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Offshore Personal/Private Banks

Own your own private bank and the world is your oyster, just don't choke on the pearl! Believe it or not, one of the largest inquiries we receive are from persons who have read a particular dark-blue covered book and are convinced that their path to financial heaven is an offshore private bank which they can form for $5,000 on the dark side of the moon, or the South Pacific, whichever is closer, and that the financial barons of the world will being knocking on their door with multi-billion dollar deposits, or else that their own private bank will allow them to navigate the financial waters of the US reserve system with the quiet stealth of a nuclear attack submarine.

Yeah, well good luck. If you've purchased the book you are already in the hole and you will be lucky if your losses are limited to the purchase price. Worse, you can pay the 5-figure consultation fee of one of these so-called offshore experts to review your situation for suitability. At worst, you can actually form one of these things.

Follow-Up: BusinessWeek, 1 June 1998

"That same year [1990], two Harris banks in Montserrat were shut down by British regulators cleaning up a bank scandal on that island, say regulators from the U.S. and Britain. * * * Harris . . . obtained two bank licenses from the government of Montserrat. His intermediary was Jerome Schnieder, another offshore promoter, who helped set up as many as 200 Montserrat banks in the 1980s, say two regulators. The banks collected deposits from Americans without dispensing promised loans. 'Many of the victims were retired Americans or other people on low incomes,' says a U.S. regulator." -- BusinessWeek, 1 June 1998.

The Numerous Problems with Private Banks

The principal problems with these offshore private banks are as follows:

• Despite all the fancy research memos and weird trust structures, these banks are effectively U.S. owned and controlled and therefore must report all operations to the U.S. Internal Revenue Service.

• Banks which are formed in jurisdictions which do not effectively regulate banks will not be considered banks for purposes of U.S. tax law; instead, they will simply be considered Controlled-Foreign Corporations with all the nasty tax consequences that entity entails.

• Banks which are poorly capitalized (undercapitalized) will not be considered banks for purposes of U.S. tax law.

• Banks which do not regularly conduct the business of banking will not be considered banks for purposes of U.S. tax law, i.e., if your only customers are yourself or related family or businesses it will not be considered a bona fide bank.

• Banks which are not audited annually by licensed accountants in the jurisdiction of formation will not be considered banks for purposes of U.S. tax law.

• If you try to hide assets or income in an offshore bank from the U.S. Internal Revenue Service, you have committed tax evasion and will probably pay an extended visit to Club Fed.

• See also Black Holes & U.F.O.s

OTHER RESOURCES

Goldhaven Scams Page -- http://www.goldhaven.com -- Matt Blackman's excellent site candidly reviews the various books on the offshore industry, and gives updates on the major offshore frauds. A "must read" site for those who don't know who is legitimate and who is a scammer within the offshore industry -- for instance, read Matt's review of the famous "Schneider series" on offshore private banking: "Jerome Schneider has done it again! He's dumped another infomercial on the unsuspecting public and asked them to pay for it." -- Matt Blackman