Bowman Offshore Bank Transfers on Expat Guide to Offshore Banking and Money Transfers

Expats do not have to be wealthy to switch their money to an offshore bank or building society.

The stigma of offshore comes from individuals trying to evade taxes by not reporting their earnings from offshore accounts.

But hundreds of thousands of people send money around the world through offshore intermediaries every day without a problem.

Although some offshore banks have a poor reputation, the service provided by the majority is important to the financial well-being of expats.

You know you are banking offshore when you have an account that is based in a country where you do not live.

Offshore branches going under

A tax crackdown led by the USA and Europe coupled with poor rates of interest paid by offshore banks has led to demand for the service shrinking.

Thousands of British expats need offshore banking but are finding money laundering regulations a problem.

The rules mean UK banks and credit card providers do not want expat customers, so are closing their accounts. The expats still need a bank, but many have closed leaving them high and dry.

A few well known British banks still have offshore branches, including Santander, NatWest, Lloyds and Barclays. Ireland’s Permanent, along with Standard Life and Kleinwort Benson also offer some expat services.

Most are based in Gibraltar, the Isle of Man or Channel Islands.

Opening offshore bank accounts

Offshore bank accounts are opened direct with the branches or through their UK high street networks.

The rules are the same as in the UK. The bank will want to identify you, confirm an address and seek a financial history to make sure you are not bankrupt or steeped in bad credit.

They will ask about:

·        Why you want to open an account

·        The source of the money paid in, particularly if the sums are £10,000 or more

·        Your future financial plans

Paying tax on offshore money

Too many investors and savers failed to report wealth they held offshore in a bid to minimize their tax – often by telling lies about their fortunes.

Everyone should report their holdings on an annual tax filing.

Two new international laws make hiding money and investments offshore almost impossible.

·        The Foreign Account tax Compliance Act (FATCA) covers more than 100 countries and thousands of overseas financial institutions.

The financial institution must pass a report of any accounts controlled by American customers to the Internal Revenue Service each year.

The rules apply to any offshore accounts worth $50,000 or more held by US residents. The bar is raised to $200,000 for US expats.

·        The Common Reporting Standard (CRS) works in the same way as FATCA, but rather than lots of countries reporting to the US, around 50 nations send financial information between each other. Unlike FATCA, the CRS has no reporting threshold.

The information collected by the tax authorities is cross-checked against tax filings to make sure the correct details of overseas accounts have been reported.

Deposit safeguards for expat cash

Protecting your money should a bank go to the wall is vital due to the sometimes huge sums concerned.

Onshore, the Financial Services Compensation Scheme (FSCS) offers protection on across all accounts held by one bank for the same consumer up to £85,000.

Offshore banks have different compensation schemes depending where they are – outside Europe safeguards are rare, while centres such as Gibraltar and the Isle of Man have developed their own.

However, the rules are different for each, so make sure money on deposit is not over-exposed.

Foreign currency accounts

Expats can open foreign currency accounts with UK offshore banks – generally in Sterling, US dollars or euros.

A good rule of thumb is to have an account denominated in your local currency to avoid losing money if exchange rates move too much.

Expats transferring money overseas

Moving money overseas with a bank can cost a fortune, but specialist money transfer firms are willing to do the job for much less.

Disruptive technology firms, such as TransferWise or the new expat app deVere e-Money Vault have made the process quicker, cheaper and easier.

Services like these can handle one-off or regular transfers direct from the bank through a smartphone.

Another difference is the exchange rate and transfer cost.

Many banks and bureau de change advertise fee-free transfers, but adjust the currency exchange rate to collect a margin on the deal. That’s why the rate on a receipt is different from the advertised rates posted by the financial media.

Logically, if the transfer was really free, the provider could not keep trading.

The key is study any written estimate carefully and look for lots of small, unexplained charges that look innocuous but bump up the cost.

Tracking down the best exchange rate

Searching for the best exchange rate is a waste of effort. Most firms claim they cannot publish them anyway as they change so quickly.

It’s better to look at the bottom of the quote or receipt for the amount of foreign currency you are getting from the transaction.

A professional money transfer firm should give information in writing covering:

·        The exchange rate

·        Any fees or other charges

·        A reference number

·        Details of how to collect the money transfer and if the operator receiving the cash makes any charge

·        How long the transfer will take and the final cost

It’s a good idea to ask if the operator has enough foreign currency on hand to complete the transaction right away.

Is your cash safe during a money transfer?

The UK financial compensation scheme does not cover money exchange services, but companies transferring more than £2.5 million a month into foreign currencies must be authorized by the Financial Conduct Authority (FCA).

They must have a client money protection scheme to separate your cash from that in the business.

The protection scheme will safeguard some money transfers.

Check if the compensation paid is restricted and if sending smaller amounts would give improved protection.

Smaller operators will say they are registered with the FCA, but this offers no formal consumer protection.

The FCA lists registered firms online

Cheapest money transfer options

Try sending regular payments overseas through an offshore account with an international branch of your bank or building society.

As a customer, the bank may preferential rates.

Sending emergency cash overseas

In an emergency, the money transfer services provided by MoneyGram and Western Union are expensive but fast.

If you can hang on for 24-hours, other services will certainly work out cheaper.

Both services have thousands of outlets in newsagents, post offices and small stores.

The cost can be eye-watering – transferring £1,000 from the UK to Sweden may be as much as £85.

May 21, 2018
by Amari Swift

Bowman Offshore Bank Transfers: Is it Dangerous to Transfer Your Offshore Money into the U.S.?

This is a question we receive often. With the implementation and enforcement of FATCA (Foreign Account Tax Compliance Act), the United States is increasing enforcement priority of noncompliant US account holders.

More than 100 countries and tens of thousands of foreign financial institutions have agreed to report US account holder information to the United States.

But I am not a U.S. Citizen?

This is a common misconception. The requirement for FATCA reporting is for the individual to be a US account holder – not a US citizen. In other words, whether you are a US citizen, Legal Permanent Resident, Visa Holder who meets the substantial presence test, or a former green card holder who was considered a long-term resident – you are generally considered a US person.

As a US person, you are required to report your foreign accounts and global foreign income to the United States (the United States taxes individuals on their worldwide income). With that said, the question generally arises as to whether a person can transfer their money from an offshore account into the United States, without issue?

Transferring Your Money to the United States

The fact of the matter is, the money overseas is your money. The IRS is not seeking to penalize you for the mere fact that you are transferring your foreign money into the United States (presuming the money was received legally). Rather, the United States is penalizing you for failing to report the existence of this money to the US government while it was overseas in a foreign account.

There are many individuals who have a reporting requirement because the value of their foreign accounts/specified assets exceeds $10,000 in annual aggregate total on any given day — but do not have any taxable income. In this situation, there is a reporting requirement, but no taxation (since there was no foreign income earned). Nevertheless, they still must report the accounts properly. If the money was “earned” income and U.S. Taxes weren’t filed and/or paid to report the money, it can complicate the situation — but through voluntary disclosure a person can usually get into compliance relatively simply.

Depending on the facts and circumstances of your case, you may be able to avoid penalties altogether. The following is a summary of the basic requirements of individuals who were considered “US persons” and therefore may have a foreign account reporting and/or foreign income reporting requirement:

FATCA & Reporting Foreign Income – The Basics

Golding & Golding is a flat-fee, full-service firm; we are lawyers who assist international clients in reporting their offshore accounts to the IRS. Most recently, many of our clients learned about Foreign Bank Account reporting requirements when they received a FATCA Letter from their Bank, asking them to certify their U.S. Status by submitting either a W-9 or W-8 BEN.

Who Has to Report?

We have represented numerous clients worldwide with issues similar to yours:

Expats who relocated overseas and did not know they had to report their foreign accounts.

U.S. Citizens who live overseas and may or may not earn significant income, but have accounts in a foreign country.

Legal Permanent Residents of the United States who relocate back to a foreign country but are unaware that they are still required to report the foreign accounts.

Non-Residents who meet the substantial presence test and therefore are required to report foreign bank and other accounts to the US government.

The Basics

These are the most basic rules when it comes to foreign accounts and foreign income:

Foreign Income

If you are either a US Citizen, Legal Permanent Resident (aka Green Card holder or recently gave up your Green Card) or foreign resident who meets the substantial presence test, then you are required to report your worldwide income to the IRS. This means that even if you do not have any US-based income, you are still required to report your worldwide income (even if it is the type of income which is not taxed in your home country such as interest and dividend income in most Asian countries). And, if you have enough foreign income to meet the minimum threshold for having to file a US tax return, then you are required to do so even if it is based on your foreign income alone.

Foreign Accounts

If you meet the requirement for being a U.S. “Taxpayer” (even if you do not meet the threshold for having to file a US tax return), you are still required to file an annual FBAR (Report of Foreign Bank and Financial Accounts). The threshold is as follows: if at any time during the year, you have more than $10,000 in foreign accounts (whether the money is in one account or spread over numerous accounts), you are required to file an FBAR.

In addition, if you have significant amounts of money overseas, then you may also have to file additional forms such as an 8938 (FATCA Form) or 8621 (Passive Foreign Investment Company, which includes Foreign Mutual Funds along with as many other passive investments). There are many other forms you may have to file, but we determine those on a case-by-case basis.

Fines & Penalties

Unless you are criminal, chances are the IRS or Department of Justice will not be banging down your door to come drag you to jail. With that said, the fines and penalties can be very steep and depending on your particular circumstances, may include penalties upwards of 100% of the value of your foreign account. If the IRS believes you were willful (aka intentional), then they may launch a criminal investigation against you and the penalties and fines can get much worse from here, including Liens, Levies, Seizures…and worse.

Customs Holds and Passport Revocation

With the implementation of FATCA (Foreign Account Tax Compliance Act), the United States is heavily cracking down on offshore tax evasion and unreported foreign accounts in general. The IRS and US government have the power to both revoke your passport as well as possibly hold you at the airport “customs hold” to question you on the spot (usually outside the presence of your attorney).

Getting Into Compliance

Getting into compliance should be mandatory on your “to-do” list. Even though our firm, Golding & Golding, is based in Newport Beach, we represent clients worldwide. A majority of our clients live overseas in over 40 countries. We have helped numerous clients get into compliance and are regarded as one of the top Offshore Disclosure Law Firms worldwide.

To that end, there are three main methods of compliance:

(1) Streamlined Compliance

This program is for individuals who were unaware of any requirement to file an FBAR and/or report their income on a US tax return. The penalties under the streamlined program are significantly reduced and may possibly be waived depending on whether a person qualifies under the strict definition of foreign resident for offshore disclosure purposes.

(2) OVDP

This program is mainly for individuals and businesses who were willful, aka were aware they were supposed to report their foreign accounts but intentionally hid or kept the account/income information secret.

(3) Reasonable Cause Statement

This is not a particular program; instead, it is a method for getting to compliance while attempting to avoid any penalty. There are many pros and cons to this method depending on your specific situation, which must be evaluated carefully with your attorney before making a decision.

April 30, 2018
by Amari Swift

Bowman Offshore Bank Transfers on How to Open and Access an Offshore Bank Account

Offshore banking is often associated with a high level of financial sophistication and, sometimes, chicanery. However, the reality is that the average person can open an offshore bank account with just a few hours of work. Each offshore bank and foreign jurisdiction has its own requirements, so you'll have to do some research to find the specifics relevant to your situation. The following is an overview of what you can expect, based on common offshore banking centers such as Switzerland, the Cayman Islands, and the Channel Islands.

The Basic Requirements

The basics of opening an offshore bank account are similar to opening a bank account in your home country. Offshore banks will ask for your personal information, such as your name, date of birth, address, citizenship and occupation.

To verify your personal information, you can expect to submit a copy of your passport, driver's license or other identifying documents issued by a governmental agency. Additionally, banks are concerned with verifying your residence or physical address since this may affect taxation issues. This requirement may be satisfied by presenting a utility bill or similar documents.

Due to the wide range of different identification documents that may be presented to offshore banks, additional assurance of a document's authenticity is often required. A notarized copy of certain documents may suffice in some cases. Other offshore centers prefer an "apostilles" stamp, which is a special type of certification mark that is used internationally. Where this is the case, you will need to visit the government office that is authorized to issue this stamp for your state or nation. (For a general overview, also see taking a Look at Tax Havens.)

Additional Verification Documents

While the basics are similar, there are often considerable additional requirements to open the account. These requirements are in place to discourage money laundering, tax fraud or other illegal activities that are often associated with offshore banking.

First, offshore banks may ask for financial reference documents from your current bank, indicating average balances and a "satisfactory relationship." Most commonly, this is satisfied by bank statements for the last six to 12 months.

Second, many offshore banks ask about the nature of transactions expected to take place through the account. This may seem overly intrusive, but offshore banking centers have been under increasing pressure to stop illegal activity. For this purpose, many offshore banks want additional documentation, noting the source of the funds you are depositing in the bank.

If the money is from your job, a wage slip from your employer will likely suffice. To verify your investment income, an offshore bank may ask for information about your investments and where they are held.

If you have significant funds from a business or real estate transaction, you may need to provide sales contracts or other relevant documents. If you are depositing funds from an insurance contract, you may need to provide a letter from your insurance company. If your money comes from an inheritance, the bank may ask for a letter from the executor of the estate testifying to this effect.

Choosing a Currency for Your Offshore Bank Account

Unlike domestic accounts, offshore bank accounts offer an option of which currency to hold the funds in. This can be a highly valuable feature of an offshore account, especially if one's domestic currency is unstable or expected to depreciate.

It is important to understand the consequences of holding your account in different currencies. For example, holding funds in certain currencies may allow you to earn interest on your deposits, but it can also result in foreign tax liability. Also, you may need to exchange currencies to make deposits and withdrawals, which could be a significant expense depending on the fee structure and exchange rates offered (see 6 Factors That Influence Exchange Rates.)

Depositing to an Offshore Bank Account

Offshore bank accounts are most often funded electronically through international wire transfers. Unfortunately, the systems that enable free electronic transfers common in domestic banking are typically not able to transfer money internationally.

Sending a wire transfer is a simple operation, but almost all banks charge international wire transfer fees to send or receive funds. Pricing for wire transfers varies from bank to bank, so be sure to look for deals. Unfortunately, there are few good alternatives. Domestic checks are generally not accepted in foreign jurisdictions, and depositing funds in person on a regular basis is impractical.

Withdrawing from an Offshore Bank Account

Offshore banks offer a variety of ways to withdraw funds to maximize the convenience of using their services. Many offshore banks issue a normal debit/ATM card that allows you to easily access your funds worldwide. You will want to look into the fees for using this method, since they can be expensive. Withdrawing larger amounts of cash at one time may help to minimize these fees.

Some offshore banks offer checks. However, this is usually not a preferred method– primarily, because confidentiality is often desired in offshore accounts. Problems may also arise since checks drawn on foreign accounts are not always accepted locally.

The best option may be to use two accounts: one offshore, one domestic. In this way, electronic wire transfers can be used to transfer larger amounts of offshore funds to a domestic account where they can be easily accessed. This method offers greater privacy and security, while also providing the convenience of local banking services.

The Bottom Line

Despite the mystique surrounding offshore banking, it is relatively simple to open an account. Often all it takes is filling out the paperwork, supplying some basic identifying documents and providing additional information to show that you are not planning to use the account for illegal activity.

Choosing the best currency and optimizing deposits and withdrawals are slightly more complicated, but the best choices should become clearer as you study the various options. When using offshore bank accounts and receiving international wire transfers, it is important to consult with a tax professional to ensure you are following all the tax regulations at home and abroad.

April 16, 2018
by Amari Swift
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