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OFFSHORE BANKING IS NOT EVIL
by
J. F. (Jim) Straw
If it weren't for the lies, distortions, and self-serving propaganda distributed by the
Government, the I.R.S., and the Bankers, you wouldn't cringe every time you hear the
term :"Offshore Banking."
Why? - Because most people haven't the foggiest idea of what Offshore Banking is,
they simply accept the distortions they read in the controlled media and ASSUME that
Offshore Banking is some form of criminal activity. Or, they ask their lawyer,
accountant or financial planner and he, being as uninformed as they are, advises that it
is too risky, illegal, immoral, or unethical.
The fear and suspicion surrounding Offshore Banking is really only a matter of "Lack
of Knowledge & Information". Very few people, including both those who condemn it
and those who promote it, really KNOW what offshore banking is. BUT, the
Government, the I.R.S., and the Bankers do know that money held outside the U.S. is
money they cannot legally control, tax, or use for their purposes. That's why they are
adamant in their defamation and condemnation. They don't know what it is, but they
know it takes money out of their hands.
Unfortunately, those who promote offshore banking have done little, or nothing, to
alleviate or satisfy the fears and suspicions of the public. As a matter of fact, because
they themselves do not know what offshore banking really is, these promoters have
given the Government, the I.R.S., and the Bankers the ammunition needed to keep the
public in a state of fear and suspicion regarding offshore banking, investments, and
opportunities. Helping keep your money in U.S. banks; paying you less and taxing
what little you do earn.
So... before we go any further... lets define Offshore Banking. Then, unlike the
politicians, bureaucrats, bankers, and promoters, YOU will know what the term
means.
What is offshore banking?
The term "offshore banking" actually has TWO (2) different and very distinct
definitions; but, I couldn't find either one of them in any of my dictionaries. One
meaning is :"MECHANICAL" and the other is ":FUNCTIONAL".
Only by knowing both definitions and understanding the relationship, yet distinct
differences, between the two, will you be able to make a decision based on
KNOWLEDGE rather than ASSUMPTION.
Since the "Mechanical" and the "Functional" definitions of offshore banking have been
so intermingled and confused by almost everyone, it will be necessary to, first define
them separately and distinctly, and then explain why the confusion exists.
Mechanical Definition
In the "legal" community (lawyers, governments, etc.) the term Offshore Banking is: A
bank :licensed" to do business only outside the jurisdiction in which it is chartered
&licensed.
That means: A bank holding an offshore banking" license" may engage in most, some,
or all activities (including but not limited to checking, savings, loans, etc.) normally
carried on by any other bank -- but -- that bank CAN NOT offer or provide those
services to the "residents" of the jurisdiction in which the bank is chartered and
licensed.
An example: A bank, "licensed offshore," in the Bahamas may offer its banking
services to anyone outside of the Bahamas -- but -- that bank CAN NOT offer or
provide those services to the residents of the Bahamas.
Some jurisdictions allow offshore "licensed" banks to provide any and all services
normally provided by any other bank. Other jurisdictions (such as the United States)
limit an offshore "licensed" bank to providing some few specified services.
YES -- the United States, through the Federal Reserve Board, does authorize offshore
banking -- but -- so U.S. bankers can continue to defame and condemn offshore
banking, the Federal Reserve Board has decided to call the U.S. Offshore Banks by
the officious title, "International Banking Facilities (IBF)."
:"International Banking Facility" or "IBF" means a set of asset and liability accounts
segregated on the books and records of a depository institution, United States branch
or agency of a foreign bank, or an Edge Act or Agreement Corporation that includes
only international banking facility time deposits and international bank facility extensions
of credit. -- 12 C.F.R 204.8(a)(a) published at Fed. Reg. 32429 (1981).
The U.S. law, although it does not call itself offshore banking, contains the very
elements under which offshore banks are licensed in other jurisdictions -- i.e. the IBF
must be licensed as a bank; maintain a set of asset and liability accounts on the books;
and CAN NOT provide services to residents of the United States.
As you can see from the U.S. law authorizing IBF's offshore "licensed" banks are most
often (but not always) A BOOKKEEPING SYSTEM ONLY.
Offshore "licensed" banks, by and large, are BOOKKEEPING SYSTEMS ONLY.
For that reason, they have a very, very low overhead cost in doing their business. They
do not spend their depositors money on fancy buildings; redundant employee's wages;
or the expensive, non- productive accoutrements found in most U.S. banks. Therefore,
an offshore "licensed" bank is in a position to pay higher interest to its depositors by
virtue of the fact that less money is spent on fancy and expensive non-productive frills.
Because offshore licensed banks are, by and large, Bookkeeping Systems Only, they
keep and maintain their operational cash accounts in "checking accounts" with other
commercial banks. Checks drawn on the account are used by the offshore licensed
bank to pay its debts, make loans, invest, pay interest, or any other normal business
purpose.
The Bookkeeping System of an offshore licensed bank, which records the assets,
liabilities, income and expense of the bank, maintains the records of the bank's
depositors and allows the officers of the bank to make investments and loans from the
public deposits held. The yield from those investments and loans are the earnings of the
bank, which are used to pay the expenses of the bank and interest to the depositors
and the net operating profit to the bank are much, much higher than in a commercial
bank with all of its expensive, non-productive costs.
Functional Definition
To the "depositor public" at large, an Offshore Bank is: ANY BANK OUTSIDE THE
COUNTRY IN WHICH THE DEPOSITOR LIVES.
That means: Any bank outside the United States is an offshore bank, if you are a
resident of the United States.
An example: If a U.S. resident maintains an account of any kind in a bank in Canada;
that bank is an offshore bank for that account holder/depositor. And, the same holds
true for a Canadian having an account in a U.S. bank.
Any time you have money deposited in, or invested with, a bank in a country outside
of the country in which you live and work, you are "Banking Offshore," even if that
bank is just across the imaginary borderline between the U.S. and Canada.
Throughout this report, the terms "Offshore Bank" and "Offshore Banking" shall be
used for any bank or banking service that qualifies under the FUNCTIONAL
DEFINITION, -- at anytime we refer to a bank under the MECHANICAL
DEFINITION, it shall be referred to as an "Offshore Licensed Bank." Of course, any
bank situated in the country where you live and work shall be referred to as a
"Domestic Bank."
Why the confusion?
A Bank is a Bank is a Bank is a Bank -- whether that bank be a Domestic Bank, an
Offshore Bank, or an Offshore Licensed Bank.
No matter how a bank is structured, where it is licensed & chartered, or where it does
business, ALL BANKS use the same channels (exchanges, clearing houses, etc.) to
facilitate the movement of funds internationally and/or domestically. Therefore, since all
of the banks in the world are indirectly connected through their correspondent and
inter-bank relationships, there is no real confusion arising from the transacting of
banking business.
The confusion regarding Offshore Banking is only a matter of "legal jurisdiction," arising
from the fact that no country may impose its laws in another country without the
country's consent and cooperation.
Because of the wide variety of laws around the world, what is illegal in one country
may be entirely legal in another country. Any country can, through its various policing
agencies, investigate any person residing in their country for a violation of their laws.
That same country, however, has no legal right to investigate the activities of any
person in any other country without first obtaining the consent and cooperation of the
country in which the investigation is to be conducted. Even then, the investigation must
be conducted under the law of the country in which the investigation is to take place,
not under the laws of the country conducting the investigation.
As an example: The U.S. can not investigate anything in Canada, without the consent
and cooperation of the Canadian government, and the Canadian Government is totally
within its international rights to refuse to consent or cooperate in the investigation,
Further, countries will not (usually), without a specific treaty or agreement, assist
another country in enforcing or investigating a crime that is not a crime in their country.
As an example: income tax evasion is a crime in the U.S., however, in countries that do
not impose an income tax, income tax evasion is not a crime. Therefore, those
countries are not obligated (and usually don't) assist the U.S., or any other country, in
enforcing or investigation a tax law which does not exist in their own jurisdiction.
THEREIN lies the confusion -- Offshore Banks, and Offshore Licensed Banks,
located in countries that do not have income tax laws do not (usually) assist the U.S.
Internal Revenue Service in enforcing, or investigation violations of U.S. tax laws.
Therefore, without the consent and cooperation of those countries, the I.R.S. cannot
(in most cases) get information regarding financial transactions conducted in those
countries by Tax Evaders in the U.S.
Since the I.R.S. is the tax-collecting arm of the U.S. Government; upon which the
Government depends to collect moneys for its self-serving purposes, the Government
readily and willingly supports the I.R.S. in its condemnation of Offshore Banking. But,
why do the Bankers join in the condemnation?
The reason is simple. If you take your savings account out of a U.S. bank and place it,
offshore, in a bank in another country, the U.S. bank doesn't have your money to use
any more. To keep you from doing that, the Bankers jump on the bandwagon to
condemn Offshore Banking; even though a good many of them do have deposits from
other countries and do, therefore, benefit from Offshore Banking themselves. As long
as they can keep YOU confused, fearful and suspicious about Offshore Banking, they
have YOUR MONEY in their banks to use for this purpose.
Not Illegal
The U.S. DOES NOT and WILL NEVER have a law forbidding the taking of money
out of this country.
WHY? No country that depends upon international commerce for its existence can
write such a law without destroying its own economy. And, if you will notice, the U.S.
has consistently and continuously had an international trade deficit; which simply means
we "buy" more internationally than we "sell".
If the U.S. had a law forbidding or restricting the movement of U.S. Dollars outside
this country, we would have NO international trade. Companies overseas would not
be able to buy U.S. goods because they wouldn't have any U.S. dollars, and
companies in the U.S. would not be able to buy goods overseas, because the
companies in those countries wouldn't be able to accept U.S. dollars.
Therefore, you, as a resident of the U.S., may legally move your money anywhere in
the world you want. There is NO RESTRICTION on the amount you move, where
you move it, or how you move it.
The ONLY REQUIREMENT imposed upon you by the U.S. Government is that you
must "REPORT" any movement of cash or certain monetary instruments out of this
country of $5,000 or more.
If you've ever been on an international flight of the U.S., you can probably remember
being given a form to complete that asked you if you were carrying cash or bearer
form negotiable instruments over $10,000 in value. If you read the complete form, it
told you that it was NOT ILLEGAL to have the money with you, or to take it out of
the country, but it was illegal not to report it.
Reporting Requirements
How many times have you been told that, if you send a deposit of more than $10,000
to an offshore bank, you MUST report it to the Government?
THAT'S WRONG!
The law (P.L. 91-508, 31 USC 5316) requires ONLY the reporting of the
transportation of "currency or certain monetary instruments" in an amount exceeding
$10,000. That means:
You may move as much money as you want offshore, at any time, WITHOUT
REPORTING IT TO ANYONE, as long as you don't send "currency or certain
monetary instruments.:"
You probably know what "currency" is, but what are the "certain monetary
instruments" referred to in the law? Both "currency" and the "certain monetary
instruments" are defined at law 1 CFR 103.11, as amended), and those definitions are
repeated here:
CURRENCY:
The coin and currency of the United States or of any other country,
which circulate in and are customarily used and accepted as money in the
country in which issued. It includes U.S. silver certificates, U.S. notes and
Federal Reserve notes, but does not include bank checks or other
negotiable instruments no customarily accepted as money.
MONETARY INSTRUMENTS:
Coin or currency of the United States or of any other country, travelers'
checks, money orders, investment securities in bearer form or otherwise
in such form that title thereto passes upon delivery, and negotiable
instruments (except warehouse receipts or bills of lading) in bearer form
or otherwise in such form that title thereto passes upon delivery. The term
includes bank checks, travelers checks and money orders which are
signed but o which the name of the payee has been omitted, but does not
include bank checks, travelers' check or money orders made payable to
the order of a named person which have not been endorsed or which
bear restrictive endorsements.
If you will notice, the last phrase of the definition of "Monetary Instruments": clearly
states, "does not include bank checks, travelers' checks or money orders made
payable to the order of a named person which have not been endorsed or which bear
restrictive endorsements."
(By the way, a "person" under the law includes any individual such as you or me, and
any legal entity such as a corporation or bank.)
So,,, if you make a check or money order payable to an offshore bank (which is a
"person" under the law), even if it is for over $10,000, you DO NOT have to "report"
the transaction to anyone.
Or... if you have a check or money order which is payable to you, you can endorse it
with a restrictive endorsement -- i.e., "Pay To The Order Of: XYZ Bank" -- and you
DO NOT have to report the transaction to anyone.
By the way, the U.S. Customs Service has published a circular (Circular:
ENF-4-$:E:P) for its employees which clearly defines and illustrates (with drawings
and pictures) exactly which monetary instruments must be reported and which ones are
"exempt" from reporting requirements.
Although you DO NOT have to report your transactions to anyone -- no matter how
much money you send for deposit offshore unless you send "currency" or the "certain
monetary instruments") - - you will still have to file a "Report of Foreign Bank and
Financial Accounts". (Treasury Form 90.22.1) on or before June 30 each year -- but
-- if you have 25 or more foreign accounts, you won't have to report where those
accounts are or how much money you have in each account; unless the Department of
Treasury specifically asks you for that information at a later date.
Using An Offshore Account Legally
Anyone who holds a Checking or Savings Account in a U.S. Bank may, legally, move
that account to any other bank, anywhere in the world (offshore).
If you have a Savings Account in a U.S. Bank, the odds are that you have already paid
your income tax on that money; before putting it in your Savings Account. Therefore,
your only further tax obligation on that money is to pay the income tax on the interest
you earn.
As an example: If you are a tax-paying, law-abiding person, and have saved $100
from your paycheck, you have already paid the taxes on your income. The $100 is
your after-tax money, therefore you don't pay taxes on it again. At the end of the year,
when the bank sends you your Savings Account statement, you add your interest
earnings to your income tax statement and pay your taxes on that earned income.
The same thing holds true if you have your savings account in an offshore bank. At the
end of the year, when you get your statement, you simply add the amount of interest
earned to your income tax and pay the taxes on that earned income.
Higher Earnings
Statistically, Eurodollar (offshore) accounts pay at least 20%more than domestic U.S.
dollar accounts. You can prove it for yourself by simply comparing the current U.S.
T-Bill rate to the Euro-Dollar Bond rate; as published in the financial section of your
daily newspaper. The Euro- Dollar Bond rate is ALWAYS higher by at least 20% or
more.
Beyond that statistical difference, Offshore Banks can usually offer much higher interest
rates than their U.S. counterparts because one of the highest non-recoverable costs of
doing business in the U.S. is taxes (income, property, ad valorem, etc..), significantly
reducing the earnings available for distribution to their depositors and investors. Banks
operating in, or from, tax haven jurisdictions; not being burdened with those
non-recoverable tax costs, can offer their depositors a much higher return.
As a matter of fact, in some jurisdictions (outside the U.S.), banking establishments are
tax exempt on their earnings, or they are allowed certain exceptional write-downs of
earnings, in order to protect the bank's depositors.
With the huge drop in interest rates in the U.S., Offshore Banking opportunities have
become even more attractive. At this writing, interest rates offered in the Offshore
Banking community are as much as 2 to 4 times the interest rates available from U.S.
Banks. (And, some offshore investment opportunities are averaging as high as 6 to 8
times the interest earnings available from U.S. Banks.)
MYTHS & FACTS
MYTH: Offshore Banks can't really pay the high interest rates they offer because, if
banks could really pay those rates, U.S. banks would try to meet the competition and
do the same.
FACT: Take a closer look at the financial statements of any U.S. Bank. You will find
that their "gross" profits against public deposits can range from 25% to 40% -- but --
they have written laws to limit the amount of interest they can pay you on your deposit.
The U.S. banks put their earnings into unnecessary and non-productive accouterments,
while offshore banks do without the fancy buildings and unnecessary frills and share
their profits with their customers.
MYTH: Offshore Banks aren't regulated, so you run the risk of losing all your money.
FACT: Nothing could be further from the truth. Every country in the free world has
laws, rules and regulations governing banks and financial institutions. Those laws, rules,
and regulations, however, are far less restrictive than the "protectionist" U.S. banking
laws, rules, and regulations, allowing those banks greater latitude in earning much
greater profits for their depositors and investors.
MYTH: Offshore Banks are not insured by the F.D.I.C.
FACT: Some of them are but, thank God, not that many. If they are, they must comply
with the same protectionist banking rules and regulations as any other F.D.I.C. insured
bank. But, the vast majority of offshore banks are insured; one way or another.
Some countries have established depositor insurance programs similar to the F.D.I.C.
program, by which the banks in those countries have their deposits insured. Other
banks in other countries have their deposits insured by independent insurance
companies who, unlike the F.D.I.C., insure 100% of the banks deposits; not just those
under $100,000. (By the way, many banks in the U.S. are not F.D.I.C. insured, and
some of them insure their deposits with independent insurance companies.)
For the most part, offshore banks are "self-insured." That means those banks maintain
a liquidity factor equal to 100% (or more) of their public deposits. For every $1 held in
public deposits, those banks have $1 (or more) in liquid assets with which they can
cover any depositor demand.
Self-insured offshore banks are actually more secure than F.D.I.C. insured U.S.
banks. The reason being, F.D.I.C. insured U.S. banks are allowed to maintain a
liquidity factor equal to about 10% of their public deposits. (Ever wonder why they
U.S. has more bank failures each year than any other country?)
Which would you feel more secure dealing with? -- A. U.S. bank that has 10 cents in
cash for every dollar on deposit? Or, an offshore bank that has $1 in cash for every
dollar on deposit?
MYTH: Offshore Banks aren't as big or strong as U.S. banks.
FACT: Of the largest and strongest leading banks in the world (in assets), ONLY one
is located in the U.S.
The leading banks in the world, according to a survey done by American Banker,
were, in order:
Dai-Ichi Kangyo Bank - Tokyo
Fuji Bank Ltd. - Tokyo
Sumitomo Bank Ltd. - Osaka (Japan)
Mitsubishi Bank Ltd. - Tokyo
Citibank NA - New York, U.S.A.
Banque National de Paris - France
Credit Agricole Mutual - France
Sanwa Bank Ltd. - Osaka (Japan)
Credit Lyonnais - France
Norinchukin Bank - Tokyo
MYTH: Offshore Banks can't be too good, or they would advertise their interest rates
and services in the U.S. publications.
FACT: Offshore Banks are restricted by law from advertising in U.S. publications;
unless they subject themselves to the very same protectionist rules and regulations
imposed on U.S. banks. For that reason, you should be wary of any offshore bank
that publicly advertises in U.S. publications. They have sold-out to the U.S. banking
establishment and may subject you to their sell-out.
MYTH: Offshore Banking is only for people with a lot of money.
FACT: Some 20 years ago, that may have been true. Today, an offshore savings or
checking account can be opened with a minimum deposit as low as $100. I know of
one offshore bank paying 9%, compounded daily, on regular quarterly-statement
savings accounts with a minimum deposit of $100.
MYTH: Opening an offshore account is complex, and you can't get your money back
when you need it.
FACT: Opening an offshore account is no more complex than opening an account with
a money market fund (or ordering from the Sear's catalog), by mail. Getting your
money back is just as simple.
Opening An Offshore Account
There are organizations in the U.S. that will assist you in opening an offshore bank
account (in Switzerland and other countries). Their "fees" for helping you open an
account can range from a few hundred dollars to a thousand dollars (and, in some
cases, much more) -- BUT -- don't waste your money. You don't need them.
To open an offshore bank account, all you need to do is write to an offshore bank and
request information about opening an account. The bank will send you all of the
necessary forms; tell you what their minimum deposit requirements are for various
accounts; and their materials will explain how to open an account and how to make
your withdrawals.
Making a withdrawal from your offshore account is just as simple. Depending upon the
type of account you open, you write a check or draft to deposit in your U.S. bank
by
J. F. (Jim) Straw
If it weren't for the lies, distortions, and self-serving propaganda distributed by the
Government, the I.R.S., and the Bankers, you wouldn't cringe every time you hear the
term :"Offshore Banking."
Why? - Because most people haven't the foggiest idea of what Offshore Banking is,
they simply accept the distortions they read in the controlled media and ASSUME that
Offshore Banking is some form of criminal activity. Or, they ask their lawyer,
accountant or financial planner and he, being as uninformed as they are, advises that it
is too risky, illegal, immoral, or unethical.
The fear and suspicion surrounding Offshore Banking is really only a matter of "Lack
of Knowledge & Information". Very few people, including both those who condemn it
and those who promote it, really KNOW what offshore banking is. BUT, the
Government, the I.R.S., and the Bankers do know that money held outside the U.S. is
money they cannot legally control, tax, or use for their purposes. That's why they are
adamant in their defamation and condemnation. They don't know what it is, but they
know it takes money out of their hands.
Unfortunately, those who promote offshore banking have done little, or nothing, to
alleviate or satisfy the fears and suspicions of the public. As a matter of fact, because
they themselves do not know what offshore banking really is, these promoters have
given the Government, the I.R.S., and the Bankers the ammunition needed to keep the
public in a state of fear and suspicion regarding offshore banking, investments, and
opportunities. Helping keep your money in U.S. banks; paying you less and taxing
what little you do earn.
So... before we go any further... lets define Offshore Banking. Then, unlike the
politicians, bureaucrats, bankers, and promoters, YOU will know what the term
means.
What is offshore banking?
The term "offshore banking" actually has TWO (2) different and very distinct
definitions; but, I couldn't find either one of them in any of my dictionaries. One
meaning is :"MECHANICAL" and the other is ":FUNCTIONAL".
Only by knowing both definitions and understanding the relationship, yet distinct
differences, between the two, will you be able to make a decision based on
KNOWLEDGE rather than ASSUMPTION.
Since the "Mechanical" and the "Functional" definitions of offshore banking have been
so intermingled and confused by almost everyone, it will be necessary to, first define
them separately and distinctly, and then explain why the confusion exists.
Mechanical Definition
In the "legal" community (lawyers, governments, etc.) the term Offshore Banking is: A
bank :licensed" to do business only outside the jurisdiction in which it is chartered
&licensed.
That means: A bank holding an offshore banking" license" may engage in most, some,
or all activities (including but not limited to checking, savings, loans, etc.) normally
carried on by any other bank -- but -- that bank CAN NOT offer or provide those
services to the "residents" of the jurisdiction in which the bank is chartered and
licensed.
An example: A bank, "licensed offshore," in the Bahamas may offer its banking
services to anyone outside of the Bahamas -- but -- that bank CAN NOT offer or
provide those services to the residents of the Bahamas.
Some jurisdictions allow offshore "licensed" banks to provide any and all services
normally provided by any other bank. Other jurisdictions (such as the United States)
limit an offshore "licensed" bank to providing some few specified services.
YES -- the United States, through the Federal Reserve Board, does authorize offshore
banking -- but -- so U.S. bankers can continue to defame and condemn offshore
banking, the Federal Reserve Board has decided to call the U.S. Offshore Banks by
the officious title, "International Banking Facilities (IBF)."
:"International Banking Facility" or "IBF" means a set of asset and liability accounts
segregated on the books and records of a depository institution, United States branch
or agency of a foreign bank, or an Edge Act or Agreement Corporation that includes
only international banking facility time deposits and international bank facility extensions
of credit. -- 12 C.F.R 204.8(a)(a) published at Fed. Reg. 32429 (1981).
The U.S. law, although it does not call itself offshore banking, contains the very
elements under which offshore banks are licensed in other jurisdictions -- i.e. the IBF
must be licensed as a bank; maintain a set of asset and liability accounts on the books;
and CAN NOT provide services to residents of the United States.
As you can see from the U.S. law authorizing IBF's offshore "licensed" banks are most
often (but not always) A BOOKKEEPING SYSTEM ONLY.
Offshore "licensed" banks, by and large, are BOOKKEEPING SYSTEMS ONLY.
For that reason, they have a very, very low overhead cost in doing their business. They
do not spend their depositors money on fancy buildings; redundant employee's wages;
or the expensive, non- productive accoutrements found in most U.S. banks. Therefore,
an offshore "licensed" bank is in a position to pay higher interest to its depositors by
virtue of the fact that less money is spent on fancy and expensive non-productive frills.
Because offshore licensed banks are, by and large, Bookkeeping Systems Only, they
keep and maintain their operational cash accounts in "checking accounts" with other
commercial banks. Checks drawn on the account are used by the offshore licensed
bank to pay its debts, make loans, invest, pay interest, or any other normal business
purpose.
The Bookkeeping System of an offshore licensed bank, which records the assets,
liabilities, income and expense of the bank, maintains the records of the bank's
depositors and allows the officers of the bank to make investments and loans from the
public deposits held. The yield from those investments and loans are the earnings of the
bank, which are used to pay the expenses of the bank and interest to the depositors
and the net operating profit to the bank are much, much higher than in a commercial
bank with all of its expensive, non-productive costs.
Functional Definition
To the "depositor public" at large, an Offshore Bank is: ANY BANK OUTSIDE THE
COUNTRY IN WHICH THE DEPOSITOR LIVES.
That means: Any bank outside the United States is an offshore bank, if you are a
resident of the United States.
An example: If a U.S. resident maintains an account of any kind in a bank in Canada;
that bank is an offshore bank for that account holder/depositor. And, the same holds
true for a Canadian having an account in a U.S. bank.
Any time you have money deposited in, or invested with, a bank in a country outside
of the country in which you live and work, you are "Banking Offshore," even if that
bank is just across the imaginary borderline between the U.S. and Canada.
Throughout this report, the terms "Offshore Bank" and "Offshore Banking" shall be
used for any bank or banking service that qualifies under the FUNCTIONAL
DEFINITION, -- at anytime we refer to a bank under the MECHANICAL
DEFINITION, it shall be referred to as an "Offshore Licensed Bank." Of course, any
bank situated in the country where you live and work shall be referred to as a
"Domestic Bank."
Why the confusion?
A Bank is a Bank is a Bank is a Bank -- whether that bank be a Domestic Bank, an
Offshore Bank, or an Offshore Licensed Bank.
No matter how a bank is structured, where it is licensed & chartered, or where it does
business, ALL BANKS use the same channels (exchanges, clearing houses, etc.) to
facilitate the movement of funds internationally and/or domestically. Therefore, since all
of the banks in the world are indirectly connected through their correspondent and
inter-bank relationships, there is no real confusion arising from the transacting of
banking business.
The confusion regarding Offshore Banking is only a matter of "legal jurisdiction," arising
from the fact that no country may impose its laws in another country without the
country's consent and cooperation.
Because of the wide variety of laws around the world, what is illegal in one country
may be entirely legal in another country. Any country can, through its various policing
agencies, investigate any person residing in their country for a violation of their laws.
That same country, however, has no legal right to investigate the activities of any
person in any other country without first obtaining the consent and cooperation of the
country in which the investigation is to be conducted. Even then, the investigation must
be conducted under the law of the country in which the investigation is to take place,
not under the laws of the country conducting the investigation.
As an example: The U.S. can not investigate anything in Canada, without the consent
and cooperation of the Canadian government, and the Canadian Government is totally
within its international rights to refuse to consent or cooperate in the investigation,
Further, countries will not (usually), without a specific treaty or agreement, assist
another country in enforcing or investigating a crime that is not a crime in their country.
As an example: income tax evasion is a crime in the U.S., however, in countries that do
not impose an income tax, income tax evasion is not a crime. Therefore, those
countries are not obligated (and usually don't) assist the U.S., or any other country, in
enforcing or investigation a tax law which does not exist in their own jurisdiction.
THEREIN lies the confusion -- Offshore Banks, and Offshore Licensed Banks,
located in countries that do not have income tax laws do not (usually) assist the U.S.
Internal Revenue Service in enforcing, or investigation violations of U.S. tax laws.
Therefore, without the consent and cooperation of those countries, the I.R.S. cannot
(in most cases) get information regarding financial transactions conducted in those
countries by Tax Evaders in the U.S.
Since the I.R.S. is the tax-collecting arm of the U.S. Government; upon which the
Government depends to collect moneys for its self-serving purposes, the Government
readily and willingly supports the I.R.S. in its condemnation of Offshore Banking. But,
why do the Bankers join in the condemnation?
The reason is simple. If you take your savings account out of a U.S. bank and place it,
offshore, in a bank in another country, the U.S. bank doesn't have your money to use
any more. To keep you from doing that, the Bankers jump on the bandwagon to
condemn Offshore Banking; even though a good many of them do have deposits from
other countries and do, therefore, benefit from Offshore Banking themselves. As long
as they can keep YOU confused, fearful and suspicious about Offshore Banking, they
have YOUR MONEY in their banks to use for this purpose.
Not Illegal
The U.S. DOES NOT and WILL NEVER have a law forbidding the taking of money
out of this country.
WHY? No country that depends upon international commerce for its existence can
write such a law without destroying its own economy. And, if you will notice, the U.S.
has consistently and continuously had an international trade deficit; which simply means
we "buy" more internationally than we "sell".
If the U.S. had a law forbidding or restricting the movement of U.S. Dollars outside
this country, we would have NO international trade. Companies overseas would not
be able to buy U.S. goods because they wouldn't have any U.S. dollars, and
companies in the U.S. would not be able to buy goods overseas, because the
companies in those countries wouldn't be able to accept U.S. dollars.
Therefore, you, as a resident of the U.S., may legally move your money anywhere in
the world you want. There is NO RESTRICTION on the amount you move, where
you move it, or how you move it.
The ONLY REQUIREMENT imposed upon you by the U.S. Government is that you
must "REPORT" any movement of cash or certain monetary instruments out of this
country of $5,000 or more.
If you've ever been on an international flight of the U.S., you can probably remember
being given a form to complete that asked you if you were carrying cash or bearer
form negotiable instruments over $10,000 in value. If you read the complete form, it
told you that it was NOT ILLEGAL to have the money with you, or to take it out of
the country, but it was illegal not to report it.
Reporting Requirements
How many times have you been told that, if you send a deposit of more than $10,000
to an offshore bank, you MUST report it to the Government?
THAT'S WRONG!
The law (P.L. 91-508, 31 USC 5316) requires ONLY the reporting of the
transportation of "currency or certain monetary instruments" in an amount exceeding
$10,000. That means:
You may move as much money as you want offshore, at any time, WITHOUT
REPORTING IT TO ANYONE, as long as you don't send "currency or certain
monetary instruments.:"
You probably know what "currency" is, but what are the "certain monetary
instruments" referred to in the law? Both "currency" and the "certain monetary
instruments" are defined at law 1 CFR 103.11, as amended), and those definitions are
repeated here:
CURRENCY:
The coin and currency of the United States or of any other country,
which circulate in and are customarily used and accepted as money in the
country in which issued. It includes U.S. silver certificates, U.S. notes and
Federal Reserve notes, but does not include bank checks or other
negotiable instruments no customarily accepted as money.
MONETARY INSTRUMENTS:
Coin or currency of the United States or of any other country, travelers'
checks, money orders, investment securities in bearer form or otherwise
in such form that title thereto passes upon delivery, and negotiable
instruments (except warehouse receipts or bills of lading) in bearer form
or otherwise in such form that title thereto passes upon delivery. The term
includes bank checks, travelers checks and money orders which are
signed but o which the name of the payee has been omitted, but does not
include bank checks, travelers' check or money orders made payable to
the order of a named person which have not been endorsed or which
bear restrictive endorsements.
If you will notice, the last phrase of the definition of "Monetary Instruments": clearly
states, "does not include bank checks, travelers' checks or money orders made
payable to the order of a named person which have not been endorsed or which bear
restrictive endorsements."
(By the way, a "person" under the law includes any individual such as you or me, and
any legal entity such as a corporation or bank.)
So,,, if you make a check or money order payable to an offshore bank (which is a
"person" under the law), even if it is for over $10,000, you DO NOT have to "report"
the transaction to anyone.
Or... if you have a check or money order which is payable to you, you can endorse it
with a restrictive endorsement -- i.e., "Pay To The Order Of: XYZ Bank" -- and you
DO NOT have to report the transaction to anyone.
By the way, the U.S. Customs Service has published a circular (Circular:
ENF-4-$:E:P) for its employees which clearly defines and illustrates (with drawings
and pictures) exactly which monetary instruments must be reported and which ones are
"exempt" from reporting requirements.
Although you DO NOT have to report your transactions to anyone -- no matter how
much money you send for deposit offshore unless you send "currency" or the "certain
monetary instruments") - - you will still have to file a "Report of Foreign Bank and
Financial Accounts". (Treasury Form 90.22.1) on or before June 30 each year -- but
-- if you have 25 or more foreign accounts, you won't have to report where those
accounts are or how much money you have in each account; unless the Department of
Treasury specifically asks you for that information at a later date.
Using An Offshore Account Legally
Anyone who holds a Checking or Savings Account in a U.S. Bank may, legally, move
that account to any other bank, anywhere in the world (offshore).
If you have a Savings Account in a U.S. Bank, the odds are that you have already paid
your income tax on that money; before putting it in your Savings Account. Therefore,
your only further tax obligation on that money is to pay the income tax on the interest
you earn.
As an example: If you are a tax-paying, law-abiding person, and have saved $100
from your paycheck, you have already paid the taxes on your income. The $100 is
your after-tax money, therefore you don't pay taxes on it again. At the end of the year,
when the bank sends you your Savings Account statement, you add your interest
earnings to your income tax statement and pay your taxes on that earned income.
The same thing holds true if you have your savings account in an offshore bank. At the
end of the year, when you get your statement, you simply add the amount of interest
earned to your income tax and pay the taxes on that earned income.
Higher Earnings
Statistically, Eurodollar (offshore) accounts pay at least 20%more than domestic U.S.
dollar accounts. You can prove it for yourself by simply comparing the current U.S.
T-Bill rate to the Euro-Dollar Bond rate; as published in the financial section of your
daily newspaper. The Euro- Dollar Bond rate is ALWAYS higher by at least 20% or
more.
Beyond that statistical difference, Offshore Banks can usually offer much higher interest
rates than their U.S. counterparts because one of the highest non-recoverable costs of
doing business in the U.S. is taxes (income, property, ad valorem, etc..), significantly
reducing the earnings available for distribution to their depositors and investors. Banks
operating in, or from, tax haven jurisdictions; not being burdened with those
non-recoverable tax costs, can offer their depositors a much higher return.
As a matter of fact, in some jurisdictions (outside the U.S.), banking establishments are
tax exempt on their earnings, or they are allowed certain exceptional write-downs of
earnings, in order to protect the bank's depositors.
With the huge drop in interest rates in the U.S., Offshore Banking opportunities have
become even more attractive. At this writing, interest rates offered in the Offshore
Banking community are as much as 2 to 4 times the interest rates available from U.S.
Banks. (And, some offshore investment opportunities are averaging as high as 6 to 8
times the interest earnings available from U.S. Banks.)
MYTHS & FACTS
MYTH: Offshore Banks can't really pay the high interest rates they offer because, if
banks could really pay those rates, U.S. banks would try to meet the competition and
do the same.
FACT: Take a closer look at the financial statements of any U.S. Bank. You will find
that their "gross" profits against public deposits can range from 25% to 40% -- but --
they have written laws to limit the amount of interest they can pay you on your deposit.
The U.S. banks put their earnings into unnecessary and non-productive accouterments,
while offshore banks do without the fancy buildings and unnecessary frills and share
their profits with their customers.
MYTH: Offshore Banks aren't regulated, so you run the risk of losing all your money.
FACT: Nothing could be further from the truth. Every country in the free world has
laws, rules and regulations governing banks and financial institutions. Those laws, rules,
and regulations, however, are far less restrictive than the "protectionist" U.S. banking
laws, rules, and regulations, allowing those banks greater latitude in earning much
greater profits for their depositors and investors.
MYTH: Offshore Banks are not insured by the F.D.I.C.
FACT: Some of them are but, thank God, not that many. If they are, they must comply
with the same protectionist banking rules and regulations as any other F.D.I.C. insured
bank. But, the vast majority of offshore banks are insured; one way or another.
Some countries have established depositor insurance programs similar to the F.D.I.C.
program, by which the banks in those countries have their deposits insured. Other
banks in other countries have their deposits insured by independent insurance
companies who, unlike the F.D.I.C., insure 100% of the banks deposits; not just those
under $100,000. (By the way, many banks in the U.S. are not F.D.I.C. insured, and
some of them insure their deposits with independent insurance companies.)
For the most part, offshore banks are "self-insured." That means those banks maintain
a liquidity factor equal to 100% (or more) of their public deposits. For every $1 held in
public deposits, those banks have $1 (or more) in liquid assets with which they can
cover any depositor demand.
Self-insured offshore banks are actually more secure than F.D.I.C. insured U.S.
banks. The reason being, F.D.I.C. insured U.S. banks are allowed to maintain a
liquidity factor equal to about 10% of their public deposits. (Ever wonder why they
U.S. has more bank failures each year than any other country?)
Which would you feel more secure dealing with? -- A. U.S. bank that has 10 cents in
cash for every dollar on deposit? Or, an offshore bank that has $1 in cash for every
dollar on deposit?
MYTH: Offshore Banks aren't as big or strong as U.S. banks.
FACT: Of the largest and strongest leading banks in the world (in assets), ONLY one
is located in the U.S.
The leading banks in the world, according to a survey done by American Banker,
were, in order:
Dai-Ichi Kangyo Bank - Tokyo
Fuji Bank Ltd. - Tokyo
Sumitomo Bank Ltd. - Osaka (Japan)
Mitsubishi Bank Ltd. - Tokyo
Citibank NA - New York, U.S.A.
Banque National de Paris - France
Credit Agricole Mutual - France
Sanwa Bank Ltd. - Osaka (Japan)
Credit Lyonnais - France
Norinchukin Bank - Tokyo
MYTH: Offshore Banks can't be too good, or they would advertise their interest rates
and services in the U.S. publications.
FACT: Offshore Banks are restricted by law from advertising in U.S. publications;
unless they subject themselves to the very same protectionist rules and regulations
imposed on U.S. banks. For that reason, you should be wary of any offshore bank
that publicly advertises in U.S. publications. They have sold-out to the U.S. banking
establishment and may subject you to their sell-out.
MYTH: Offshore Banking is only for people with a lot of money.
FACT: Some 20 years ago, that may have been true. Today, an offshore savings or
checking account can be opened with a minimum deposit as low as $100. I know of
one offshore bank paying 9%, compounded daily, on regular quarterly-statement
savings accounts with a minimum deposit of $100.
MYTH: Opening an offshore account is complex, and you can't get your money back
when you need it.
FACT: Opening an offshore account is no more complex than opening an account with
a money market fund (or ordering from the Sear's catalog), by mail. Getting your
money back is just as simple.
Opening An Offshore Account
There are organizations in the U.S. that will assist you in opening an offshore bank
account (in Switzerland and other countries). Their "fees" for helping you open an
account can range from a few hundred dollars to a thousand dollars (and, in some
cases, much more) -- BUT -- don't waste your money. You don't need them.
To open an offshore bank account, all you need to do is write to an offshore bank and
request information about opening an account. The bank will send you all of the
necessary forms; tell you what their minimum deposit requirements are for various
accounts; and their materials will explain how to open an account and how to make
your withdrawals.
Making a withdrawal from your offshore account is just as simple. Depending upon the
type of account you open, you write a check or draft to deposit in your U.S. bank
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