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Offshore Banking Myths


Offshore banking comes with a stigma, so many entrepreneurs and business professionals cringe at the mere mention that their money can be safely kept in an Offshore bank account. Images of fast, expensive boats, drug kingpins, and white suits come instantly to mind. This perception, of course, has not been altered by the proliferation of bad Hollywood movies, television shows, and negative portrayal in the press. They could not be further from the truth.

Offshore Banking: How It Is Really Used

The fact is that offshore financial centers (OFC) or banks, also known as tax havens, exist mostly for the purpose of providing asset protection, asset growth, and tax reduction — depending on your jurisdiction. Such institutions are known to cater to for foreign individuals and corporations, large and small, around the world.

Offshore bank account havens and financial centers can present real world solutions to many of the issues facing people looking for asset protection from pending lawsuits, or as a way to mitigate the ramifications of a local unstable government. To be sure, an offshore bank account combined with an asset protection trust can also provide asset protection from the ordinary perils such as divorce, poor market conditions, or litigation that is so often a marked consideration in the Western world.

Offshore Bank Accounts: Money Laundering, and Other Criminal Activity

Banks around the world have one main goal when opening accounts for foreign people: to keep the good ones in and keep the bad ones out. A bank can lose its license if it looks the other way then suspicious activity is suspected. It can also lose it ability to wire funds in US dollars or Euros, essentially putting it out of business. So, rest assured, when opening an account, a bank will not let you slide on providing your identity documents. They are going to want to see valid source of funds documents and evidence that the funds were from legal sources. With the cost of obtaining and maintaining a banking license, banks will not let you take shortcuts when it comes to obtaining the required due diligence to get an account opened.

It would be a misstatement to state that no illicit funds find their way into Offshore bank accounts–but as we will soon see, that isn’t really saying much. In reality, those jurisdictions that the average lay person would least suspect to be guilty of this or other illegal banking activities have turned out to be the major money laundering and criminal enterprise-funding centers in the world. And the United States is chief among them, with an estimated half of all of the money laundered in the world laundered within its 50 states. This half translates to a conservative estimate of $300 billion US.

Of course, the United States is not the only high-tax, or “large” jurisdiction that is home to this activity. Other countries such as the UK and Germany share in this dubious distinction. US people are taxes on worldwide income. So, moving funds offshore in the proper legal tools may provide asset protection benefits. However, it is not typically effective for tax reduction. Being that tax transparency is the new reality, tax evasion using offshore structures is neither advisable nor realistically effective.

So although the tax haven offshore banking jurisdictions are perceived to be the ideal locales for the financing of the criminal underworld, the reality is that the high-tax jurisdictions house the vast majority of these funds. Low-taxation havens represent a much smaller percentage overall.

These type of facts, of course, are very rarely ever reported by TV news and print media, or by the jurisdictions that are frankly quite embarrassed by these astonishing figures.




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