What you need to know about offshore banking options

March 12, 2009 | Comments Off on What you need to know about offshore banking options

When people talk about private banking, some images automatically come to mind: Switzerland, secret vault and mysterious account holders. There are many good reasons why many high net worth individuals choose to put their money in offshore accounts, but before you decide to open one, I urge you to think through the following issues:

Insurance and asset protection
Most people don’t know that their money is NOT insured in many offshore locations. While the lack of insurance may not pose a significant threat in good times, the current market turbulence make default risk a real risk. Onshore accounts, however, are well protected. The US government insures your funds and deposits with onshore accounts.

Privacy

Private banking accounts are very discreet. This does not mean, however, that you really own a secret account. While here are many control procedures in place to keep your identity confidential after you have opened an account, you must know that the account opening screening is very rigorous. Banks are now required by law to carry out “know their customer” audit procedures. Unusual activities and transactions will usually be reported to the compliance department which in turn report to the regulatory bodies. This is something you as a potential client must understand.

Law enforcement
For US citizens, when their assets are not in the country, they can’t be seized by the government. If asset forfeiture is a major concern to you, consider putting some of your money to offshore tax havens.

Remember, the ultimate goal of hiring a private banker is to enhance or preserve wealth. Using offshore accounts do not automatically make your assets safer. If your money is currently sitting in a relatively safe country such as the United States or Singapore, you don’t necessarily have the need to move your money offshore. You need to understand your specific investment philosophy, goals and business situations, as well as the potential tax benefit before making a decision to move your money somewhere else.


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