Hiding Money Offshore

Quatloos! > Investment Fraud > Financial Planning > Hiding Money Offshore

Also known as:

Secret Bank Accounts
Secret Offshore Bank Accounts
Anonymous Accounts
Swiss Bank Accounts

What It Is

You place your money with someone offshore. They declare that the money is theirs, and you deny that the money is yours. The money then grows tax-free, and your creditors can’t get it since you will deny that it exists.

The Problems

Whoever you’ve given your money disappears with it, or will not give it back, and you can’t go to the authorities for fear of revealing that you have committed tax evasion.
Whoever you’ve given your money to not only keeps your money, but actually extorts additional money out of you, which you pay so that they don’t reveal that you have committed tax evasion.

Frequency

This happens ALL THE TIME. Every day some sucker gets off his or her cruise liner at some offshore centre, walks over to the nearest offshore service provider and says "I want a trust and a secret bank account" and then hands them the money. And, about once a month, a publication such as Offshore Alert or a scam site somewhere will run a story about how an offshore service provider disappeared with their clients' money.

We wish we could find a statistical breakdown of how much money disappears by the process, but I can't because the inherently secretive nature of these transactions means that there is no reporting upon which such statistics could be based. However, we estimate that worldwide it is easily in excess of US$100 million annually, and perhaps much more.

Commentary

It is easy to get sucked in by offshore service providers (after all, the major offshore banks encourage you to have secret accounts) because there is a "Hide the Money" atmosphere offshore. They will show you the laws of the offshore jurisdiction (which, after all, are structured just for this very purpose) and tell you that there is "no way" that the Revenuers could ever find out what you have done.

The rub is, however, that for this to work you can’t declare that you have an interest in the account or report any interest earned on the account. This means that you are committing tax evasion -- a very serious crime. This means that if the offshore service provider simply keeps your money and refuses to give it back, you are pretty much screwed. You can’t go to your government to complain, and the government of the country where you placed your money will probably protect the offshore service provider more than you (after all, it is bad business if it admits that an offshore service provider was embezzling money). So, you’re just screwed -- and worse the offshore service provider might start embezzling even more money out of you by telling you that they will turn you in (and send you to prison and ruin your life) if you don’t cooperate.

Solution

The solution is to JUST DON’T DO IT. Don’t ever trust your money to anybody but yourself, or a well-regulated bank or trust company. And don’t try to hide your money from the IRS -- life is too short for the grief of worrying about this. Structure your affairs so that you can disclaim the money when creditors come knocking, but if you really own it report it to the IRS and pay your taxes on it (there are a variety of ways that you can legally declare it to the IRS while at the same time innoculating it from creditors, such as by forming an offshore limited partnership) and then keep it in a respected and regulated offshore bank or trust company.

Because if you hide the money, the next most likely thing to happen is that your money will then be hidden from you.

Report of Foreign Bank and Financial Accounts

If you own a foreign bank account, stock account, mutual fund, unit trust, or other financial account, then you may be required to file a Treasury Department Form 90-22.1, which provides in part as follows:

This form should be used to report financial interest in or signature authority or other authority over one or more bank accounts, securities accounts, or other financial accounts in foreign countries as required by the Department of the Treasury Regulations (31 CFR 103). You are not required to file a report if the aggregate value of the accounts did not exceed $10,000. SEE INSTRUCTIONS ON BACK FOR DEFINITIONS. File this form with Dept. of the Treasury, P.O. Box 32621, Detroit, MI 48232

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INSTRUCTIONS

A. Who Must File a Report -- Each United States person who has a financial interest in or signature authority or other authority over a bank, securities, or other financial accounts in a foreign country, which exceeds $10,000 in aggregate value at any time during the calendar year, must report that relationship each calendar year by filing TD F 90-22.1 with the Department of the Treasury on or before June 30, of the succeeding year.

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B. United States Person -- The term "United States person" means (1) a citizen or resident of the United States, (2) a domestic partnership, (3) a domestic corporation, or (4) a domestic estate or trust.

D. Account in a Foreign Country -- A "foreign country" includes all geographical areas located outside the United States, Guam, Puerto Rico, and the Virgin Islands.

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F. Bank, Financial Account -- The term "bank account" means a savings, demand, checking, deposit, loan or any other account maintained with a financial institution or other person engaged in the business of banking. It includes certificates of deposit.

The term "securities account" means an account maintained with a financial institution or other person who buys, sells, holds, or trades stock or other securities for the benefit of another.

The term "other financial account" means any other account maintained with a financial institution or other person who accepts deposits, exchanges or transmits funds, or acts as a broker or dealer for future transactions in any commodity on (or subject to the rules of) a commodity exchange or association.

G. Financial Interest -- A financial interest in a bank, securities, or other financial account in a foreign country means an interest described in either of the following two paragraphs:

(1) A United States person has a financial interest in each account for which such person is the owner of records or has legal title, whether the account is maintained for his or her own benefit or for the benefit of other including non-United States persons. If an account is maintained in the name of two persons jointly, or if several persons each own a partial interest in an account, each of those United States persons has a financial interest in that account.

(2) A United States person has a financial interest in each bank, securities, or other financial account in a foreign country for which the owner of record or holder of legal title is: (a) a person acting as an agent, nominee, attorney, or in some other capacity on behalf of the U.S. person; (b) a corporation in which the United States person owns directly or indirectly more than 50 percent of the total value of shares of stock; (c) a partnership in which the United States person owns an interest in more than 50 percent of the profits (distributive share of income); or (d) a trust in which the United States person either has a present beneficial interest in more than 50 percent of the assets or from which such person receives more than 50 percent of the current income.

H. Signature or Other Authority Over an Account --

Signature Authority -- A person has signature authority over an account if such person can control the disposition of money or other property in it by delivery of a document containing his or her signature (or his or her signature and that of one or more other persons) to the bank or other person with whom the account is maintained.

Other authority -- exists in a person who can exercise comparable power over an account by direct communication to the bank or other person with whom the account is maintained, either orally or by some other means.

I. Account Valuation -- For items 7, 9, [of the form] and Instruction A, the maximum value of an account is the largest amount of currency and non-monetary assets that appear on any quarterly or more frequent account statement issued for the applicable year. If periodic statements are not so issued, the maximum account asset value is the largest amount of currency and non-monetary assets in the account at any time during the year.

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O. Penalties -- For criminal penalties for failure to file a report, supply information, and for filing a false or fraudulent report see 31 U.S.C. 5322(a), 31 U.S.C. 5322(b), and 18 U.S.C. 1001.

Would this include a debit card? Yes! -- Many offshore service providers will tell you that they will own the account, but you will get a debit card to use, and the debit card does not trigger the filing of the TD F 90-22.1. This is completely false, as a debit card clearly constitutes authority over the account. Use of a debt card for an unreported account over $10,000 is tax evasion.

Will the filing of this form cause me to get hung up in Customs or audited? This is a stupid question, if you think about it. The Treasury Department is looking for people who don't file the form, not those who have filed it. If you shuffle tens of thousands of dollars in and out of the country by wire-transfer every year and then don't file the TD F 90-22.1, you can pretty much count on being audited and then forever hung up in Customs.