The Organization for Economic Cooperation and Development (OECD) recently released a report that uncovered a whopping $11 trillion of offshore assets held in offshore banking accounts. Many are speculating that this could mean the death of offshore banking, but is this really the case?
The truth is that offshore banking has been predicted as a dying trend many times over the years, but we’ve only seen it grow.
Why Offshore Banks are Surviving - even Thriving
The recent OECD report’s findings are based on the implementation of the Common Reporting Standard (CRS), a standard that automatically reports asset information to the home countries of account holders. CRS has certainly changed the face of offshore banking, and since more than 100 countries have adopted CRS to mitigate tax evasion, we are seeing that offshore investors are taking other precautions and steps around their offshore banking strategies. Offshore bankers are typically looking for anonymity, so what can they do?
While some people are speculating that offshore banking is dead, that’s simply not the case. In fact, the way banks is operating especially in the Western world (which is very poorly run, by the way,) the case for offshore banking is even more stronger, especially given the fact that the jurisdictions' regulations are supportive toward sound banking practices (e.g. full reserve banking).
It’s a great time to include offshore banking in your asset protection plan, but it’s more important than ever to take the right steps to ensure that your assets are safe. It’s also important to ensure that you are implementing the right asset management strategy that works for you.
How to Stay Safe (when Banking Offshore)
In this article, we’re going to cover three important steps for mitigating the risks of CRS and other regulations when you are involved in offshore banking. Simply being aware of what these regulations are and how they can impact you is crucial.
Here are a few steps for mitigating the risks of CRS in terms of offshore banking:
1. Leveraging Cryptocurrency
Cryptocurrency has been seen as an offshore banking alternative for many because it offers a level of anonymity. Since cryptocurrency is decentralized, it’s not affected by governmental and economical factors.
Changing requirements are making an impact into how people invest in cryptocurrency, however. Tax requirements are popping up and requiring that people report their cryptocurrency holdings, which puts a damper on the anonymity aspect. It could also trigger capital flight from the countries imposing crypto tax laws in the process.
Still, cryptocurrency can be a healthy part of any asset management strategy.
2. Find a Non-AEoI Jurisdiction
AEoI (Automatic Exchange of Information) and CRS go hand-in-hand. The idea of these global standards is to eliminate tax evasion, but the flip side for investors is that it strips away anonymity. The simple way to get around these types of regulations is to set up offshore bank accounts in countries that don’t implement AEoI or CRS. Some of these jurisdictions include the United States, Jamaica, Albania, Egypt, Morocco, and Ecuador.
The 'trick' to finding a non-AEoI jurisdiction that will work for you is to find one that is stable and reputable. There are many non-AEoI jurisdictions out there, but only a handful are considered to be reputable.
3. Be Aware of Compliance Regulations
There are several other compliance regulations aside from AEoI and CRS, and it’s important to be aware of them. As long as you are aware of these regulations, you can make better decisions regarding your offshore investments.
You’ll need to discover whether or not these regulations apply to you and ensure that you are fully in compliance. For instance, the U.S. Treasury Department’s Financial Crimes Enforcement Network (FinCEN)’s Form 114 - Report of Foreign Bank and Financial Accounts (FBAR) is required if you hold more than $10,000 in foreign assets. Additionally, if you have any income coming from abroad, you will quite likely be required to report it via the FATCA (Foreign Accounts Tax Compliance Act). If you are involved in an international trust, just know that there are special rules, and you could possibly even be exempt from reporting requirements.
Here’s Why Offshore Isn’t Going Anywhere
While the offshore investing market is changing, there’s no reason why putting your assets in an offshore account is a bad idea. The concept certainly isn’t dying, although headlines might make you think otherwise. In fact, it’s a great time to invest in offshore.
Offshore banking sets the standard for banking around the world, offering the height of customer care and convenient online banking. If you’re looking for unique and diverse investment opportunities, as well as the opportunity to have your assets actually backed by gold, offshore can open many doors for you. Offshore banking can still yield anonymity, you just have to know what to look for before investing. It’s still true - offshore banking is a great way to protect your assets and get the banking stability you are looking for.
While offshore banking isn’t dead, it’s certainly changing, and as with any industry, the only way to the top is to stay ahead of the latest changes. By understanding the changing nature of offshore banking, you can get the most out of your asset management strategy.
JUL
2020
Table of Contents