International Wealth and Asset Protection: Myths and Facts
There are many myths and misconceptions about international wealth and asset protection. For various reasons governments and domestic banks have an interest in keeping your wealth and options well within an arm’s length. We have compiled some of the top myths and the reality behind internationalization.
Myth 1: Offshore banking is illegal.
Fact: There are a few countries that do prohibit their citizens from holding banking accounts abroad, the United States and EU are not among them. Even nations with strict capital controls such as China, Russia, and Venezuela do not ban their citizens from holding offshore bank accounts. Nearly all countries do, however, require that your offshore holdings are reported to tax authorities. With the advent of FACTA expecting to be able to hold an offshore account in secrecy is figment of Hollywood thrillers.
Myth 2: Only criminals or the super wealthy bank offshore.
Fact: Offshore banks are established and well regarded systems of international finance. Of course some illicit funds are deposited, as in any bank in any country, but these constitute a very small percentage of the total amount of funds held internationally. Most clients of offshore banks are not evading taxes but seeking legal tax planning and asset protection strategies while diversifying their political risk factors. Many banks are now catering to the emerging global and mobile middle class. Many offshore banks will open an account with a deposit of $1000 or less.
Myth 3: Offshore banking is tax free.
Fact: Generally, taxes are not owed to the jurisdiction where the account is actually held. The big but is that most nations still require you to declare and pay taxes on your offshore holding to your home taxing authorities. Not claiming offshore holdings to the IRS is a major tax violation and can lead to criminal charges.
Myth 4: Offshore banks are remote and difficult to access.
Fact: While many offshore banks may be physically remote on islands, they are all very accessible and welcome foreign investors. Funds can be deposited and withdrawn electronically with a secured internet connection. Many banks do not even require a physical visit to open an account. Bank representatives or personal banking concierges can open your account by mail, with certified copies of the required documents.
Myth 5: Banks with a global presence in a foreign location are more likely to release your information to your home country.
Fact: This may have been true in the past but almost all major banks have adopted FACTA compliance with the United States. Very few offshore banking jurisdictions have maintained banking privacy in light of FACTA and will send FACTA reports on US citizens to the IRS. Regardless of the global or local presence of your chosen bank US citizens must be aware and in compliance with all laws stemming from their citizenship.
Myth 6: Poor regulation of offshore banks is better for business.
Fact: While greater capital freedom is generally better for business and the economy this can lead to rampant fraud against consumers by the banks themselves. This was well demonstrated during and after the 2008 recession where many Ponzi schemes and frauds were uncovered. Banks that facilitate money laundering and tax evasion are often subject to international capital controls and sanctions, making your money inaccessible and potentially lost.