What Are Offshore Banking Accounts?

Offshore Banking Accounts refer to opening an account in one of the many banking or investment institutions in another country or jurisdiction. Any bank can be considered an offshore bank if it is located in a low-regulation, low-taxation, haven, jurisdictions.

Since they began, offshore banks have had a bad reputation. They have been accused of being involved in everything from tax evasion, to money laundering. The careful examination of where illicit funds are really held shows the truth of the situation. Other false accusations about offshore banks are-unsafe environments and poor regulation are untrue. Most Offshore Bank account jurisdictions are very sophisticated, with stable banking regulations. It is in their best interest to attract depositors. The regulations are bent toward meeting the needs of a depositor.

One of the benefits of having an offshore banking account is the fact that they are usually located in tax havens that provide great asset protection and confidentiality to the bank holder. This often allows for relaxed restrictions with regard to the types of accounts available to depositors and investors, there is generally a decreased tax liability. Offshore banks can be located in actual island states like, the Caymans or Channel Islands, or landlocked countries such as Switzerland. It is not imperative that the land is surrounded by water.

There are still a number of misconceptions associated with offshore banking accounts, but as a would be offshore bank account owner, you will need to take many of these statements with a grain of salt. You should also do a bit of homework on any offshore bank you are thinking of opening an account in. Most offshore banking accounts offer a confidential and secure environments. While there are a few offshore jurisdictions that do a poor job of managing and regulating their banking institutions, if you are informed you will know these offshore banks are unsuitable for you.

Europeans have always been subject to heavy tax burdens. In the British Isles, as well as on the continent, they were faced with the burden of huge tax bills. The solution came when the small, island nation known as the Channel Islands convinced the European depositors that opening a banking account in their banks would make their deposits free from the heavy handed taxation. The European taxpayers agreed and soon the idea of offshore banking accounts became quite popular. Other jurisdictions became aware of this idea and they began changing their banking institutions, adopting banking rules and regulations that eased the concerns of investors and depositors. This was the start of the offshore bank.

Soon Offshore banking institutions were started in smaller, haven jurisdictions that offered safe, secure, practical and confidential banking regulations. Soon the rest of the world got the word and began looking into these havens as solutions to their banking needs. Unlike conventional banks, are not subjected to economic or political strife. In the past few years they have a greater use and more visibility, it has become widely known that offshore banks can be havens for funds and assets in need of secure, safe, confidential keeping.

Offshore Debit Cards and Offshore Bank Accounts

The global financial crisis has gravely hurt the financial status of all governments around the world. As a result, governments have put far more effort to having control over their finances. And with the governments intensified efforts, those who before were able to hide the money they got from activities outside of their normal system are now having difficulty keeping their funds out of the governments knowledge. These people are now facing the risks of large penalties and huge taxes.


With their hidden bank accounts in danger of being found and subsequently frozen, people are now desperate on finding more secure ways to hide their money. As anxiety was taking its toll, the Panama laws have provided more opportunities for keeping money undetected. The Panama laws state that money kept in foreign lands are safe from being frozen and are kept confidential from government knowledge. And so hiding money offshore to remove any risk of it being frozen and at the same time avoid bulky taxes has now become the new trend.


An offshore bank account is a bank account at a foreign bank. As the offshore bank is located beyond the sovereignty of the offshore bank depositors home government, it is completely safe of state meddling and intervention. The offshore bank accounts functions the same way as a local bank account, though there are some who do not offer interests. These interests however, are immaterial compared to the tax savings the offshore depositor will benefit from keeping his money out of his governments knowledge.


The downsides of keeping money at an offshore bank account are the difficulties and costs of managing its funds. Such problems however, can be solved by simply getting an offshore debit card. The offshore debit card will serve as the key to allow you to open your bank account at almost any ATM outlet all over the world. There are even those offshore debit cards that allow you to keep track of your account through your mobile phone.


The offshore debit card has already replaced the credit card as the number one in the electronic payment system. The offshore debit card offers almost all the benefits a credit card has to offer, with minimal costs. The offshore debit card does not have high monthly charges or high interest rates. Offshore debit cards also do not encourage extravagant spending as unlike credit cards, they do not allow the cardholder to spend money that he does not have. Unlike credit cards in which all spending is charged to the card provider to be later paid by the cardholder with interests, offshore debit cards charge the spending to the cardholders own offshore bank account. The limit of what the holder can spend with his offshore debit card is the balance of his offshore bank account.


At the cardholders choice, the debit card may be named under the holders company, the card providers company or simply a number code, thus providing utmost protection against identity theft and fraudulent use of the offshore debit card. Applying for an offshore debit card is also very quick, easy and less costly, as screening procedures are not that tight.

Are You Looking For A Secret Numbered Bank Account?

For many, numbered accounts are shrouded in mystique. What could be more exciting that having an associate wire money direct to your secret Swiss numbered bank account?

 Get greeted by your personal banker (although he doesn't know your name), be guided past nuclear security systems like the President himself into the vault, where a numbered box lies waiting for you, filled to the brim with fresh pressed notes.

It's a dream, and one we can all indulge in for a moment, but how does it work in the real world?

Until quite recently it was still possible to get your own ''numbered account'', and if you had opened one up in the 1950's, you would still be the proud owner of such an anonymous bank account.

Swiss banks used to offer anonymous bank accounts, numbered bank accounts or even the legendary 'sparbuch' savings account, where the owner of a secret passbook was identified as account holder. These would be protected by razor sharp Swiss bank secrecy, and perhaps slotted in to a larger asset protection structure which included offshore companies with bearer shares, trusts and nominee directors.

Times have changed. Governments have grown ever more aggressive in the collection of taxes since the 1970's heyday of offshore banking, and wizened up to the tax avoidance methods promoted by offshore service providers and asset protection specialists.

Part of their campaign against tax havens has been to associate bank secrecy and secret numbered accounts with money laundering. This concept was cemented in government ideology after the 9/11 attacks after which governments could claim that secret bank accounts were used not only by drug lords but terrorists too. Following creative logic they could then claim that all offshore money was 'soiled' by criminal hands and would not be 'cleansed' again until in the hands of the Government.

In 2004 Switzerland was forced to introduce new money laundering regulations which spelled the end of the numbered account, obliging all account holders to be properly identified.

Now numbered accounts still exist, but only if the bank knows exactly who the account holder is.

Do you still want a secret numbered account?

Although the Swiss numbered account as we know it has officially gone, you can still get an alternative much cheaper which protects your privacy in the same way.

For example you can use a trust company to open a secret account for you at a bank in a safe and private jurisdiction in their name, denominated with your own special reference number. All transactions will show only a number and the name of the trust company. The bank doesn't know who you are.

Interesting...?

Offshore Tax Haven Privacy Update

What the Financial Times of London calls "a cascade of concessions on tax secrecy by some of the world’s leading private wealth centers" is being hailed by some as "a breakthrough in a decade-long international assault on tax evasion."

To some degree that may be true, since the pursuit of specific tax evaders by foreign countries will be made easier by greater co-operation from Switzerland, Austria, Luxembourg, Hong Kong, Singapore, Liechtenstein, Andorra and others.

In recent days each of these leading offshore jurisdictions has bowed to pressure, announcing that they will adopt international standards on tax information exchange, although they insist they will continue to protect investors’ privacy under their own laws.

Tax Havens For Bailout Recipients

A new Government Accountability Office (GAO) report shows that many of the largest companies receiving bailout billions have set up hundreds of off-shore tax shelters to avoid paying taxes. Major scofflaws include Citigroup, Morgan Stanley, AIG, and Bank of America.
A majority of America's largest publicly traded companies and the U.S. government's largest federal contractors -- including some receiving millions in federal bailout money -- use multiple subsidiaries in offshore tax havens to conduct business and avoid paying U.S. taxes, a new report finds.

The new Government Accountability Office (GAO) report, released today by Sens. Byron L. Dorgan (D-N.D.) and Carl M. Levin (D-Mich.), lists Citigroup and Morgan Stanley as having set up hundreds of tax haven subsidiaries, along with American International Group and Bank of America. Also in the tax-haven list are well-known companies and such federal contractors as American Express, Pepsi and Caterpillar.

GAO, searching publicly available data filed with the Securities and Exchange Commission, determined that 83 of the 100 largest publicly traded corporations and 63 of the 100 largest federal contractors maintain tax havens in 50 subsidiaries. Dorgan and Levin said they requested the updated report from one several years ago because they are focused on combating offshore tax abuses, which they estimated cause $100 billion in lost U.S. tax revenue each year.

"This report shows that some of our country's largest companies and federal contractors, many of which are household names, continue to use offshore tax havens to avoid paying their fair share of taxes to the U.S. And, some of those companies have even received emergency economic funds from the government," Dorgan said. "I think we should take action to shut down these tax dodgers, and we will be introducing legislation to do just that."

To illustrate the problem, Levin said the report found that Citigroup has set up 427 tax haven subsidiaries to conduct its business, including 91 in Luxembourg, 90 in the Cayman Islands and 35 in the British Virgin Islands. He said other havens include Switzerland, Hong Kong, Panama and Mauritius.

Why Multi-National Corporations are Choosing Panama

Corporations are always searching for great opportunities. Panama has been a great opportunity for decades; global Fortune 500 companies - Coca Cola, Sony, HSBC, Nestlé, Roche - all know this. Where they go, others follow. Foreign investment capital inflow continues as potential becomes reality, and reality becomes profit.

The Republic of Panama stands apart from other Latin American countries. The Economic Liberty Index for 2007 ranks Panama 47th of 157 countries. A major consideration in making the choice to do business in Panama is quality of life. Panama City is cosmopolitan and offers excellent living conditions. Office, commercial, industrial and housing spaces are available, as are skilled, multilingual employees.

Some of the key attributes of Panama are: a stable government; a dollar-based economy, without currency exchange restrictions; the Canal and the Colon Free Trade Zone; an international financial center with a well-developed infrastructure including a top notch telecommunications system; an excellent legal framework that allows 100% foreign owned investments; a strategic location with access to the entire western hemisphere.

The U.S. - Panama Free Trade Agreement (2007) passed the Panamanian legislature and is awaiting U.S. approval. Its purpose is to provide legal security for business, trade and investments between both countries, and increase opportunities available to investors from the United States. Law 41 (2007), based on successful models in Switzerland and Singapore, was passed with the intent to ensure that Panama becomes an attractive center for multinational firms. Benefits given to multinational companies establishing their headquarters in Panama include tax exemptions, and special labor and migration status, with simplified and streamlined visa, residence and work permit requirements. There are already special considerations for industrial parks, call centers, and ecommerce to facilitate trade and investment.

Income tax laws permit taxation only on income generated from trade entirely within Panama. Foreign source income, generated outside Panama, is 100% exempted. Income from the following activities is not considered domestic activity within the territory of the Republic of Panama, and is specifically exempted from taxation:

-Invoicing, from an office established in Panama.

-The resale of merchandise or products for an amount greater than had previously been invoiced against the office in Panama, provided the goods transit solely outside Panama.

-Directing transactions that are executed, completed, or effected outside Panama.

-Distributing dividends or participations from the tax exempt activities.

A corporate regional headquarters with offices and employees based in Panama does not pay any income tax, if the office merely directs operations from Panama; that is, it performs only international operations from Panamanian territory.

For manufacturing or assembly operations, the existing law for Export Processing Zones designates them as 100% tax-free areas. Both the developer and the export item will be 100% exempted from national direct and indirect taxes, duties, levies, right and charges.

It is plain to see that there are tremendous benefits to doing business in Panama.

How to Start an Offshore Fund

Starting an Offshore Fund has its complexities.  If you are a super trader with an impressive track record, it is likely that you will be seeking to enter the international investment fund arena for the first time, with a 'seed capital' of between US$500K to US$1 million.  This requires starting a private fund, preferably offshore. To start an Offshore Fund, you need to know the types of specialist services that are available:

INITIAL FUND START UP SERVICES

- Incorporation of an Offshore Company

- Preparation of Private Offering Memorandum (Prospectus), Shareholders' Agreement and Share Subscription Agreement.

- Facilitation of Offshore Administration services, Private Offering Memorandum (Prospectus), and Subscription documentation.

- Preparation of investor documentation and letters.

-Vendor Due Diligence documentation

FUND ADMINISTRATION SERVICES

- Providing the Offshore Fund a management office and non investment manager-trader operations personnel (if required)

- Due diligence checks on the Investor under the Anti-Money Laundering (AML) regulations.

- Risk Management and Data Recovery services.

INVESTOR MANAGEMENT SERVICES

- Provide prospective investors with memorandum, shareholders' agreement, and other necessary materials

- Managing subscription documents

- Processing and notifying an investment manager and a general partner for subscriptions, capital contributions and withdrawals

- Distributing financial reports, mailings and electronic communications

- Responding to investor inquiries.

ACCOUNTING SERVICES

- Calculation of monthly capital account balances on an economic and tax basis.

- Calculation of management fees and performance allocation.

- Preparation of monthly financial statements.

- Calculation of fees due sales agent.

- Interaction with investment managers and traders, banks, counsel and auditors.

- Facilitate and manage the preparation of financial statements and year end audit.

- Facilitate and manage tax preparation, planning and consulting.

PROCEDURE FOR RECOGNITION OF A BVI INVESTMENT FUND 

THE PROCESS, THE SERVICES & START UP COSTS

REGULATION UNDER THE BVI MUTUAL FUNDS ACT,1996 (BVI MFA)
The BVI MFA defines a mutual fund as a company, partnership or unit trust which:
a. collects and pools funds for the purpose of collective investment; and
b. issues shares (or similar interests) that entitle the holder to receive on demand or within a specified period after demand an amount computed by reference to the value of a proportionate interest in the whole or part of the net assets of the company, partnership or unit trust.

The BVI MFA does not cover funds with only one investor (where that investor is a mutual fund that is regulated by the BVI MFA); or closed-ended funds (because the investors do not have the right to receive the NAV of their interest on demand).

The BVI MFA distinguishes between two types of non-public funds:

PRIVATE FUND - constitutional documents specify that either it will have no more than 50 investors or that an invitation to subscribe for interests is to be made "on a private basis".

PROFESSIONAL FUND
- the initial investment in which, in respect of the majority of the investors, is not less than US$100,000

THE PROCESS
1.  Formation of a BVI Company with a customized Memorandum and Articles of Association (M&AA).

2. Decide on the contents for the Offer Memorandum or Prospectus.

3. Decide on the Fund Manager, Company Administrator, Auditors (KPMG) and Bankers (Barclays International)

4. Prepare the fund's constitutional documents to reflect the terms of the offering. In other words, the Offering Memorandum.

5. Prepare the service agreements

6. Prepare the form of subscription agreement, which must include appropriate representations on the status of the fund (whether it is a private fund or a professional fund).

7. Approve the fund documents.

8. Submit the following documents to the BVI FINANCIAL SERVICES COMMISSION(FSC):

i. a certified copy of the fund's Certificate of Incorporation;
ii. a certified copy of the fund's constitutional documents'
iii. a copy of the fund's subscription agreement;
iv. an application form for recognition;
v. a statutory notice detailing the address of the fund, its registered agent in the BVI and the fund's business address.

When all the above criteria is satisfied, the Certificate of Recognition (labeled as either a private or professional fund) will typically be issued within a week following submission of these documents to the BVI FSC.

The BVI MFA does not require a recognized fund to have an offering memorandum.

STRUCTURING A BVI OFFSHORE FUND 

It is worthwhile to consider the following structure:

1. An 'open-ended' investment fund, which enables the fund to receive subscriptions on a regular basis. Therefore, you need to have month-end valuations, which will enable the fund to receive subscriptions monthly;

2. An independent administrator carries out the valuations, and accountants from an established firm (such as KPMG) audit the fund.

3. BVI is a tax-free jurisdiction for 'non-resident' investment funds. Although the profits of the fund are not taxable in offshore bank accounts in the BVI, individual investors may be taxed on their investment in the fund when the profits are being credited to a bank account in their home country. Some countries tax on worldwide income and the investors are obligated to declare all of their income sources.

4. BVI adopts very strict confidentiality laws, and so investor details are not open to public scrutiny.

ONGOING REQUIREMENTS OF A BVI RECOGNIZED FUND 

An investment fund which can be recognized as a private or professional fund must:

- Notify the BVI FSC of any changes to the statutory notice with regard to the address of the fund, its registered agent in the BVI, and the fund's business address within 21 days.

- Pay an annual fee of US$350 in which the fund is registered prior to June 30. It will be USD175 if the fund is registered after that date.

Even though a private or professional fund is not required to file audited accounts, the BVI FSC is empowered to require access to the information and records of the fund in order to ascertain compliance to the BVI MFA (Mutual Funds Act,1996).