Banks overseas have long suffered from rather dubious reputations. They are often thought of as being located in tax haven countries. As such, the uninformed think they help unscrupulous people defraud their governments through income concealment and tax evasion. Increasingly however, this negative image is blurring away and overseas banks are now mostly seen as safe, legitimate financial institutions.
There are a number of reasons people open accounts in banks overseas. When part of a well-crafted asset protection plan, an account in an overseas bank can help safeguard your money. Holding the foreign account in an offshore LLC and asset protection trust can keep your local court out of your pockets. Business owners with worldwide operations use them to help facilitate international transactions. Shrewd investors use them to take advantage of investment opportunities that may not be available in their home countries. Many Americans and EU residents, weary of persistent bleak interest rates in their local banks, rely on offshore banking to enjoy higher interest returns.
Offshore Banks that Accept US Clients
In this arena, doing the legwork required pays off in the end. Despite onerous and stricter reporting regulations, there are still several foreign banks that accept U.S. clients. However, not all of them are equal. Take the time to weigh the pros and cons of each option before you make your decision. Once you make up your mind however, plunge ahead and don’t wait. You’ll never know when a lawsuit with your name on it will land on the desk of a U.S. judge placing your hard-earned assets at risk.
Overseas Banking Definition
Banks overseas are also known as offshore banks or foreign banks. These are simply financial institutions that are located outside of a depositor’s home country. Unfortunately, these banks acquired something of a shady reputation mainly because of the shroud of secrecy often associated with them. However, recent worldwide regulatory enhancements have slowly chipped away at this clandestine image of overseas banks. Today they are better understood and appreciated as offering a wide range of legitimate banking services.
People from practically all walks of life now regularly use banks overseas to complete perfectly legal transactions. Gone are the days of covert Swiss bank accounts concealed behind smoke and mirrors. As you will see below, banks overseas offer excellent opportunities to make your money work harder for you.
Asset Protection Benefits of Banks Overseas
In the past, the individuals commonly associated with overseas banking accounts were drug dealers and tax cheats. This has never been 100 percent true, of course. But the perception was widely held and remained entrenched for decades. However, recent world events, such as worldwide drug trafficking and terrorism, have significantly altered the banking landscape. Majority of reputable financial institutions all over the world have agreed to greater transparency and increased cooperation. This resulted in the lifting of the veil of concealment that once obscured goings-on in many banks overseas.
Offshore Banking + Asset Protection Trust
Increased transparency, however, has not completely diminished the asset protection benefits of an overseas bank account. Newly established and much-improved offshore bank information sharing has made it difficult to hide assets held in a foreign bank. But just because your legal nemesis knows where your assets are, doesn’t mean he or she can get to them. Parking your money overseas is not enough. It is not protected by the banking laws and regulations of the country where your bank is located. So, what is the solution? Putting your money offshore inside of an offshore company such as an LLC owned by an offshore asset protection trust. This way when your friendly neighborhood judge demands that you bring the money back, you have a an ally on your side. Your trustee can step in to protect you.
With your money in an offshore bank and international legal tools, opportunistic creditors have to follow the laws of the foreign jurisdiction. If they want to separate you from your money they have a nearly insurmountable mountain to climb. This is much to their regret (and to your advantage). This can be a complicated, drawn-out and expensive process. And as indicated, it is doubly difficult if you place your overseas bank account in an offshore asset protection trust. Remember, the more layers of protection there are between a possible lawsuit and your assets, the more secure it is.
Business Advantages of Overseas Banks
If your business has a worldwide presence, you already know the advantages of maintaining accounts in foreign banks. Overseas banks provide payroll services for companies with employees and suppliers in different countries. Additionally, they provide letters to credit to ensure the payment of good and services between companies in different countries. Importing and exporting goods worldwide can be costly. Overseas banks routinely provide financing services to businesses engaged in this commercial activity.
Even if your business does not yet enjoy an international reach, opening an account overseas still makes sense. You’ll be well-positioned to quickly take advantage of beneficial business opportunities that may suddenly appear on the international horizon. As any astute businessman knows, the ability to act decisively is beneficial to any type of domestic or international business.
Divide and Conquer
If you maintain both a business and personal account in your overseas bank, be sure to keep them separate. This way, if a creditor penetrates the security of your business assets, your personal assets can remain safe – or vice-versa. Your creditor will have to mount another case against you if he or she wants to access your other assets. Whenever possible, consider establishing an LLC in a settlor-friendly jurisdiction. You can then use that entity to ‘house’ the business assets in your overseas bank. Another layer of protection accomplished.
Additional Opportunities with Banks Overseas
Successful investors know that a diversified portfolio can withstand market and business fluctuations better than one with limited holdings. Banks overseas often give depositors access to international investment opportunities that are not available in their home country. This is especially true in popular international financial centers like Switzerland and Singapore. Using an overseas bank provides a gateway to unique investment opportunities – and the greater income they generate in return.
Many foreign banks still give Americans and EU residents better interest rates for their money. This is especially true for banks in countries with low dollar reserves who are facing a great demand for dollar loans from other clients. To entice you to deposit your U.S. dollars with them, they must offer incentives. With the depressing interest rates in the U.S., offering a higher interest rate is an attractive inducement. The actual difference in dollars and cents may not amount to much – unless you’re talking millions of dollars in deposits. It’s the perception of your money earning more that makes a big difference. This is especially true for depositors who are weary of disappointing interest rates in their home countries.
Best Overseas Bank Location
There is no one perfect overseas location or jurisdiction for an offshore account that is ideal for everyone. Be wary of financial advisors who claim otherwise. It’s true of course, that some parts of the world are better than others. If you had the choice, and you do, why would you choose an overseas bank in a politically unstable country?
Begin with the level of risk with which you’re comfortable. If you think banks on tiny island nations are unstable, opt for an Asian or European overseas bank. Mighty and fiercely-neutral Switzerland could be an option for you. Although Hong Kong is an island, it has enjoyed a long and stable banking history. If a bank’s past financial performance is more important to you than its actual location, Hong Kong would be an excellent jurisdiction to open a foreign bank account.
Next, you should zero in on the purpose that your bank overseas will serve. If asset protection is your top priority, choose a location with the most depositor-friendly legislation. For this, you may also want to consider jurisdictions that favor and openly protect trust settlors and LLC founders. This way, if you place your account under a trust or LLC, you automatically double the protection your money receives. Your choice of bank may be different if your primary goal for placing your money in an overseas bank is to take advantage of investment opportunities that are not available in your home country. The point is, your choice should reflect and support the goals you have for your money.
Finally, choose a bank with strong ties to the local community and a solid reputation for conservative banking policies. Know that FDIC only insures deposits in local U.S. banks. However, if you search for the world’s safest banks, you will see that the US, as of this writing has only 3 on the top 50 list. An offshore bank with an extensive local customer base will be less likely to experience stress in a financial crisis. Banks that follow conservative fiscal policies simply means they’re careful with their client’s money. It also means they likely have a strict protocol of checks and balances to prevent theft and misappropriation of funds.
Overseas banks are slowly but surely shaking off their largely misleading dubious reputations. They are proving that they are legitimate institutions with an important role to play on the international financial stage. Banks overseas help protect your assets, facilitate worldwide business transactions, and provide greater income for their depositors. There is no single offshore location that’s ideal for everyone. Your choice depends on a number of factors. Among these factors should be: the level of risk you’re comfortable with, the main reason you’re opening an overseas bank account, and the bank’s own policies and role in the community where they are located. No matter what bank overseas you decide to use, make sure it meets your requirements for the protection and best use of your money.