Posted on: 14 January, 2002
Author: Nicholas Pullen and Henry Morgan
There are more offshore banking havens than you can shake astick at. Nicholas Pullen tells you how to separate thewheat from the chaff, and make sure the haven you choose isreally a ... for you There are more offshore banking havens than you can shake astick at. Nicholas Pullen tells you how to separate thewheat from the chaff, and make sure the haven you choose isreally a safe-house for your money.There are definite and strong advantages to placing some ofyour hard-earned money in offshore bank accounts:First of all you get protection against your government.Nobody knows what a government will do next, anything ispossible. But, unlike funds held in your home country,wealth stashed offshore is greatly protected against anynegative actions your government might take, or legislationit might introduce, tomorrow.Secondly, you get protection from predators and parasites.Offshore wealth is shielded from the attentions of assethunters. Avaricious litigants, thieves, fraudsters, conmen,blackmailers (disgruntled ex-business partners and ex-spouses) who all seek to pinpoint, target and eventuallyattack individuals with visible wealth. These sharks haveweapons at their disposal, and they use them. They routinelyrun asset searches to identify just who has what worthtargeting. But offshore assets are safe. Asset searcheswon't uncover offshore assets, these remain totallyinvisible and safe from attack.Thirdly, with an offshore bank account you are insuredagainst the unknown events tomorrow might hold. You neverknow when you might be mighty glad of offshore cashreserves. If circumstances at home make it impossible orunwise for you to stay, or impossible to access yourdomestic funds, your offshore funds provide you with afinancial lifeboat."Not all banking havens are suitable, safe, or secure."Finally, you can rest secure in the knowledge that you havea secret nest-egg. You can build and grow a private stash ofcash beyond the gaze of anybody in your home country.The first thing you need do, to enjoy the benefits of anoffshore bank account, is to select a good offshore bankinghaven where you can open your accounts. This is easier saidthan achieved. You aren't short of choice, from the Bahamasto Vanuatu, Cyprus to the British Virgin Islands,Switzerland to the Cayman Islands. Countries the world overare in the market for, and only too happy to accept, asmuch foreign capital as they can get their hands on.However, you must bear in mind that not all banking havensare suitable, safe, or secure. Some are excellent. Othersare ticking time bombs. If you open an account in the wrongcountry, it can prove very costly in more ways than one.What you need to do is to find out how particular bankinghavens measure up before you lodge any of your cash orassets there. This will require you to perform some researchand investigation. This is well worth doing, and thoroughly.Mistakes avoided at this early stage save time, trouble andmoney further down the road.I suggest you measure the quality of any haven whichinterests you by subjecting it to my Ten-Point SuitabilityTest. Satisfy yourself on all points crucial to yourparticular requirements.1. Location, Location, Location?Where is the haven located? Do you want to visit your cashregularly? If so, is it convenient or practical to have itstashed in a banking haven thousands of miles away fromwhere you live?Can you access your haven by air - directly or indirectly?Is it a problem getting entry to your haven? Will you needto queue for an entry visa every time you want to visit?Also, be aware that making regular, visible (visa recordsare a paper trail) trips to a known banking haven is likewaving a red flag at any government snoop who might betaking an interest in your affairs and movements.Give some consideration to time differences. Can you manageyour financial affairs efficiently if it's midnight in yourhaven during business hours at home? Are you happy to waitup until the early hours to speak to financial managers?2. Do You Speak The Language?Effective, smooth-running financial management depends onfluent communication. Do bankers and professionals in yourhaven speak English or some other language with which you'refamiliar? You may need to discuss complex financial mattersin technical detail. It could cost you dear if things areconfused or compromised by language barriers.3. How Easy Is It To Stay In Touch?Are there sufficient and reliable telephone and fax lines?Are email facilities available? Is airmail deliveredquickly? How efficient is surface mail delivery?If your banking haven is deficient in these areas, it maybecome difficult to maintain regular and instant contactwith your advisors and account managers. Is this acceptable?4. Is The Tax Situation Right For You?Ensure your haven provides the exact tax treatment you need.Mistakes can prove expensive. Some havens imposewithholding tax" on foreign-held bank accounts. Are yousatisfied that this is fair exchange for the benefits youraccount will deliver.5. How About The Legal System?Are the laws in your prospective haven based on Englishcommon law? Is the judiciary of a high standard? Is itindependent? Is the Court system effective? Are there rulesto resolve conflicts of law? Are the banking regulationsstiff? Or is there ample opportunity for a fly-by-nightmerchant to slip through the nets?Are banking services registered with regulatoryorganisations that uphold professional standards andprocedures?Satisfy yourself that the haven has local laws and legalpractices which provide adequate protection of your fundsand investor rights.6. Is Your Haven Financially Stable?Check your prospective haven's financial stability, bycalculating what percentage of its Gross Domestic Product isrepresented by foreign aid. Foreign aid is as high as 70% ofGross Domestic Product in some havens. The Cook Islands,Nauru and Vanuatu being recent examples of this.A haven's confidence in its liquidity can be judged, atleast to some degree, by its willingness to put in placesolid depositor protection. Enquire of financialinstitutions in the haven whether or not depositorprotection exists.7. Is The Haven Free Of Trouble? Will It Stay That Way?Does the haven have a trouble-free history and a secureculture? A country which has experienced only moderatepolitical, economic and social change, and where politicaland social violence is uncommon, is a trouble-free country.A stable past is a good predictor of a stable future.On the other hand, countries with a history of civil war,military coups and civil unrest are definitely not right forbanking purposes. Cash held in a banana republic is high-risk. Future flash points in volatile regions can renderyour cash lost or worthless.Look at the human rights record of the haven's government. Agovernment with high regard for its domestic population islikely to regard you equally highly. A government whichtreats citizens like cattle to be reared, milked andslaughtered is likely to come to view you in the same casualmanner. In such a climate private wealth may suddenly becomegovernment property.Check if there's a strong socialist political faction in thehaven. Overtly socialist governments can't be trusted tolook after your nest-egg. Political upheaval, newideologies and attendant legislation can change a haven'sattractiveness overnight. Ensure there's little likelihoodof an ultra left-wing political party sliding into power inthe foreseeable future.Is the haven free from racial tensions and other socialproblems? These can trigger crisis which may affectdeposited funds.What about the prospect of foreign invasions and war? Theseare slight for an isolated country. But keep an eye on thetreatment your haven receives in the international press.Areas and regions seldom become hot spots overnight. Look atrecent political developments and events in the haven toestablish if there is any potential trouble."A stable past is a good predictor of a stable future."Consider local attitudes. Is there wide local support forthe financial services and banking industries? Does thelocal population appreciate that international bankingoperations are effectively supporting the country's economy?Or does the presence of foreign capital breed resentment?Is there a foreign-bashing agenda?Be sure to keep abreast of events and the socio-politicalclimate in your haven. Subscribe to newsletters coveringsuch developments. Read the local press. The writing isoften, literally, on local walls in the form of graffiti,for months before anything actually happens which mightaffect your bank accounts.8. Does Your Haven Provide A Back Door For Your Government?Make sure your banking haven doesn't provide your governmentwith a back door into your accounts. For example, sometraditional tax havens are existing or former Britishcolonies, such as Bermuda, Cayman Islands, the ChannelIslands, and the UK government is exerting pressure onauthorities there to release information relating to UKaccount holders.British citizens should find out if their prospectivebanking haven has tax treaties in place with the UK. If so,be aware that the treaty allows for the free sharing ofinformation between the authorities in the two countries.9. Does It Offer Enough Freedom For Capital?Are you free to take money in and out of the haven? If thereare severe restrictions, the haven is no use to you. Even ifthere are no exchange controls in operation now, check thatthe haven doesn't have a history of exchange controls. Youdon't want your cash trapped in a country which iseffectively stemming flight capital.Make sure you have adequate guarantees that you'll be ableto do what you need to before opening accounts in the haven.For example, are there restrictions on converting foreigncurrency into local currency and visa versa? Are reportsfiled on each occasion? Ask financial institutions inthe haven.10. Does The Haven Offer Sufficient Privacy?Seek out banking havens which recognise and actively promotesolid banking privacy. Many havens claim to do so only on aninformal basis. Under pressure bank managers and financialadvisors may sacrifice you to the sharks. Does your haven,and/or the institutions operating there, have a history ofrolling over when exposed to external pressures?Check whether banking privacy is tradition or actual bindinglegislation. Check whether a professional in a particularhaven is breaking the law if he passes data relating to youand your financial affairs to a third party. Be aware that"confidentiality" laws allow local government access to youraccount details (although they can't pass the data on to athird party).Solid banking privacy legislation is the best protection foryour cash. A strong, secure haven will have banking privacylegislation which carries stiff penalties (financial andcustodial) for any professional who breaches them and passesdata on to third parties.Beginning Your ResearchA very good place on the Internet to begin yourinvestigations of suitable tax havens ishttp://www.escapeartist.com axhavens axhavens.htm.The Offshore Journal is a useful e-publication whichfrequently reports on relevant events and changes in bankinghavens around the world. Subscriptions cost £15 per year.Subscribe at http://www.rpifs.com. Source: Free Articles from ArticlesFactory.com