Offshore Banking – How to Do Your Due Diligence on Offshore Banking


OK, so you’ve decided to open a bank account. You’ve done your research and found banking “opportunities.” They look good to you and you seem to be acceptable to them. With that first hurdle cleared, you need to apply a few more selection criteria. When choosing an offshore bank, there are two main factors you need to consider (besides of course privacy and confidentiality)

  • Stability – is it a well-established, solvent bank?
  • Quality of service – are they fast and efficient


Due diligence and KYB (“Know Your Banker”) is essential. There is no point in jumping from the frying pan into the fire.

There’s no reason to save your hard-earned money from your tax man or your miserly ex-spouse, only to have it disappear into a virtual black hole when your offshore bank closes. You also don’t want your investment manager wasting your money on “hot” trades that never happen, but earn him big commissions.

Nowadays, with the Internet, it is relatively easy for anyone to set up a bank. You need a license, but jurisdictions you hardly knew existed, such as Montenegro or Somalia, will, for a fee, provide all comers with a valid government-issued banking license. Try to avoid banking in these high risk areas as they attract too many scammers and dreamers. Before you invest any money, make sure that the bank you are investing in is run by professional bankers and not some Eastern European teenager with good programming and web design skills, who just to decide last month that it would be advantageous to be bank president!

Most offshore financial institutions seem solid until they unexpectedly collapse. The Marc Harris organization in Panama has attracted many clients. Marc Harris is currently serving a long prison sentence in Florida. Swedish Crozier Bank of Grenada and Saint Lucia also seemed very professional. Paritate Bank in Latvia has impressed many people with innovative products, flexibility and good customer service. Now they are all dead. They all sank, taking their customers’ money with them. (In fact, Paritate is back up and running, but the old investors never got their money back).

Another thing to consider when reviewing the websites of banks in exotic locations: any bank anywhere that uses shady characters will (sooner rather than later) be shut down by regulators. You don’t want your hard-earned money mixed up in such a mess. Avoid banks that explicitly encourage you to hide your money.

It is almost unheard of for large banks in early civilized and well-regulated financial centers like Luxembourg to be corrupt from top to bottom. But, of course, even the improbable can happen! This is exactly what happened not so long ago with the Bank of Credit and Commerce International (BCCI) which was registered in the UK and Luxembourg.

The bottom line is that due diligence is important. Most offshore banks are very reputable, stable, well managed and professional. It is those who are not who make the headlines. But it’s important to ask questions until you’re completely comfortable, and to seek a second opinion (from people who know what they’re talking about) if you don’t feel completely confident in your own offshore knowledge. . Don’t believe everything you read on the net or in a glossy brochure. Always ask for a copy of the annual report, to start with, and if you don’t feel confident analyzing it yourself, ask a professional such as an accountant or financial adviser. Then, search the internet for the bank’s name and SWIFT code, this should bring up negative comments or involvement in questionable transactions.

Quality of service

“Different shots for different people,” they say. You’d be surprised how good service means such different things to different people. For some, it might be a friendly old Swiss banker who treats you to lunch, gives you a nice golf umbrella, and chats for a few hours. He will want to know everything about your financial, business and social situation.

Other people may prefer a banker who just does as he’s told and never suggests that you have personal meetings. You may prefer it if your banker doesn’t even know what you look like. Maybe all you want is a good internet interface to be able to transfer money in the middle of the night if you want, with extremely smooth technological efficiency.

Some people like their personal banker to know them and trust them enough to move six or seven figures based on a single phone call or email. This would be shocking to other clients of mine who first want to login via an encrypted five step security system with three passwords plus a one time code generator operated by a 6 digit PIN to give instructions !

Buying banking services is like buying any other service. You can check websites and brochures, talk to people. How quickly and efficiently do they respond to phone calls and emails? It’s always a good indicator. I’ve dealt with banks that respond to emails in a foreign language within five minutes if you email them in the middle of the night in their local time, and others that absolutely never respond to an email, or who state on their website that they will respond “within five business days”. Well, that kind of defeats the purpose of emailing, doesn’t it?

So, too, nothing is eternal. If you receive bad service or hear rumors you don’t like, you can opt out immediately. At least you should be able to. This is something worth checking out too!

Source by Peter Macfarlane

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