Are Private Offshore Banks More Secretive?

This excerpt is from an open source article and is not necessarily the opinion of bostatic.com

Part of the reason why private offshore banks are called 'private' is their reputation for secrecy. People expect private offshore banks in a country like Switzerland or Panama to keep confidential account records an issue between banker and client.

How Does Bank Secrecy Work In Practice?

The way a private offshore bank does this is twofold. Firstly, most offshore banks that purport to be confidential are located in countries with strong bank secrecy laws. The Swiss banking law or the Cayman secrecy law are good examples. Secondly, a typical characteristic of a private bank is its exclusivity. By keeping the number of clients down to a select few, and limiting the size of their own staff, well run private banks can limit the chances of a leak.

Very importantly, a smaller private bank that has no operations outside of its country of origin (often a tax haven or offshore financial centre), has no requirement to respond to information requests from foreign authorities.

Some private banks go a step further by offering 'numbered accounts'. Although a numbered bank account is not the same as an anonymous bank account, what it may do is shield the identity of a private banking client from 3rd parties. When the client sends or receives a bank transfer, his account is identified by an account number --12345678-- but his true identity is known only to the offshore bank.

But when private banks over-extend themselves and establish operations outside of their jurisdiction, no amount of tricks, accounting intrigue, shell banks or shell companies can protect the identities of their customers. When a private bank in an offshore island or tax haven opens a branch in a country that seeks information on the worldwide bank accounts of its citizens, it ceases at that point to offer any bank secrecy advantage. Numerous cases where banks have turned over confidential records demonstrate this.

So, is a small, well-run private bank in a jurisdiction known for its secrecy laws guaranteed to keep your account safe and private?

Although this is one of the more confidential options, bank secrecy in one country is never guaranteed. Increasingly, alternatives are being utilized to protect confidentiality independent of bank secrecy laws. Offshore financial companies and trusts for example that are authorized to hold client funds can legally shield their customers from 3rd parties. In all cases, due diligence must be completed, usually a notarized passport copy and proof of residence being the minimum.

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