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.

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.