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    Are offshore accounts illegal?

    On Behalf of | Jan 6, 2022 | IRS, Offshore Accounts/International Tax Disputes, Tax fraud

    Anyone with significant financial holdings knows that they are not illegal. So, why the bad rap? It is because these very legal, above-board accounts have been misused or used to hide money.

    Offshore banks have been connected to money laundering, tax evasion and straw men and shell companies. Famous and wealthy spouses have been caught hiding money in bank accounts in other countries in an effort to hang on to their monetary assets or pay their former spouse less alimony. These activities and the press’s coverage of these behaviors have contributed to offshore accounts being  construed as, quite erroneously, illegal.

    The shift to globalization

    Today’s world is one of international flow; products, services and finances do flow across borders. It makes sense then, that investors and others with significant monetary assets would optimize their banking whenever possible.

    Banking laws are germane to the country or jurisdiction of the bank’s location. If one country or area has laws that offer lower or no taxes on financial assets, it would make sense for a savvy investor to take advantage—quite legally—of that opportunity. If these same areas also offer anonymity, this may also serve the best interest of the investor. Many of the countries where companies put their assets are both politically and financially stable. Therefore, by making use of a financial intermediary, such as an offshore bank, an investor or fiduciary is in fact fulfilling their duty to their shareholders.

    Where offshore accounts are typically held

    Across the globe there are many places that make sense to hold assets. There are also many offshore banking service providers. According to aggregate data, the five most stable and favorable countries or jurisdictions for offshore banking are:

    1. Cyprus
    2. Liechtenstein
    3. Panama
    4. Cayman islands
    5. Switzerland

    Mauritius, Singapore, Belize and Puerto Rico are also very popular countries for offshore banking. Some countries are no longer either financially, economically or politically stable and are not recommended for banking, most notably at this writing Ukraine, Syria and Venezuela.

    Honesty is the best policy

    As with any business or legal undertaking, following the rules and being above-board is the best protection you can provide for yourself. Pay your taxes on the income you make. Complete the FBAR form and file it with the IRS. Provide information to the IRS on offshore accounts that involve over $10,000. Avoid confusion and acting without clarity. When in doubt, consult an attorney who works with tax issues.

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