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Life Member: The Top
Trial Lawyers in America

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… and it may surprise you with what follows below as the US financial situation continues to worsen.
The catastrophe looming in the documentary "I.O.USA.” isn't romantic like the doomed young love in "Titanic," but billionaires Warren Buffett and Pete Peterson warn Americans that they may very well be in for a far worse heartache. Buffett has long warned that the nation's trade deficit is a ticking time bomb, and he warns what’s ahead is bigger than any we've seen thus far during the past year.
What’s more, the two native Nebraska natives warn, if the US doesn't do something quickly to tame the $59 trillion federal government's debt, we will threaten our retirement years and saddle our children with even greater economic problems.
America’s Field of Vision
A year after the credit crisis first exploded US policymakers are still scrambling for ideas. On Friday, August 22, 2008 Chairman Ben Bernanke spoke at the Kansas City Fed’s annual conference in Jackson Hole, Wyoming about the Fed’s steps during the past year to help fix the US financial system. Unfortunately, Bernanke and the US Congress is only just now waking up to the fact that the US financial system needs a major overall to protect it from a major collapse by strengthening the overall infrastructure.
Bernanke stated “This experience (over the past year) has led me to believe that one of the best ways to protect the financial system against future systemic shocks is by strengthening the financial infrastructure…”
What’s more, he only now seems to understand the importance of building a strong banking system, beginning with conservative banking practices and overall financial governance under strict supervisory controls. This new lesson for Americans has been the hallmark of many quality banks and financial systems around the world for decades, or longer.
Surprisingly, Bernanke admits he still doesn’t have a clear path for the future of US banking when he states “Going forward, a critical question for regulators and supervisors is what their appropriate “field of vision'' should be. The development of supervisory guidances is a process which involves soliciting comments from the industry and the public and, where applicable, develops a consensus among the banking regulators.”
And consider the comment made by former Fed Chairman Paul Volcker as Helicopter Ben tosses more liquidity to the panicked crowds during recent months: “Too many bubbles have been going on for far too long. The Fed is not really in control of the situation.” 
This isn’t a Republican or Democratic problem, but an American problem. We sure hope someone soon in the US figures out what the appropriate “Field of Vision” is for the financial well-being of American banks. And sooner, not later.
And how would such new “consensus of supervision” over US banks differ from current practice anyway?
America’s current patchwork of supervisors is poorly suited to the task: it encompasses 5 federal bank regulators, 50 state regulators, separate securities and futures regulators and now a new supervisor for quasi-private mortgage companies, Fannie Mae and Freddie Mac. Almost certainly, Mr. Bernanke would like the new supervisor to be the Fed. But by contrast, as the system worsens, Treasury Secretary Henry Paulson has proposed largely stripping the Fed of such powers and giving them to a consolidated prudent regulator, while leaving the Fed broadly responsible for financial stability.
This is a banking system we are supposed to trust for our retirement and children’s future? It’s time Americans stand up and demand better for their financial future.
In the meantime, many other banking systems elsewhere around the world already practice frugal, conservative banking practices to avoid losing customer’s money, or wasting your tax dollars to bail out bad financial practices.
Looking for Banking Alternatives?
Unless you’ve been living in a remote cave, you are probably very much aware that the world of international banking has undergone enormous change. If you have limited experience with offshore banking, it is easy to become intimidated by the process. But if you understand things do not always operate the same as at home, and you’re willing to learn to do in Rome as the Romans do, you’ll be fine in working through the process.
First, the OECD and FATF’s (Financial Action Task Force) ongoing attacks during the 1990’s against so-called “tax havens” resulted in many offshore jurisdictions agreeing in principle to more transparency. Many of the foreign nations who aggressively sought your banking business agreed to greater transparency in business operations and superior “know your customer rules.” Alternatively, many offshore banks simply refuse to deal with US citizens ... with this increasingly being the case.
Then the Patriot’s Act made a fresh new impact on all global banking transactions. Financial transactions immediately came under closer scrutiny as governments in coordinated effort attempted to monitor and trace bank accounts. Suddenly, every banking transaction came under increased government scrutiny, even though they very rarely result in the conviction of a crime.
Of recent is the Basil II Accord, an attempt to create uniform banking standards globally. Whether you believe these banking changes are kowtowing to big brother, or a uniform set of global rules being implemented, the fact is, changes continue throughout the world of banking.
The US wants to keep your hard-earned money close to home for its own purposes, so it takes great effort to denigrate offshore banking. If you are bored and want to read some of the stuff that made Tom Cruise popular in The Firm, then read the latest 114 page report published by the US Senate Permanent Subcommittee on Investigations entitled Tax Haven Banks and US Tax Compliance. (Send me an email and I’ll forward you a copy)
Your Offshore Banker
With the above being said, does this mean that offshore banking should be avoided?
Certainly not, but keep in mind that transacting business through an offshore bank today is much different than only a few years ago. Truth be told, I believe the reasons for offshore banking are far greater today. The needs for international financial investment diversification, flexibility with the free movement of people and capital, protection against US currency devaluation, and preservation of your hard-earned money against frivolous lawsuits are just a few of the good, legitimate reasons for offshore banking. These reasons have always existed, and endure even more today than ever before.
The problem is that the experience of opening a new offshore bank account today can sometimes be on-par with having dental surgery. Living in one country and attempting to open an account elsewhere without a good referral source can be very challenging. Obtaining an introduction from an experienced international lawyer, or other good, reliable and legitimate professionals, is an important first step in establishing a new offshore bank account. And then you must do your homework.
A small offshore bank with potentially inadequate capital and reserves must be avoided. Some of these fly by nights have been plagued by banking scams. And finding adequate deposit insurance - known as FDIC in the US - is not common elsewhere. Losing capital to marginal banks is not unusual.
However, major multi-national banks are typically well capitalized with very large reserves. In the better offshore jurisdictions, these banks are highly regulated by the Central Bank or local government authorities. Generally these banks are more financially sound than US banks, since they operate under more conservative and sounder banking practices. Doing business with these banks can be similar to banking in the US, but without exorbitant fees and the slow service.
But there are several problems in dealing with the large multi-nationals. First, even the private bankers for high net worth individuals often operate in a cookie cutter fashion. Instead of customized service you can often feel like you have been run through an assembly line. Investment products can be a one-size fits all mentality. And too, if you transfer your money to a large multi-national bank offshore with a domestic branch, you might find the funds tied up by virtue of a lien back home. This effectively means the safety of fleeing capital is only an illusion.
A bank with a US branch might be fine when there is no litigation, but it becomes essential to know about branch banks if asset protection is necessary. If your offshore bank has a local jurisdiction presence when litigation begins, it is certainly time to move to a different bank.
For the above reasons, most people looking to protect cash offshore, stay with a solid mid-sized bank with large reserves and solid capital funding, but without a US branch. There are many of these solid banks located throughout Europe and Australasia.
Some people incorrectly believe offshore banking creates a negative stigma. They believe the money must be from tainted sources. And when banking in a small, questionable tax haven, this ill-founded belief becomes more certain in their mind. To avoid this ignorant mentality, banking in jurisdictions with sound reputations avoids some stigma. However, if you have legitimate reasons for banking offshore and all income is reported and compliance issues are satisfied, then why worry about the ignorance of misinformed others?
From an offshore banker’s perspective, most take the responsibility to “know your customer” seriously. This is more than just a catchy phrase, and has become a hard and fast rule before gaining entry into a new banking relationship. Today, due to stringent banking regulations your new banker will want to know who you are and where the source of funds originated. Be prepared to prove who you are and the source of money with your new offshore banker before an account is opened.
Once your new banker feels comfortable with establishing a relationship with you and your money, you will endure an exhaustive list of application forms and ancillary documentation to establish your new account. This may test your patience. While the requirements will vary from bank to bank, they have all established a very complete and thorough documentation process that must be signed, witnessed, certified, and notarized, along with multiple forms of identification. Providing original copies of bank statements and utility bills with your home address is not unusual. Signed, sealed and delivered is rarely enough.
I have found that the Germanic banking countries, such as Switzerland and Austria, can be almost anal retentive in their exhaustive pursuit of detail. Other banking jurisdictions in Australasia can be a bit more flexible and require less documentation and formalities, but be prepared for more compliance and documentation than ever before. All good banks will take their duty serious.
Naturally, the level of banking services will vary from bank to bank. In the US the term “Private Banking” is seldom used. And creating a “foreign account” for foreign held currencies is almost unheard of in the US. The good news is that when banking offshore you will find the larger your deposits, the greater availability of services.
Generally gaining entry into the private banking departments, or “Key Accounts”, requires larger deposits. The amounts vary from bank to bank. Sometimes $100,000 or $200,000 will start a relationship when promises of more to follow are made. Others may require between $250,000 and $500,000, while larger multi-national banks may require new deposits of $1 million plus. And negotiated “bumped up” interest rates on deposit can increase significantly with larger deposits. For smaller deposits you will be limited to retail banking services with lower retail rates.
When using an offshore bank you can invest directly into other products, or arrange for investment advice through your banker. Since more than two thirds of all equity and income opportunities are located beyond the shores of the US, this opens up a whole new investment world. The investment products offshore are typically far greater than your run of the mill savings and checking deposits found in the US. But US taxpayers must watch out for the Offshore Mutual Funds Tax Trap.
But Can Offshore Banks Be Trusted?
There are a huge number of banks around the world, including more than 7100 in the United States, and Standard & Poor's rates more than 2000 of the worldwide banks.
By way of example in Australasia, New Zealand depositors are fortunate that the 4 largest domestic banks - ANZ National, ASB Bank, Bank of New Zealand and Westpac - are in an elite group of only 28 banks, out of the 2000 plus, that are rated AA or better. The New Zealand Banks are owned by larger Australian Banks, and these banks are subject to Reserve Bank supervision and are required to have a high level of disclosure.
Of these elite 28 banks, 7 are based in Switzerland, 4 in the United Kingdom, 4 in Australia and New Zealand, 4 in the United States (yes, only 4), 3 in Spain, 2 in The Netherlands and 1 each in Luxembourg, France and Belgium.
There are only 5 AAA rated banks in the world - 3 Swiss private banks, Rabobank and Wells Fargo Bank. The AAA rated Rabobank operates in New Zealand. 
Six of the 28 banks with an AA rating have New Zealand activities: the 4 largest Australian banks, Hongkong and Shanghai Bank and Citibank. (They are currently offering 7 1/2% to 8 1/2% rates on NZ$ and AU$ deposits.)
Another feature of Australasian banking is that bank failures, where depositors lose money, are extremely rare. The last retail bank failure in New Zealand was in the 1860s – almost 150 years ago. Since the 1860s, there has been no banking loss to depositors.
And across the Tasman, the last bank failure in Australia was in 1931, where depositors lost only a minimal amount in the collapse during the Great Depression.
There are a number of additional reasons why many offshore banks are in a far stronger position than US banks. These include:
* Banks are far better capitalized.
* They have much better governance structures and minimal loans to directors, employees and their related parties.
* Banks have diversified lending books and limited exposure to property developers.
* They have much wider funding capabilities.
* Australasian banks do not appear to have material exposure to sub-prime and other collateralized debt obligations (CDOs).
Another important point to note is that bank failures in the United States are more common because of the US Government's deposit insurance scheme. All deposits held by an individual with each bank are insured up to US$100,000 by the FDIC, funded through levies from banks and savings institutions.
An unusually large number of US banks fail because depositor insurance does not encourage best practice corporate governance.
This is reflected in Standard & Poor's ratings as 5 of the 17 NZ banks, which represent over 90 per cent of all domestic deposits, have a AA or better rating, while only 4 of the 7181 FDIC insured US banks have achieved this standard … yes, only 4 in the US.
How Best Establish Your Offshore Banking Relationship?
An International Trust should be the centerpiece of your financial structure.
When investing through an entity foreign to an offshore jurisdiction you can legally avoid or minimize local income taxes. For example, an Arizona or Nevis LLC will be considered “non-resident” in New Zealand or Australia. This will create a non-resident withholding tax obligation (NRWT) of 2% or 10%, respectively, which will be automatically withheld and paid to the local tax authorities (which you can credit against your US tax obligations). The interest or dividend income will still pass through an LLC to your International Trust, and then on to you, but it is less foreign income tax credits you need to claim on your personal income tax return. And too, there is less potential of US individuals losing these foreign tax credits through AMT (alternative minimum tax).
And with an International Trust you are creating roadblocks and obstacles that are increasingly difficult to overcome by potentially aggressive litigants. You too can discover a better world by going offshore for asset protection, banking, privacy, financial diversification, freer movement of capital, and protection against currency devaluations, along with an elevated level of banking services not found at home.
Remember, making money is the first step, but keeping what you have worked long and hard for is the bigger financial challenge of life. You can learn more in “How to Legally Protect Your Assets.”
Income Tax Evasion
And one last point…
... yes Dorothy, even in Kansas it is perfectly legal for global citizens to maintain a foreign bank account. However, the US government wants to know about those accounts for tax reporting reasons. US persons are therefore required by law to report any income from foreign bank accounts, even though the income earned in those accounts is not reported to the IRS.
As a reminder, for US citizens, a foreign bank account is required to be disclosed on Tax Form 1040 when your personal return is filed. If the aggregate of the accounts are greater than $10,000 at any time during the year, you must report all accounts on Form TDF 90-22.1 by June 30th to disclose all foreign account information. There are severe penalties for a willful failure to file this disclosure.
Keep in mind that if you are a tax evader, there is no statute of limitations on auditing your tax return. If in your retirement years the authorities find out about a foreign bank account you forgot to tell them about, it’s all subject to penalties and interest plus the taxes, regardless of how long it took to become uncovered. And US tax evasion has no dollar threshold.
The Bottom Line:
Today, many quality foreign banks don’t want anything to do with US account holders unless there is a substantial balance. If you live outside the US this is often relaxed, since it makes sense you need cash for local transactions. And some foreign banks still require much larger deposits to take on new accounts for a US citizen. There is simply too much profitable banking business available today without banks taking on the risk of dealing with an illegitimate taxpayer.
These are the facts of life in offshore banking today with respect to US and other nationals. So this means it will take time, effort and money to build a new relationship with a foreign bank. Be prepared for “due diligence” steps as your banker gets to know his new customer. The good old days of depositing large amounts of cash with a nod and wink are long gone.
As noted earlier, there are many good reasons outweighing the burdens when using offshore banks. Asset protection and international investment diversification are excellent reasons to look offshore. Added benefits include high levels of confidentiality, security and convenience, as well as global access. You can learn more by reading “Offshore Living & Investing.” 
A whole new world awaits you … if you are ready.
Until next time.
David A Tanzer, Esq.
JD, BSc, Ph.D (Hon)
For more information visit or email to David is the author of “How to Legally Protect Your Assets” and “Offshore Living and Investing.”

David A Tanzer & Assoc., PC.

Vail, CO USA:
Tel. (970) 476-6100
Fax (720) 293-2272

Auckland, New Zealand:
Tel. (64) 9 353-1328
Fax (64) 9 353-1328

Brisbane, Australia:
Tel. (61) 7 3319 6999
Fax (61) 7 3319 6999

(Licensed to Practice Law in U.S. States & Federal Courts;
Assoc. Member Auckland, N.Z. District Law Society - Foreign Lawyer; &
Assoc. Member Queensland Law Society, AU - Foreign Lawyer)
The comments herein are not intended to constitute a legal or tax opinion regarding any specific legal or tax issue as additional issues may exist; does not reach a conclusion with respect to any specific legal or tax issue addressed herein or any additional issues not included; and cannot be used for the purpose of avoiding legal or tax obligations or penalties with respect to issues in or outside the scope of matters discussed herein.
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