finance – and the economic shockwaves that will result – could provide investors with some of the greatest profit plays they’ll ever see in their lifetimes.

No matter which camp you’re in, the China-spawned changes are headed our way.

In 1990, the U.S. banking system was 2.3 to 2.7 times the size of its counterpart in China. Today, however, the situation has been reversed, and there is much more of an imbalance. In fact, China’s banking system has 25 times the reserves of the U.S. Federal Reserve.

At some point, the United States will no longer be able to dictate international monetary policy. Unfortunately, as our monetary policy aptly demonstrates, Washington seems to be the only player involved in this game of high-stakes global finance to not understand just how this is destined to play out.

U.S. leaders continue to employ monetary policy as a weapon – despite the fact that most of the rest of the world views the U.S. dollar as a liability.
At the end of World War II, virtually the entire world functioned on dollars. By some accounts, 100% of the world’s money supply was the dollar. Today that figure has dropped all the way down to 19%, says Rochdale Securities LLC analyst Richard Bove, a noted expert on the U.S. banking system and Federal Reserve.

Now that the federal government has deployed a few trillion dollars more as bailout bucks, it’s clear that the greenback has lost its mojo and the U.S. government has lost its international monetary leverage.

Why is this worrisome? History tells us that the countries with the strongest economies tend to also have the strongest currencies. It may take awhile for the latter to catch up with the former, but the relationship is highly correlated relationship – suggesting that China’s on the rise economically, while its currency is advancing with the unstoppability of a diesel locomotive operating at full throttle.

So if the U.S. dollar gets derailed as the world’s chief reserve currency – as we’ve repeatedly predicted is destined to take place – the world’s next reserve currency is likely to be China’s yuan, known officially as the renminbi.

Washington says that won’t happen, since Beijing takes steps to keep the yuan from being fully tradable. That’s true enough. But Beijing also understands that the dollar is a liability – which is why China’s leaders are going to great lengths to establish the yuan as a viable currency all its own, while simultaneously minimizing the Red Dragon’s dollar-based exposure.
In the last six months, for example, China has signed at least $95 billion in swap agreements, under which it can trade directly with countries for payment in yuan. The countries that sign these deals are getting huge discounts from China in exchange for their participation – and for buying goods from China. And the deals enable China to do an end run around the entire dollar-based currency trading system.

When it comes to this long-term plan to boost the yuan’s importance, China is waging a campaign on multiple fronts. This past spring, for instance, China organized a meeting in Moscow – attended by representatives from Brazil, India and Russia – where the main goal was to supplant the U.S. dollar as the world’s main reserve currency, replacing it with a yuan-led market basket of currencies, one that is simply backed by China’s renminbi, or perhaps even one based on the International Monetary Fund’s so-called Special Drawing Right (SDR).

Created by the IMF in 1969 to support the Bretton Woods fixed exchange rate system, the SDR was redefined in 1973 as a basket of currencies. Today, the SDR consists of the euro, Japanese yen, pound sterling, and U.S. dollar.

My guess is that this gathering in Moscow was merely the first of many such meetings that we’ll see take place around the world in the years to come. Expect the list of attendees to grow, as well.

Given all that we now know, the real question becomes: What happens if China succeeds and the yuan displaces the greenback as the world’s top transactional currency?

The list of potential implications is very long, and includes several scenarios that are almost apocalyptic. But most of the outcomes raise as many questions as they answer.

Let’s consider the Top Five:

1. Global Gloom Leads to U.S. Doom: The U.S. dollar goes into freefall for the simple reason that if no country has to hold dollars any longer, they won’t. Instead – thanks to the ragged state of the U.S. government’s finances – many countries will dump greenbacks fast as they can, which will only put additional pressure on an already-strained U.S. financial system, which in turn will further damage our economy.
2. Inflation Inflates: Inflation will strike here with a vengeance, as anything bought, sold or priced in dollars will instantly rise in price to offset this fall.
3. Repatriation Risk: With the dollar serving as the world’s de facto currency, U.S. companies bear very little exchange rate risk when the time comes to repatriate assets or make currency-related adjustments. That would change overnight and prices throughout the value chains would rise sharply to compensate.
4. Money Costs More: The cost of money itself would rise. If the dollar falls, not only will there be massive selling pressure against it, but the cost of borrowing it will rise dramatically as lenders raise rates to cope with the increased risk of dollar-based transactions.
5. Death By Debt: And finally, if there is another reserve currency, other countries will no longer have to buy our debt, and you can guess where that will leave us – especially given the fact that we’ve taken on trillions in new debt to help finance our way out of our current mess.

My best guess is that we won’t see any one of these things in isolation, but will instead experience a blending of several or all of them. To the extent that China continues to absorb our inflationary influences, buy our debt in measured doses and maintain its reserves, we’ll probably have a measured decline in the value of the dollar – but not the catastrophic fall many in the doom, gloom and boom crowd are predicting. At the same time, I also see the IMF change course in the next few years to reflect China’s increasingly substantial influence and monetary power.

On the individual investor level, this clearly provides a new set of influences that most investors have yet to grasp. Most will perceive what I have said as a threat, but I believe the correct way to view this is that there will be a whole new set of opportunities coming our way.

Some of those opportunities will be obvious – like the need to invest in currencies and commodities that are of interest to China. Others, like direct investments in China’s yuan, will require special insight, a good investment guide, or a leap of faith.

Further reading: If you’ve not yet read Q Wealth’s five part course on offshore banking, asset protection and international wealth creation, check it out now. It’s free. If you are already a member of Q Wealth then you will have access to a wealth of material and information on how you can take full advantage of opportunities presented by the global crisis.

The bottom line – and the most important thing to remember – is this: No matter how this plays out, there will always be an upside for investors who are willing to seek it out.

“We are moving rapidly to a corporatist/fascist model” says Vera Verba for The Q Wealth Report

Things have begun declining rapidly in the US!

Obama’s health care takeover has a lot of normal Americans very angry. I now see and hear angry comments about this plan from non-political types at stores, on the street, etc. But, once these people show up at a meeting and complain, the elites slander them as carrying swastikas (Pelosi), being “funded by billionaires,” and having hidden racism and anger because there is now a black President.

These political elites evidently can’t handle dissent, and so, whoever opposes them is not only incorrect, they must be evil. Hence, we see things like this clip from the vile MSNBC:

We are moving rapidly to a corporatist/fascist model. Not only do we hear an abundance of “those who disagree with us are evil” comments, but the large institutions are lining up with Obama – even groups like the pharma lobby and AARP, whom you would expect to oppose such a system; one that controls pharma companies and will withhold treatment from old folks.

You may now expect the elites to get serious about undermining Talk Radio in the US.

The financial situation (currently in a Bailout Bubble) appears ready to fall apart again, and what happens this time is anyone’s guess.

In Production Versus Plunder, I was forced to conclude (against my initial inclinations) that Western Civilization is doomed. I said that there was a chance to avoid mass systemic collapse, but that it would be difficult. The hard thing (which I did not try to do in the book) is to predict when this happens. This week, it has begun to look more like years rather than decades. Was this just one bad week? I dunno.

So, it’s getting scary. (And there is an overflow of bad news from the EU as well.) I don’t have any specific predictions to throw at you, but the past week has not made me more optimistic.

Further reading: The writer is a member of the Q Wealth Panel of Experts as well as being author and publisher of many interesting books. If you are interested in more predictions about the Doom of Western Civilization, along with practical solutions to prosper from it, you might enjoy Dr Richard Cawte’s piece How to Prosper from the Coming Shift in Power that makes up the last part of our free five part course covering Offshore Banking, Asset Protection and Wealth Creation matters. You can obtain the free course by entering your e-mail address in the signup box above, or at this link: The Secrets of the Super Rich

A lot of readers have been asking me lately about offshore banking and wealth management opportunities in Singapore. Unquestionably, Singapore has some very sophisticated banks and bankers, and it has developed a well-earned reputation for discretion and confidentiality.

However I found the following observation on an internet discussion group, that I found interesting:

“Switzerland said it would seize UBS AG data to prevent the U.S. Justice Department from pursuing a U.S. court order seeking the identities of 52,000 American account holders in a crackdown on tax evaders.”

“The Swiss government “will use its legal authority to ensure that the bank cannot be pressured to transmit the information illegally, including if necessary by issuing an order taking effective control of the data at UBS that is the subject of the summons,” according to the filing.”

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“The Singapore government is proposing changes to its tax laws to meet demands from the U.S. and Europe to clamp down on bank secrecy.

“Singapore will seek to amend its domestic laws to allow it to extend further cooperation on information exchange” via double-taxation agreements with other countries, the Finance Ministry said in a statement.  It is seeking public comments through July 28 on the amendments.”

So, how can we interpret these two news items?

First of all, they both have to be taken in context. While it’s good to see Switzerland sticking up for its sovereignty, we have always recommended clients against doing business with big, international banks like UBS or Credit Suisse. Iwas hardly surprising that UBS were targeted, given their large US presence that makes them something of a sitting duck. We have numerous articles about the Right Way to do Swiss bank accounts (Cantonal Banks, for example), and our Practical Offshore Banking Guide includes contact details of other recommended sources for private banking in Europe (not necessarily Switzerland).

Singapore is a place we’ve never done a lot of banking business with, and the quotation above goes some way toward explaining our reticence. But we full admit that our geographic bias when it comes to banking is more towards Europe and Latin America. Singapore is certainly convenient for Asians and Australasians, due to time zones, languages and culture. On the other hand, it would have to be up there with Hong Kong at the top of the hit list for say the Aussie tax authorities, who are getting more and more agressive these days.

But is banking in Singapore and Hong Kong such a good idea for Europeans and North Americans? In my view, probably not. Both the EU (particularly the UK) and the USA have quite strong influences there, and neither of these entities are friends of offshore banking. Canadians might be OK in Singapore. If you are interested in banking in Asia, then World Offshore Banks has some intriguing services worth exploring.

Generally, the rule is that convenience is a threat to privacy. If you are looking for the most private, best offshore bank for you, you want to be as far away as possible – both geographically and culturally – from your home country and the places where your fellow countrymen do their offshore banking. Europeans might do well in Latin American havens like Panama and Uruguay. North Americans might do well still in obscure corners of Europe.

Whatever you decide, remember that nothing is for ever. You need to monitor the situation and changes taking place in the world of offshore finance. It pays to work with banks that are nimble enough to help you with this. We can recommend a few. And The Q Wealth Report is here to help you with offshore banking advice and recommendations. If you haven’t yet signed up for our Free Offshore Banking and Asset Protection course, I would recommend you do so!

by Peter Macfarlane for The Q Wealth Report

When you decide to open an offshore bank or brokerage account, whether in Switzerland, Cayman, Belize, Panama or anywhere else… one of the most typical requirements is for a bank reference letter. Offshore bankers are generally required to ask for such letters in order to complete their due diligence file on you as a new account holder. This applies equally whether you are opening a personal or corporate account.

Yet, bank reference letters can be a big threat to your privacy. You are opening an offshore account mainly for privacy reasons, I would assume. You believe that your finances are your business and nobody else’s. You are concerned about threats to your banking privacy onshore, in the form of tax information exchange agreements, credit reference bureaux and the like. So in this blog posting, I am going to look at what you can do to ensure your privacy, and whether it is possible to open offshore bank accounts without reference letters?

It has been reported recently in the offshore media that requests for “Bank Reference Letters” are now subject to “Suspicious Transaction” reporting in the USA. The story goes that banks are refusing to issue reference letters because they would then have to file a suspicious transaction report.

Frankly, we have seen no evidence to support this claim. It’s worth noting that more and more entities are requesting bank reference letters. For example, these days buying a high value property quite often entails providing a bank reference to prove clean funds, clear of criminal origin. So requests for bank references are really on the increase and most requests probably have nothing whatsoever to do with offshore accounts. On the contrary, one would think the powers that be would like to encourage more use of bank references because they create a paper trail. But therein, of course, lies the problem!

One of my clients in the UK did tell me today that she had been asked to justify to the bank’s head office her request for an open reference letter addressed “To Whom it May Concern.” Most UK banks now blankly refuse to write references like this, though some still do.

Anyway, whatever the truth of the matter, I understand that many clients are reluctant to tell their bank at home about the business they are doing offshore, and a bank reference request might entail this. So many clients ask how they can open an offshore bank account, whether corporate or personal, without a bank reference.

The answer is that it is difficult, but certainly not impossible. Over the years I have built up excellent relationships with a number of top flight European, Latin American and Caribbean banks, and I do understand how they work. By dealing at a higher level, I get to talk to intelligent bankers who are prepared to get to know clients as individuals not as numbers (though they might still offer numbered accounts!) The benefits of these referrals and relationships I am happy to pass on to my readers.

Let’s make it clear, I am not saying that I deal with banks that will cut corners on due diligence. We only want to deal with honest individuals. I have plenty of experience of sniffing out scammers or crooks and they will not get in the door at any bank, at least not with my endorsement.

But if you are a true, honest, freedom-loving and privacy seeking individual with good intentions and clean funds, who is sick of government intrusion in your life, then I am prepared to help you to open accounts without bank references. We can do it properly and legally in reputable banks. I do know which banks have more flexible policies, especially where higher level personnel are involved in the account opening.

You will have to provide some kind of reference letters, but not necessarily from a bank. Commercial reference letters might be acceptable, or references from a lawyer or accountant. Other banks might accept copies of the last 3-6 months of your bank statements, in place of a reference. Or sometimes you are permitted to open a personal account without a reference, and then use that as the basis to open a corporate account if you wish soon after.

I am certainly not going to name specific banks here in public, only to have them deluged with scammers trying to open accounts and picked on in public by the anti-tax-haven people. Suffice to say that if you are holding off opening an offshore bank account because of worries about providing a reference, don’t wait any longer. Take a look at my Practical Offshore Banking Guide 2009. If you are already a Q Wealth Member, it is available free of charge for download instantly in pdf format. If you’re not yet a member you can sign up right now and get instant access.

Within the Guide, I would refer you specifically to the section about “What Can You Do if Not All the Documents Are Available.” You’ll find some guidance there. You’ll also find a list of various different offshore banks and brokerage houses all around the world we have successfully worked with, done due diligence on, and recommend. If you need additional help with bank referrals, remember that as a paid Q Wealth member you are entitled to a free e-mail consultation with Peter Macfarlane in order to get your structure up and running smoothly.

Full membership brings a host of other benefits too… including information on Secure, Non-Reportable Gold Investments for example. You will also be invited to exclusive Q Wealth Events… designed for present and future millionaires!

If however you would prefer just to try our services first of all without any cost, commitment or obligation, sign up now for our free five-part introductory course on Offshore Banking and Asset Protection.