How to Open an Offshore Bank Account

How to Open an Offshore Bank Account

03/28/2014 - 5:26 AM
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Offshore Banking License

Want to open an offshore bank account? Here is our guide on how to open an offshore bank account quickly and easily. Do you want to know how to open an offshore bank account? Are you thinking about moving some of your assets out of the United States? Want to protect yourself from issues within the American economy? In this article, I will tell you how to select an offshore bank and give you step by step directions on how to open an offshore bank account. More importantly, I will tell you how to keep that offshore bank account in compliance and your most important “asset” out of jail.

As the U.S. government attacks its own citizens in a grab for tax revenue, the number of offshore banks willing to deal with the pressure and hassle is dwindling. These days, it is very difficult to open an offshore bank account…and, keeping that account open can be even more challenging.

Before we talk about how to open an offshore bank account, let’s review where to open that account. When you open an offshore bank account, you have two choices: size and security or privacy and asset protection. This is because, the U.S. government can levy any bank account, anywhere in the world, if that bank has a branch in the U.S. and most large banks have branches in America.

So, if you have money in HSBC Panama, the IRS can send a letter to HSBC N.Y. and demand they grab your cash and pay it over. No legal or court proceedings are required and no special effort need be made. The person assigned to your case simply enters a few keystrokes in his or her computer and your cash in Panama is gone.

Note that this is not unique to Panama. Any bank, anywhere in the world, that has a branch in the U.S., is subject to Uncle Sam’s whims. Are you hording cash at Royal Bank of Canada, Cayman Islands? This seems safe enough…a Canadian Bank in the Cayman Islands. RBC has a branch in Georgia, USA.

  • I also note that Canada is especially troubling to those seeking security. Any asset, including bank accounts and real estate, in Canada, France, or the UK can be seized by the US IRS. While taking and selling real estate in these countries does require a manager’s approval, it is a relatively simple process that most IRS revenue officers are familiar with.

Therefore, if asset protection and privacy are important to you, I suggest opening an account at an offshore bank that does not have a branch in the United States.

You, my well informed reader, might be thinking to yourself, with the Foreign Account Tax Compliance Act (FATCA) coming in only a few months, does it matter if your offshore bank has a U.S. branch? Do I still need to know how to open an offshore bank account? Yes it does.

FATCA requires banks to report your account and transactions to the U.S. IRS. If you are in compliance, this information gathering is not a major issue. However, information exchange is quite different from the right to seize your property.

In other words, FATCA means the government will know where your money is. If that cash is in a bank with a U.S. branch, or in Canada, England, or France, then it is subject to levy. Otherwise, you are at least free from that worry for now.

HOW TO OPEN AN OFFSHORE BANK ACCOUNT

Now that you have a general idea of where to open an account, let’s talk about how to open an offshore bank account.

You can forget about the easy and relatively painless experience of opening an account in the United States. Offshore banks are much more cautious and require quite a bit of supporting documentation.

First, some banks require, and all recommend, that you open an account under an offshore company. This will provide you a level of asset protection and allows the bank to put you in their business group.

Next, the bank will need your name, date of birth, address, citizenship and occupation. With this, they look you up in a database called WorldCheck. If you have a criminal history, or ended up in this database for another reason, your application will be denied.

After this first check, the offshore bank will put you in one of two categories: American or Other.  If you are a gringo, more due diligence will be required, you will probably pay more in fees (as much as $500 to open the account and $300 per year in compliance costs), and all of your transactions will be reported to the IRS.

Along with your application, you will need to provide a notarized copy of your passport, a utility bill that reflects your name and home address, a reference letter from your bank (all US banks have form letters they use, which will be fine), and a personal or professional reference letter.

Finally, some banks will require a copy of your last year or two of tax returns and a résumé. The intent here is to demonstrate the source of funds…that you are a legitimate business person and not a drug dealer.

Some countries allow you to open an offshore bank account by FedEx, and others require you to be present in the bank. For example, the banks I work with (listed below) in Belize accept applications by courier while the banks in Panama require you to be present.

A note of caution: the number of banks that are kicking out Americans with offshore bank accounts is growing quickly. If you want to ensure your banking relationship, you should consider obtaining residency in countries like Panama and Belize. Once you are a resident, your account is no longer tagged as offshore and you should be protected from future purges.

  • The best residency program available now is the friendly nations program in Panama. When combined with an investment in teak of about $15,000, you can obtain residency quickly and efficiently. For more information, please contact me at info@premieroffshore.com

Offshore Bank Account and Brokerage Suggestions

The bank selected will depend on the size of your account. For accounts of less than $500,000, I recommend Caye Bank (www.cayebank.bz) or Atlantic Bank (www.atlanticibl.com) in Belize.

  • Because Caye Bank does not have a branch in the U.S., they have a good handle on FATCA, focus on U.S. clients, and offer a wide range of investment options, I often suggest clients plant their first flag offshore with Caye Bank and then open brokerage accounts or diversify from there.

For accounts over $2m, I recommend Andbanc in Androa or their branch in Panama (http://www.andbanc.com/).

In the Cook Islands, I recommend Capital Security Bank or a managed investment account at First NZ Capital (https://www.firstnzcapital.co.nz/). These bank may require a Cook Islands structure.

In Panama, I recommend Uni Bank (https://www.unibank.com.pa/en/index.html). For accounts over $2M, I recommend Andbanc (http://www.andbanc.com/).

For online currency trading, I recommend Saxo Bank in Denmark. Their website is http://www.saxobank.com. Though, there have been rumors that this bank will dump Americans this year.

Finally, I recommend Panama Wall Street (http://www.panamawallstreet.com/) and Titan in Belize (http://titanbelize.com/index.html?agree=0) as online trading platforms.

If you prefer a financial advisor and bank in Europe, I recommend PIC in Luxembourg. Their website is http://pic-europe.com/.

I hope this article on how to open an offshore bank account has been helpful. Feel free to ask any questions or list your favorite offshore bank with a link to its site in the comments below. The list of offshore banks who accept American’s is always shrinking, so your suggestions are appreciated.

Offshore Bank Account Reporting Requirements

Now that you know how to open an offshore bank account, let’s make sure you don’t shoot yourself in the foot with this knowledge. Be careful, because your offshore bank account comes with many new and exciting U.S. filing obligations.

Most importantly, if you have more than $10,000 offshore, you must file the Report of Foreign Bank and Financial Accounts, Form TD F 90-22.1, referred to as the FBAR. Anyone who is a signor or beneficial owner of a foreign bank or brokerage account must file this form.

The law imposes a civil penalty for failing to disclose an offshore bank account of up to $25,000 or the greatest of 50% of the balance in the account at the time of the violation, whichever is higher. Criminal penalties for willful failure to file an FBAR can also apply in certain situations.

The penalties can be imposed for each year. So, fines can add up quickly and will exceed the total value of the account if you have not reported for just a few years.

In addition to filing the Foreign Bank Account form, the offshore account must be disclosed on your personal income tax return, Form 1040, Schedule B.

If your offshore bank account is under a foreign corporation, you will be required to file IRS Form 5471. This is a U.S. tax return, similar to IRS Form 1120 for domestic companies, and includes a profit and loss statement as well as a balance sheet. An offshore corporation is always the best structure, and 5471 the best form, to use with an offshore business.

If you elected to form a single member LLC, rather than an offshore corporation, then you will file IRS Form 8858 for a Foreign Disregarded Entity. This is a simplified return, so your costs to hire someone to prepare it for you should be less than Form 5471. However, it is not efficient to operate an offshore business through an LLC…holding investments in an LLC is just fine and often preferred.

If you have significant investments offshore you will need to file IRS Form 8938, which is a report of foreign assets. The filing requirements for this form are detailed, so check out the instructions before completing the form. There are a number of articles on PremierOffshore.com describing Form 8938. For example, reporting requirements for gold transactions, and reporting requirements for real estate transactions.

I hope you have found this information helpful. If you would like to learn more about how to open an offshore bank account, or to form an offshore company, please contact me at info@premieroffshore.com for a free and confidential consultation.

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