Section 17

Why Have an Offshore Bank Account?

As Americans, we have grown accustomed to our easy lifestyles with unlimited modern conveniences and familiar practices. To be asked to do something different that appears to be less than conventional is requesting a lot, even if to our advantage. Being sons and daughters of this geographically large and diverse land, with the world's largest productivity generating an enormous economic output that leaves our global neighbors pale in comparison, it is easy to understand this attitude.

Our comfort level over the decades though, especially after becoming a superpower at the close of World War II, and now the only superpower, has left us with a false sense of security and blind trust in our political leaders, government and institutions, propelling us into the danger zone. Americans have a deep and growing concern for the system that we have supported, nurtured, boasted of, and trusted. The public is genuinely questioning the value of their vote; the ability of leaders and candidates, their word and trustworthiness; our present and future position in a rapidly changing world; government ineptness and unbridled growth and expense; our country's economic strength; and the strength of our financial institutions. The concerns go on. Fortunately, even though we have lost substantial economic ground in recent history, this country and its people still possess great talent and unrealized potential. Our dynamic stock market today, reflects our trust and beliefs in our ideas, enterprise and prospects.

Economic Woes

Just a short time ago, politicians, the media and commentators would never have dreamed of using the "D" word or expressing that a depression is possible. But today, the possibility is discussed openly and Americans can foresee that such a dreaded event could come to pass. It is a frightening thought, but nonetheless, the speculation and possibility is real. When all of the banks were closed across America over a three day holiday weekend back in the early '30s, Americans were not as aware of the impending disaster as they are today. The global roller coaster stock markets in October-November 1997 are signs of their potential volatility.

Ask yourself, can you afford to suddenly be cut off from your liquid assets, the lifeblood of modern civilization that is essential to survival? What if tomorrow you were restricted from withdrawing your money from your local bank account or removing items from your safe deposit box? What if gold and silver were banned and possession were suddenly illegal? What if you and your money or other assets were suddenly restricted from leaving the country? What if the U.S. dollar becomes worthless and is no longer accepted or replaced by a fiat currency or other questionable monetary unit? All of these possibilities can happen. What are you doing to prepare yourself? How much cash do you have on hand? Is your refrigerator well stocked? Can you grow your own vegetables?

Well, it is a concern that each individual should personally address. Am I prepared for change? Am I willing to accept what may be handed down? Do I have alternatives? A major depression or drastic deterioration in our government is an extreme scenario, but one which shrewd persons will likely consider, prepare for and devise a plan of action for should there be a national catastrophe. We were surprised at the sudden fall of the USSR. Are we immune to abrupt change?

Government Oppression

History shows us that governments that are fearful of their citizenry and their possible unacceptable actions try to oppress them through a variety of means including restricting rights, restricting travel, restricting the free flow of money, restricting speech, controlling the media, and other similar oppressive strategies. In Communist countries, government action against the people is more overt and more physical. All of these acts are being inflicted on people right this minute somewhere in the world. A Chinese citizen cannot leave the country, a Latin American cannot send money out of the country, a Communist citizen cannot speak negatively about their government without being threatened. These practices are as old as man himself. Hopefully these tragic events will never happen to you.

Fortunately in America we have had considerable freedom, let us hope it remains that way. As citizens, we have the duty to protect our rights that guarantee our freedom, or else we expose ourselves to possible highhanded government practices. Thus, we should guard our interests, families and futures. Consider the unexpected and realistically speculate on how you might handle severe financial hardship.

It sounds far-fetched to Americans, but ask anyone who has ever experienced oppression at the hands of their government. We have all heard the stories in the media. It really hits home when you know or meet people who struggled to survive.

Fear of oppressive governments, adverse political actions and economic instability play havoc on our emotions. These are some of our darkest human fears, even for those who have never experienced them firsthand.

There are many devices to induce cooperation at the disposal of a government determined to exercise its power. But those are limited to their reach. A government can impose restrictions as we have seen here, but only to the extent of their ability to control. A person concerned about the future of their country or their own well-being, may plan ahead and move some of their money and assets out of the country which threatens them. They may secure a second passport to insure unrestricted travel in the event theirs is confiscated, cancelled or expires. This is happening and has happened repeatedly throughout history. Today, Latin Americans are doing it, Hong Kong residents are doing it, and Communist citizens are doing it. It is a means to preserve one's wealth, health and freedom. Once their money is safe, they leave their country in advance of restricted travel, if possible. Sometimes a person is forced to move their money and themselves to another country under very difficult circumstances because movement of assets and travel may be forbidden.

Advance preparation and thought is worth its weight in gold. And this is where an offshore bank account is invaluable. The need for such an account may not seem paramount, but that is the best time to establish it. Regardless of nationality, it is wise to think ahead while there is still time, before unpleasant limitations and restrictions are imposed. There may never be a need for the account other than to provide peace of mind.

Although U.S. citizens are free to travel with few restrictions and move their money and assets around at will, there are some signs that these freedoms could be restricted. Gradually, over the past 20 years or so, the U.S. has created and enforced new requirements for us to meet. Often these changes are made in the name of crime prevention. But the author holds to the opinion that crime usually makes up a much smaller percentage than honest pursuits. So who is being controlled? With more laws that restrict ordinary citizens, more "criminals are created."

Reporting requirements have been implemented to monitor the movement of money, who is moving it, and to where. Mandatory legal requirements include the filing of certain forms when specific financial transactions take place. Citizens and financial institutions are legally bound to comply under threat of fines, imprisonment and passport restriction. These laws are probably frequently violated by innocent citizens unaware that they exist.

Treasury form 4789, Customs form 4790 and Treasury form 90-22.1 must all be filed at times. For instance, 90-22.1 is required to be filed disclosing the existence of a foreign bank or financial account and its location. Other similar requirements are expected of us.

Other controls come in the form of tax laws. Here are some that may affect you. Most of these will apply only to U.S. citizens engaged in offshore business, but it serves as an example of further restrictions in operating outside the realm of U.S. territory. It is a way to reach outside its boundaries and maintain influence over citizens. These laws are:

Foreign Personal Holding Company Tax
Passive Foreign Investment Company Tax
Accumulated Earnings Tax
Effectively-Connected-With-U.S. Tax
Foreign Source and U.S. Income Tax
Foreign Earned Income of an Individual
Tax Treaties

If you fall into one of these areas, one or more of the following IRS forms must be completed. They are Form 5471, 926, 3520, 3520a, 1042, 1042a, 1020NR corporation, 1040NR individual. Consult your tax accountant for further information.

These requirements are a mild form of oppression and further coincide with the deprivatization trend in the United States. Although these are disclosures of various kinds, which in themselves can have adverse affects, they stop short of actually preventing you from doing business outside the U.S., earning foreign income, investing overseas, banking offshore, moving to a foreign country, taking your money or assets elsewhere or bringing them back. Restrictions preventing these doings would drastically inhibit your freedom. Exchange controls could be the next step in the U.S.; we have experienced them in the past, but they would be detrimental to the planners' goal of a global economy.

If you have an offshore bank account, you have succeeded in preserving a portion of your assets from your own government. Even a small amount of money during difficult times may prove to be a lifesaver. This is not to suggest closing your local account, since it has its purpose, but rather to maintain sums for convenience sake and daily living costs.

Government oppression in any of its many forms, or economic catastrophes are the two worst possibilities, but may be less of an immediate concern to readers. There are more immediate reasons to bank offshore that can improve your life.

Privacy

Privacy is an increasingly important commodity which helps insulate against government oppression, and intrusion from other people and corporations. Erosion of privacy is prevalent today. Both government and the private sector are guilty. The deprivatization trend is growing to perverse proportions. The result is the deterioration of individual rights, strength and power that as Americans we say we cherish. There are many reasons for wanting privacy.

Discrimination

Persons of a minority fear discrimination because of their political, religious, racial or other status reasons. Both government and the private sector are responsible. Poor people are discriminated against, rich people, business people, black people, white people, immigrants, people that drive new cars, members of unorthodox religions, people who own guns, people who have different ideas, short people, tall people, ugly people, beautiful people, discrimination is endless. You may fit into one or more of these categories and it may be causing you distress. It could be affecting your marriage, your job, your financial position, your health, your future. Often, privacy can protect individuals from being select targets of groups or other people with sharply differing attitudes.

Excessive Government

Excessive government and its oppressive behavior is another motivation for privacy. You may be forced to fight in a war that is not morally acceptable to you. Until Vietnam, most Americans probably felt it was their patriotic duty to fight for their country when our leaders engaged us in war. But that apparently changed with Vietnam. In the future, will we be asked to fight a war that we cannot accept, where we feel our government is not representing our interest or wishes?

Excessive government is expensive to administer. Increasing government influence here and abroad and expanding bureaucracy require sufficient revenue. More employees are necessary to implement new programs, enforce new laws and keep the public from getting restless. All of these pursuits place a burden on the government's ability to fund them. Where will the money come from? Taxes, of course. And to receive more taxes, the government has to increase taxes, create new taxes, increase enforcement measures or expand the economy so that there is more to tax. Today, the combined levels of government employ approximately 50% of the U.S. work force. That certainly helps the employment figures, but it is quite a financial hurdle. Few people would probably pay taxes if there were not laws enforcing them to do so. Taxes are not voluntary, although they refer to it as "voluntary compliance." Who wants to give away 50% of every hard earned dollar? To some extent, government is justified in demanding exorbitant taxes as there is an enormous bureaucracy to support. And at this stage of the game, insufficient collection of taxes could spark economic disaster.

The standards that determine tax avoidance and tax evasion change. Avoidance is to legally circumvent paying taxes and evasion is blatant defiance of the tax laws. But the laws change. What was okay to avoid yesterday, may make you a criminal tomorrow. Where does it stop? For many U.S. and foreign citizens, it stops when they are fed up with it and feel that it jeopardizes their prosperity and well-being. But most of us are compelled to comply even if we do not know where the money is to come from. We fear possible negative repercussions. Therefore, advance tax planning is critical.

Information Snoops

Information about us that we have no control over can adversely affect us. Whether it is cheap gossip, or a credit rating, true or not, it can push us to want more privacy. Some truths can be as negative as a lie. The lie is probably not flattering and could become the basis for action against you in one form or another or a truth, positive or negative about your life can also be used against you. Nothing is sacred–just look at a copy of Forbes 400. Not even a billionaire can hide, and this is only one example. There are thousands. You can probably think of at least one form of discrimination that touches you or your family.

Lawsuits and Asset Protection

Litigation has become a national pastime. President Bush, during the Republican convention, addressed the problem by figuratively declaring war on trial lawyers. Most lawsuits are probably not warranted. It becomes easy to sue when lawyers are willing to work on a contingency basis rather than charge the client by the hour for services rendered plus related expenses. It is a way for lawyers to get more business and make more money. And the plaintiff in the suit has the opportunity to pick up a chunk of money with little effort. The practice is so abused, that some medical people such as ob/gyns cannot even get malpractice insurance because the risk of lawsuits is so high, leaving their practice and their assets unprotected. Incorporation has always been a means to protect personal assets from business lawsuits, but that is not enough.

Today, shrewd tax havens based on common law are enacting legislation that specifically addresses the needs of American professionals and business people for protection of their assets. Although trusts have long been around, "asset protection trusts" are a new means for professionals and business people, with or without adequate insurance to armor-coat their assets. In some cases, it is the only alternative a professional has to survive, giving them the chance to continue their practice. Without malpractice insurance, a professional cannot remain in business for long without losing everything to lawsuits.

Threat of Crime

White collar criminals prey on individuals and companies. There are a wide variety of ways that your money can be pilfered against your will, or even with your cooperation. An officer of your company may embezzle corporate funds, or you may succumb to a high pressure telemarketing salesman and spend your last $100,000 on a piece of "art" you have never seen. Privacy may save you from being victimized in untold ways. Privacy is very difficult to attain without being conscientious. An offshore bank account is a simple, fast and inexpensive way to cloak your financial affairs.

Considering that dozens and dozens of files are maintained on every citizen in this country covering every aspect of their lives, obtaining privacy in the 20th century is no easy task. With the computer revolution, it is doubtful that unwarranted intrusion into our personal lives will disappear anytime soon. Chances are, the 21st century will bring more of the same. Therefore, those persons who place value in their privacy need to learn how to get it and how to enjoy it. There are dozens of methods at the disposal of the intruders and just as many ways for the well informed to protect themselves.

Individuals can benefit from an offshore bank account and avert many of the daily threats to their wealth and health. But, beside the reasons already given, there are still others.

Financial Incentives

Offshore banking is much more than simply having a bank account in a foreign country. Think about these benefits for a moment.

· Diversify your investments, holdings and location.

· Hedge against drops in the value of your own country's currency. By holding another more stable currency, you can protect against loss of purchasing power.

· Diversify internationally. Discover new chances for opportunity.

· Gain prestige.

· Demonstrate sophistication.

· Get greater financial flexibility.

· Gain increased convenience when traveling.

· Gain increased convenience to receive foreign funds.

· Exercise your right and freedom to have a foreign bank account.

· Bank in tax havens that have specific secrecy laws punishable by fines and imprisonment.

· Avoid disclosing your nationality or political alliance to others.

· Keep your physical location a secret by using an offshore account.

· Expose yourself to other customs and practices.

· Gain total anonymity.

· Gain the benefits of superior banking and courteous service.

· Seek safety from unstable financial institutions at home.

· Receive higher returns and interest on deposits.

· Get asset protection for deposits and investments.

· Gain easy access to funds by check, wire transfer or debit card.

· And more!

There is a wide selection of banks with which to do business. Banks cater to different types of clients including the rich, businesses, investors, foreigners, local residents, etc.

Banks offshore include merchant banks, commercial banks, private banks, foreign banks, branches of banks, international banks, offshore banks, deposit-taking institutions, they are all there.

And every bank is unique. They have special interests and place emphasis on certain areas of their business. They offer various interest rates depending on the type of deposit and various charges for their services. Some banks will give more personalized service than others. There are banks that offer a wide range of services, some of which we do not see in American banks.

A single bank may not provide all of these services, but this is what can be found offshore. Here is what you can do with your offshore bank account.

· Open a current account and write checks; some are interest bearing.

· Open a deposit account and receive a passbook. Earn higher interest.

· Make time deposits. Receive best interest rates.

· Open accounts in different currencies or a multi-currency account. U.S. dollar accounts are common.

· Purchase foreign currencies.

· Receive detailed bank statements.

· Avoid local taxes.

· Purchase all types of bonds.

· Establish precious metals accounts.

· Open securities accounts or have the bank buy and sell in their name on your behalf.

· Invest using margin accounts and forward contracts.

· Let the bank hold your valuables in their vault through a custodial account.

· Real estate can be purchased through some banks.

· Banks located in tax havens will often perform incorporation services, provide nominee directors and management, and tax services.

· Establish an IBC coupled with an APT or managed account and let the bank manage your portfolio. The bank will invest on your behalf using their judgment and knowledge of investments and markets.

· Open a safe deposit box in a foreign country.

This report is written to help you financially diversify, protect your assets, expose yourself to new opportunities and guard against the unexpected. And hopefully in the process, you will earn more interest and make more profits. While offshore, begin thinking of how to reduce your tax liability through advance planning by engaging U.S. and offshore professionals.

Banking offshore is not the sole answer to today's problems, but it has literally saved lives and life savings in this century.