Opening offshore bank accounts:
Paper and privacy

Your address and modern-day
surveillance techniques

Are your offshore investments really private? And what about your offshore credit card? Could your private details leak into open databases? It's an issue to address well before you give your address away.

OFFSHORE-FOX.COM
with Alex Hanson

(Part 6 of 7)

Banks worldwide are being pressurised by the FATF to clearly establish the actual residential address at which the account holder and/or director of an offshore corporation lives. Addresses are of great importance to those seeking to establish who has private offshore holdings; addresses make cross-referencing with tax files and other databases possible.

			Addresses are of great importance to those seeking to establish who has private offshore holdings; addresses make cross-referencing with tax files and other databases possible.

The FATF realise that while offshore banks will stop short of giving out the confidential details of their account holders, there are many other ways in which at least some of the data can slip out into the public domain. The leakage of your private information can occur whenever your offshore bank interacts with third parties -- be they banks or other financial institutions -- on your behalf. And this happens more often than you think.

On the wires

Making a wire-transfer will typically involve one or more correspondent banks. If you order a payment in US dollars, funds will be routed via the United States -- along with your name as the sender, as well as your address. Where your name alone would probably not be enough to successfully identify you, your residential address provides the extra piece of information necessary to lead onshore authorities right to your door.

But it's not only wire-transfers that can compromise your confidentiality.

Offshore investments

One of the attractions of an offshore environment is the availability of a wide range of investment products, and most offshore banks will gladly help you meet your investment goals. Where some of the investments on offer will be private, in-house products, virtually every offshore bank will also let you access an array of third-party investment vehicles such as funds, bonds and other financial instruments.

But putting your money in your favourite fund may well be the end of your offshore secrecy if the fund is based in a tax-cartel friendly jurisdiction. Again, your offshore bank may well (or may have to) give out your personal details -- and if it includes your private residential address, you may be giving the bureaucrats back in your home country enough data to identify you.

Naturally, caution is advisable with respect to investment vehicles managed from the United States or the European Union. Remember that Luxembourg, a home to many popular investment funds, is part of the European Union -- and although it still enjoys a degree of autonomy regarding bank secrecy, this is unlikely to be the case for long. Even more traditional offshore havens are surrendering their fiscal sovereignty nowadays -- you might think it safe to invest in a Bermuda-based fund, but you might not know that Bermuda was first to sign up to the OECD's information sharing protocols with a capitulatory letter of commitment.

There are a handful of privacy-minded offshore banks that are aware of the danger that third-party investments pose to their clients' confidentiality. To prevent the leakage of client information, they will hold all third-party investment products in their bank's name rather than in the name of the client. Often, however, this is only applicable to numbered accounts.

Offshore credit cards

Asking your offshore bank to issue you with a credit card is pretty much a sure way of having both your name and address given out to one of the large onshore credit card companies. Where many offshore banks do take a variety of technical steps to protect the confidentiality of their clients when it comes to credit cards, no solution has yet been found bullet-proof.

In 2000, tax authorities in the United States (IRS) were granted access by a Miami court to thousands of Mastercard and American Express credit card accounts held by U.S. taxpayers in three offshore banking havens. The IRS claimed that they were looking for high-value purchases, airline tickets and so on, in order to establish who was living beyond their means.

			Near-anonymous credit cards are possible but only where your offshore bank simply does not have the information that could enable onshore authorities to successfully identify you.

If you tell your offshore bank your actual residential address, forget about asking for a credit card. Never mind assurances about "confidential offshore payment clearing systems" and so on -- whatever protections your offshore bank puts in place, the fact remains that your credit card is going to be a part of one of the big global payment networks if it's to be of any use to you. Consequently, it can never be totally private.

Near-anonymous credit cards are possible but only where your offshore bank simply does not have the information that could enable onshore authorities to successfully identify you.

Near-anonymous credit cards are often arranged through the use of a nominee-administered offshore company and a bank that needs no more than a name and a signature for corporate cardholders. Note, however, that where the cardholder is also the actual beneficial owner of the underlying offshore company -- and mostly he is -- such a structure must be formed so as to successfully resist the leakage of personal information under any beneficial owner disclosure legislation.

Sometimes they just tell them (without telling you)

You should also know that in at least one country widely touted for private offshore banking services, banks have a legal requirement to pass personal details (names and addresses) together with bank balances to the local tax office. There are no legal protections which oblige the local tax officer to keep this "non-resident" account information private.

There are many other circumstances where your name and address can find its way from your offshore bank into the hands of your home authorities -- and you might not even know it's happened.

Remember that to have an actual residential address attached to an account holder's name is simply invaluable to the bureaucrat who is willing to patiently wait until the supposedly private data leaks out from your offshore bank. Protect yourself accordingly, and be aware that you are under no legislative obligation to tell your offshore bank where you live. Those banks that do ask for utility bills or other proofs of residence are either ignorant to issues of customer confidentiality, or -- even worse -- are showing themselves to be well versed in FATF paranoia.