Offshore Banking and Banks

This is the one area that creates the most concern and also the most protection for offshore investors and businesses. Everyone keeps reading about bank problems and not being able to get your money out, etc. Well we have not had any problems with the institutions in Guatemala which we have used over the years. Some of these banks are not common names and some have mid size capitalization, but they all use proper banking rules and regulations and have connections to major banks. We also believe in using banks with “brick and mortar”, ie they are real and are not just a web-site from somewhere and they have knowledge-able and understandable staff on hand.

There a lot of scam and fake banks out there so invest wisely. Its almost as important to decide on which bank operation you will be using as it is to incorporate in the “right” jurisdiction.

You can incorporate almost anywhere in the world, but it is getting extremely difficult to open a new bank account, even in places like Panama.

Opening bank accounts
The company will normally need a bank account to handle its financial transactions and this should, of course, be offshore. We normally open bank accounts where we have close relationships with the bank and can help control the client's affairs better. Banking arrangements in some of the offshore centres are often very inefficient.

But, no reputable bank, nowadays, will simply open an account for you on a whim. They all follow the “know your client” rules. Some banks are extreme in their information requirements, while others need only the minimum, but they all require some details that, the signing officer must provide. Basics include passport and license copies, bank and professional references, ownership details of account and source of funds. The banks that ask for more than that simply do not want your business.

It is now being reported that some banks in Panama want 2 banking references, the past 3 years of your tax return and a business plan for your company. And even then, it is taking 2-3 months or more to get an active account.

Banking secrecy
Offshore banking is founded on secrecy. Bank staff sign declarations of confidentiality and the system would fall down if clients did not have faith in the secrecy of their affairs and transactions.

In some countries this is underwritten by law, but in most it is an unwritten rule strictly adhered to. It should be noted, though, that exchange of information clause in most tax treaties may enable the tax authorities in one treaty country to obtain information about bank accounts held by one of its residents in the other treaty country.

The key is that we use a bank that has complete privacy and confidentiality laws, from the jurisdiction. That is, they cannot, by law, divulge information or details about the accounts and the account holder. Many times, IRS, or Revenue Canada or Inland Revenue try to get details about transactions or are looking for asset details, and parts of a good defense are the banking laws and the institutions used. Guatemala has very strict banking laws and has no mutual tax agreements or tax treaties with other countries.

Deposits
Another element is the level of “deposit”. Many European banks (particularly Swiss) have minimums at $250,000, others have $100,000. Many though will get by with as little as $5,000. That means that some funds must stay in the account. Many banks will pay a small return on funds “on account”, perhaps 1-2 % pa. Most banks will be happy to provide CD’s or GIC’s with returns relatively equally to North American rates.

Why Bank There
The key is to identify what you need the bank for. To us, it is no more than a holding account that is used for transactions to other investment vehicles or for business purposes. Anyone with large funds offshore will be investing those into many various institutions and vehicles. No one should be keeping large amounts of cash “in the bank”. It does nothing for you but give small returns when there are so many other possibilities.

The final point is that for US taxpayers, certain signing authorities are to be reported to the Treasury Dept on the special form. This is another area that we can provide some assistance with through our private management and secure bookkeeping services.

Setting up a Foreign Bank Account
It’s actually more difficult to open a bank account in a reputable tax haven than it is to open an account in Canada or the U.S. They usually require more details and are more stringent with respect to funds deposited and timing of withdrawals. It does vary from bank to bank and within jurisdictions but most elements are similar. Many banks require that the person is “at the bank” to open an account, while others will accept notarized copies of documents and legal papers.

Copy of passport and drivers license
Reference letter from present bank and another professional
Bank forms signed and sealed
Details as to original source of funds and use of at the bank
Approx amount of deposits and frequency
Signature stating that funds are not from Drug and money laundering
Names of “owner” of bank account
Copy of utility bill
Copy of Business formation and certificates
Deposit of between $1,000 and $25,000 (most Swiss banks require $250,000)


Remember that most banks are used as funnels only. That is, funds are placed and then sent out to other locations in order to be invested and grow.

Also watch out for the monthly fees and service fees imposed on transactions. Many clients have been charged hundreds or thousands a year above normal fees. All of this because someone originally wanted to “do it cheap”.

We can open bank accounts in Guatemala for our clients with minimal banking due diligence. But we do require full knowledge for our law firm.

IMPORTANT NOTE REGARDING BANK SECRECY
With the new rules of the latest US / UK / OECD etc tax treaty and information agreement, the Bahamas, the Caymans, British Virgin Islands, Turks & Caicos Islands, Channel Islands, Isle of Mann and Bermuda, Austria and more are under EU, UK and US pressure. They are all have removed tax evasion exception from their secrecy and confidentiality laws. Thus, if the IRS goes to Bahamas or Grand Cayman and alleges that someone has committed the US crime of tax evasion, the authorities will be required to assist making available financial records, etc., for that person to the IRS. Similarly, banks and trust companies, etc., in those jurisdictions will not be able to resist the IRS’s requests. Thus, there will be NO BANK SECRECY in these jurisdictions for Tax Authorities once these exemptions are eliminated.

We have developed various asset protection elements for our clients so the funds can be better protected and our clients can feel more secure by going offshore. Call our office or send an email to discuss the options and opportunities. www.guatemalalaw.org

Published in Sections: Asset Protection :: Guatemala Bank Account :: Guatemala Corporation :: Guatemala Foundation :: Resources and Information ::