Banking secrecy used to be a big deal. And while it’s all but dead, there are still a lot of rumors floating around the internet saying that it can still be achieved… it can’t.
What many of these innocent people don’t understand is that these experts either don’t understand the current banking environment, are oblivious to where the banking industry is heading, or simply choose to ignore the blatant fact that banking secrecy is over.
Instead of trying to find loopholes or tricks to increase “secrecy,” people should take the steps to legally structure themselves, and their affairs, and acquire fiscal residency in appropriate jurisdictions.
The top rumor that we see being constantly shared about banking secrecy is that non-CRS banking allows you to maintain your privacy and not have your private financial information sent to governments.
Generally speaking, information sharing is here to stay and just because a country didn’t officially join the CRS as a full member yet, does not mean that it won’t still share information now or in the future.
Banking Secrecy vs Information Sharing
Information-sharing agreements are changing the offshore banking world. That’s a fact.
Today, banks are exchanging personal tax information with tax authorities around the world at the fastest rate in history.
According to the OECD, in 2018, banks sent tax authorities personal financial information on more than 47 million customers. That includes all their financial holdings, transactions, and personal details.
Why? Because governments want to collect tax revenue from people that are trying to illegally hide money offshore.
So, what happened when banks started to share information with governments?
Believe it or not, people started reporting their taxes.
In fact, over 500,000 people disclosed offshore assets to their domestic tax authorities for the FIRST time ever.
Governments everywhere applauded. CRS member countries uncovered an additional $8.3 billion in tax revenue that never existed before.
What Does This Mean for Governments?
More money. Thanks to information sharing agreements, governments rake in more tax revenue by collecting more information on taxpayers than ever before.
For the first time ever, governments can instantly and easily identify tax evaders and see all the financial holdings of their taxpayers overseas.
This means governments that implement info-sharing agreements will collect more tax revenue, generate more back-taxes and penalties, and scare more taxpayers into reporting their taxes and financial holdings properly.
As far as participating CRS countries are concerned, information sharing is (and will continue to be) a huge success. It’s here to stay.
Now you might be less concerned with how governments benefit from information sharing, and more interested in what this means for individual account holders.
What Does This Mean for Individuals?
If you bank internationally, the answer is pretty simple: it’s time to get your affairs in order. If you are not reporting properly, start. And if you have yet to structure yourself strategically, it’s time to take action.
Simply put, there is nowhere to hide anymore. Governments will soon have all of your financial information… if they don’t already. Banking secrecy is a thing of the past.
If you do not carefully consider and structure your residency, your business, and your assets now – you will be vulnerable to overreaching governments, draconian laws, and higher taxes later on.
This is just another reason why it’s so important to start taking steps to protect yourself and your assets now, before it’s too late. And opening an offshore bank account is one of the most important steps in that process.
Why Does the Death of Banking Secrecy Matter?
We’re at a critical time in history. Governments have never had this much power or information on their citizens.
For the first time in history, governments have the tools they need to recoup billions in tax revenue. And, all they have to do is sign an agreement (like CRS) and modify their tax laws to get at it.
Even if you live in a country with a territorial based tax system, those systems can change. Preparing yourself for such eventualities and having a contingency plan (or Plan B) will protect you in the future.
It’s important to recognize boiling frogs when you see them – so you can structure yourself (and assets) properly and get ahead of the storm.
To do this, you need the right information to diversify and protect your assets, grow your wealth, increase your freedom, and maximize options – before it’s too late.
Here’s What You Need to Know About the Death of Banking Secrecy
1. Banking Secrecy is Dead
Gone are the days of numbered accounts and hiding money in Swiss banks.
Banking secrecy is dead. You can’t hide money from governments in offshore tax havens or foreign banks anymore.
Banks and governments automatically exchange information now, thanks to CRS and FATCA. And this is forcing taxpayers with offshore bank accounts to report their taxes and financial holdings – or face devastating consequences.
As a result, how people and companies bank offshore, minimize tax, and structure themselves is changing dramatically.
And the offshore banking world is changing too. There are new challenges, obstacles, complications, and prerequisites to banking offshore that simply didn’t exist five years ago.
2. Tax Residency is Critical
Thanks to FATCA and CRS, foreign banks are now legally required to share information on their customers with tax authorities. They are the ultimate fail safe against banking secrecy.
This means that fiscal residency, or “where you pay taxes”, is increasingly important. As long as you have your fiscal residency in place and you report (and pay) taxes correctly, you shouldn’t have any issues.
Not surprisingly, demand for residency in low tax, no tax, or territorial tax jurisdictions is increasing. And if you haven’t already secured your residency as part of your broader offshore strategy, you should be looking at options now.
Like most things, the residency options that are currently available won’t last forever. And as demand continues to increase and pressure from other governments continues to intensify, costs will go up and certain residency options will disappear.
3. The “Best” Offshore Strategies Will Change
The offshore strategies and banking practices that people used in the past are no longer applicable and have dangerous consequences. They are outdated and need to be updated for the new realities and regulations that now exist.
For example, in years past, global citizens and digital nomads regularly used the “perpetual tourist” tactic to avoid paying taxes, avoid having tax residency anywhere, and to try and achieve banking secrecy.
The idea was simple: just travel constantly, don’t acquire tax residency anywhere, and you don’t pay taxes anywhere. When opening bank accounts overseas, many would proudly state that they “were not a tax resident anywhere,” get an account open, and not report those funds to their home countries.
Being a perpetual tourist was (and still is) a flawed strategy.
This group now has tax problems because all of their account information is automatically being sent to their home countries under CRS. That’s what happens when you assume you have banking secrecy but you don’t do the necessary work upfront.
Because members of this group do not have tax residency, they have difficulties opening bank accounts and keeping their current accounts open. Plus, people who can’t prove tax residency are more vulnerable to have their accounts frozen or closed.
Had this group seen the writing on the wall and understood how information-sharing would negatively impact them, they could have simply re-domiciled in a country with a more favorable tax system.
The “perpetual tourist” strategy is just one example of an outdated offshore strategy that no longer works and must be updated for reality. There are hundreds of other examples.
Banking strategies, corporate structures, and tax plans all need to be updated as rules change.
The reality is that the offshore world is becoming increasingly transparent and governed by new rules. Those who deny reality risk getting blocked out of the banking system, being denied bank accounts, and getting hit with tax consequences and penalties because they were chasing banking secrecy.
4. Offshore Money is Heading to the USA
In addition to changing strategies and structures, information-sharing agreements are also changing the way that money flows, where it flows, and which banks it flows to.
For instance, now that CRS is widely implemented, many individuals and companies are simply moving money and assets to the USA to avoid CRS.
Their logic for this approach is pretty simple. The US is not a signatory to the CRS. So, the US doesn’t exchange information about non-US taxpayers who bank in the US.
The OECD likes to say that their information-sharing agreements are a success because “foreign-owned bank deposits in international financial centers are 22% lower than in 2008”.
But the reality is that this money just moved to the US. And as far as we can see, it’s going to continue moving to the US in the coming years, which will further perpetuate the US’s perceived status as the #1 tax haven globally.
5. USA is Non-CRS. But That Doesn’t Mean it Has Banking Secrecy
Now, while many people think that they can avoid the CRS and avoid paying tax in their home country by simply moving all of their money to the USA, they’re wrong.
Carelessly moving money anywhere, especially to a non-CRS country like the US, can have disastrous consequences.
Here’s what almost every “offshore expert” gets wrong about CRS and banking secrecy:
If you’re from one of the 90 countries that have ratified a bilateral tax treaty with the US, your country can simply request information on all taxpayer accounts held in the US via something called a “John Doe Summons.”
So even though the US didn’t sign CRS and doesn’t automatically share information about foreign taxpayers under CRS, they have to comply if the foreign country applies for a John Doe Summons.
And given the success of information-sharing agreements and the amount of additional tax revenue countries can generate, it’s safe to assume they will use every option available. This can include a John Doe Summons, which will break whatever banking secrecy you thought you had.
Oh, and before you think the US is going to turn a blind eye to any indiscretions, think again. The US considers foreign tax evasion a crime if it is committed using interstate wires (a.k.a the US banking system).
For example, let’s say you evaded taxes in your home country by moving money into the US. You may have done this through the banking system via wire transfer, phone, or fax. In the US, that’s a crime called “wire fraud”. So in addition to being in hot water back home, you’re also going to have legal issues to deal with within the US.
6. Non-CRS Banking is Short-Sighted
If you want to avoid the CRS or want to minimize taxes in your home country, banking in a non-CRS country isn’t the solution.
Stop listening to “offshore experts” that tell you which countries are not signatories to CRS. It doesn’t matter.
These countries will eventually adopt information-sharing agreements. And your financial information will eventually be exposed, and you will eventually get in trouble.
What you really need to do is to get your finances in order now and start reporting properly. Then, figure out which countries you ideally want to pay tax to in the future and re-domicile there.
What Does This Mean for You?
The message is clear: information sharing is here to stay. Your bank will be sharing your information with tax authorities in the countries where you are tax resident or citizen. It’s no longer a question of whether or not it’s happening, it is.
Report your taxes and financial holdings properly. Also, consider restructuring your financial life and your tax residency. This can include your business to ensure compliance, boost tax efficiency, and increase your options.
If you’re confident that you have your affairs in order and you’re ready to start exploring international and offshore banking as a way to increase your personal freedom and diversify, then here’s how to get started.
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