Debunking 12 Offshore Banking Myths

Offshore bank accounts are mostly used by spies and criminals -- It would be silly to say that this does not happen, but the reality is that most of the funds kept offshore are deposited by fortune 500 companies shielding their asset base as part of their risk management strategy. I personally know a TV personality that every person reading this knows, and He banks in Panama among other countries to reduce his risk and protect his assets.

Offshore banking is too complicated for the average Joe -- This is actually true if the average Joe were to do all the legal work himself. Typically an offshore bank account is created in conjunction with an offshore corporation due to many governments taxing worldwide income of individuals. This sounds complicated but a good lawyer will have the entire package done in less than a week.

Offshore bank accounts are only for rich people. -- A typical offshore package is less than $2000USD to setup. Once in place an offshore bank account and offshore company are the basis for a rock solid asset protection and tax plan.

Because of 9/11 bank secrecy has been eroded severely -- It is true that the MLAT treaty has been adopted all the offshore jurisdictions pretty much, BUT what most people don't understand is that this treaty only allows for co-operation in crimes. The issue under investigation must be a crime in both countries and the requesting country must produce evidence that they have a strong case against you. Also the activity must be a crime in in BOTH countries. Tax evasion is not a crime in Panama for example, and as such the Panama government would not co-operate with an MLAT requests under those circumstances.

To open an offshore bank account you need to visit the country in question -- This is a falsehood. We open bank accounts regularly for our clients without ever seeing them. Everything is done by fedex, phone and fax.

Offshore banking has been destroyed by the MLAT treaty -- If you are engaging in serious criminal activity this statement is true. For most people just trying to protect their assets this statement is totally false. In fact, countries like Panama, only comply in serious criminal cases, and deny many requests. The requesting country has to show that they already have strong evidence that a crime has taken place AND the activity in question has to be a crime in Panama too. So tax evasion, for example, is not a crime in Panama and so Panama would not entertain MLAT requests for information relating to tax evasion.

Tax treaties now allow most governments to share information freely -- Sadly this is true for many countries, but it is not true of serious offshore jurisdictions like Panama. Panama has NO TAX TREATIES WITH ANYONE!

Its hard to manage a bank account offshore secretly. -- Today all the major banks allow you to do your banking online using encrypted communications. Offshore banks are no exception. Online banking is a common feature of an offshore bank account. In fact, you can even send a bank wire using your offshore bank account. This is a service many onshore banks don't have.

Offshore banking won't protect me in a lawsuit because the court will order that I bring the funds back. -- If you setup your asset protection plan before you get sued you are well protected. Once you donate your money to an offshore foundation, for example, they money is not legally yours to get back. The judge cannot order anything illegal. If legal proceedings are already under way and you move the funds you might be charged with fraudulent conveyance. There are ways to avoid this, but it is beyond the scope of this article.

Someone will be able to track the money to its offshore destination -- It is true that if you send a wire to an offshore bank there will be a trail. This is avoided by first wiring the money to another offshore bank usually in another offshore haven. For example, the money is wired to a bank account located in Belize and then wired again from Belize to Panama. Now someone would have to break Belize bank secrecy to even know what country the money is now in. This is very strong security.

Offshore bank accounts can be used to do all the same activities as an onshore account -- This is almost true. The only exception is online bill payment. This popular feature doesn't make sense offshore and to my knowledge no offshore banks offer it. Typically, the money held offshore is not used onshore anyway. Having said that, most offshore banking clients have a bank card that allows them to withdraw funds anywhere in the world. The card only leads back to the corporation which owns the bank account (and would require breaking bank secrecy even to find that out). The corporation is usually a bearer share corporation which means that its ownership is anonymous anyway.

It is illegal to use an offshore bank account -- There is no doubt that you could use an offshore bank account to do something illegal, but opening up an offshore company and bank account is 100% legal. In fact many fortune 500 companies keep much of their assets safe in offshore