Money Laundering and Offshore Banking

Whenever the term “offshore banking” is mentioned, people automatically conjure up images of money laundering charges and investment schemes. The truth is that not all offshore deposits are tied to the crime of cleaning money. In fact, a good number of these accounts are held by ordinary, law-abiding citizens.


What is Offshore Banking?

Put simply, an offshore bank account is one that is held in a country other than the one in which the holder is living. It can be opened for a number of reasons, such as:

  • Privacy
  • To provide a tax haven
  • Protection against an unstable government


Is It Legal to Deposit Money in Foreign Banks?

Although Americans may legally deposit money in foreign banks, they are nonetheless required to report the existence of any such holdings when filing a U.S. tax return. Even so, since these accounts are not numbered or tracked in many countries, a great deal of interest income nonetheless goes unreported each year.


Attempts to Regulate Offshore Investments

In recent years, there have been increased efforts among a couple of groups to either stamp out or regulate offshore investments more closely. The Organisation for Economic Co-operation and Development (OECD) and the World Trade Organization (WTO) both claim that current foreign investment practices result in unfair competition, which in turn harms the world economy. Opponents of these two groups claim that they are only looking for ways to control the money that is held in foreign accounts by campaigning for uniform regulations across the globe.

Although regulation has met with strong resistance, many overseas banks have nonetheless tightened up their policies concerning account holders since 9/11. Some of the new requirements include preventing people from establishing accounts by mail and placing certain limits on when and how money can be transferred.

If you have any questions about overseas investments, schedule a meeting with Rand Mintzer at 713-862-8880.