Opening an offshore bank account:
Paper and privacy

Reference free banking:
Common and civil law

You can still open a reference free bank account, corporate or personal, if you know where to look. But act now - reference free banking will not be here forever.

OFFSHORE-FOX.COM
with Alex Hanson

(Part 3 of 7)

So how do you deal with the issue of bank reference letters?

One alternative is to use a professional fiduciary company to manage your offshore bank account. Of course, the fiduciary company itself must require no more than an introduction, or at most a non-banking reference, for this to count as a valid solution to the problem.

			Civil law jurisdictions, as well as a number of hybrid common / civil law jurisdictions, typically do not require references.

A more direct option is to simply give your business to a bank that does not need any reference letters from new clients. Despite what a surprising number of people think, reference free banking is still widely available -- although not in common-law jurisdictions.

Civil law jurisdictions, on the other hand, as well as a number of hybrid common/civil law jurisdictions, typically do not require references.

The reason for this is historical and directly relates to the way that people are identified under the two different systems:

1. Under common law, people have traditionally enjoyed greater personal freedoms. Common law based countries have often lacked centralised registers of population and ID cards, and there has been no reliable way to confirm a person's identity except to take his word for it. To minimise the possibility of deception, a system of using references developed -- that is having another person confirm that you in fact are who you say you are.

2. In contrast, civil-law jurisdictions have always had much less need to rely on references (other people's opinions) for reasons of identification. Instead, they developed centralised government registers of citizens, personal numbers and compulsory ID cards to refer to.

This key difference between the two systems has formed accepted practices in all areas of life, banking included. As a result, many bankers in civil law jurisdictions do not even understand the concept of -- let alone the need for -- bank reference letters. As far as they are concerned, an official document confirming your identity (such as an identity card or a passport) is all that's needed to get an account opened.

While there are still many places to go for reference free banking, it must be noted here that the original reason for bank references -- the need to confirm identity -- is being slowly shifted. Under the guidelines set by the Paris-based Financial Action Task Force on Money Laundering (FATF), many bankers now view bank reference letters as a necessary confirmation of a prospective client's suitability. As a result, a number of bankers in civil-law jurisdictions have followed their common-law colleagues lately and also insist that a reference or two be provided by all new clients.

Staying within the norms of locally accepted practice is always the best way to approach any financial transaction. Choosing the right jurisdiction, the right bank, and the most appropriate type of account is important. For example, there are circumstances where you might be better off with a large retail bank and not one that exclusively offers private banking services -- particularly if keeping a low profile appeals to you more than facing intrusive questions in a one-to-one meeting with your private banker.

These and other issues require an almost encyclopaedic knowledge of local financial customs, and it is best to seek professional advice from a source that shares your concerns, ideally in the jurisdiction that you wish to utilise.