There's an art and a science to using your offshore funds. Become a skilled practitioner, or face the consequences.
So you've got your emergency funds safely stashed offshore. What if an emergency suddenly develops at home? How do you access a portion of your offshore stash without alerting the tax man or other predators to its existence? When you take the plunge and stash a portion of your cash assets in a privately opened offshore bank account you receive many benefits and advantages. Cash placed offshore is free from home government interference and exorbitant taxation rates. It is also exposed to an environment where it enjoys higher interest rates and freedom from restrictions, for example, offshore accounts may offer opportunities to invest in foreign stocks, bonds and mutual funds not available at home. Offshore accounts also help to protect your financial assets. The existence of your offshore account and its contents, if you have set the account up privately, are not readily known to predators or claimants planning to obtain a judgement on your assets. Finally, an offshore stash is insurance against bad times or emergencies which may occur in the future.
You can't predict what might happen tomorrow. It may one day become impractical to remain where you are now. Economic turmoil, the collapse of your country's banking system, political unrest and social disorder, a natural disaster, or one of many other reasons may make it impossible, unviable or unwise to stay. If you've taken the sensible precaution of stockpiling offshore funds, it means you can leave, safe in the knowledge that you have accessible funds: the basis of a fresh start for you and your family available to you overseas.
An offshore stash is a safety net. In the event of a catastrophe it cushions your landing. However, when you wish to access your offshore stash due care and caution is needed.
The Problem With Unpredictability
What happens if you've moved your spare, liquid cash offshore and an emergency at home means you really need to use some of your offshore funds? What if a family member gets sick and you need your offshore cash to pay for treatment? What if your business suddenly requires an injection of cash to keep it afloat? You may face unemployment and suddenly need your offshore stash to cover living costs until you are back on your feet. What if other unseen costs arise?
None of these emergencies necessitate fleeing the country. They may well require dipping into offshore reserves. It is likely you went to great lengths to protect your privacy when setting up your offshore account. It is vital your offshore account remains private, particularly if you intend to access the funds while still based at home. To maintain your privacy it is essential to observe the same standard of precautions when accessing an offshore stash as you did when you moved cash into it.
In an emergency situation it is easy to panic. It is easy to make mistakes. Ultimately, rash actions will expose your offshore assets and activities to scrutiny. This could be very costly. Follow the advice I give below, if you need or choose to repatriate funds from your offshore stash. Using these repatriation techniques will ensure that your offshore stash remains a secret, and that your financial privacy remains intact.
The One Thing You Should Never Do
Firstly, whatever you do to repatriate funds, don't transfer them directly from your offshore bank account into an account in your home country. If you do this you will instantly eliminate all the privacy surrounding your offshore account. The existence of your offshore stash will become known to your home bank, the bank's employees and, in all likelihood, the tax man. The funds you transfer will also be considered taxable income, unless you can conclusively demonstrate they are a tax-free gift from someone who is likely to make such a gift.
The Pros And Cons Of Cash
Cash is king when it comes to depositing funds in your offshore stash. The same is true when it comes to withdrawing the funds and repatriating them. You should withdraw cash in person if possible. You can combine a trip to your offshore bank, or to one of its branches, with a short vacation, a series of business meetings, or attendance at an offshore event. This will effectively disguise from the authorities and casual observers your real motives for travelling to the haven. Make certain the amount of cash you bring home is below the reporting requirement ceiling in your country. Travel in a low-profile manner. Try to look as much like a tourist as possible. People travelling to and from recognised tax havens are likely to attract some attention from the authorities.
Some guy turning up from a tax haven with a briefcase handcuffed to his wrist, no luggage, and arriving back less than 24 hours after he flew out, is a prime target for closer inspection. Even if he's carrying less than he is legally required to report. A note could be made that he arrived back from a known haven with cash. This information could be passed along the line. His security is no longer what it was. Look, behave and travel like a tourist. Blend in. Don't make yourself conspicuous.
From The Comfort Of Your Armchair?
What if your haven is thousands of miles away, difficult to get to, or it is prohibitively expensive to take a short break every time you need a few thousands pounds at home? Or what if you don't want to keep making trips to your haven because you fear you're drawing unwanted attention to yourself?
What are the alternatives?
Well, some people choose to instruct their bank to withdraw funds in cash and then mail it to them. I don't recommend this option. Items of mail get lost every day in the international postal system. While the vast majority of postal workers are honest, there are also some bad eggs who might be very interested in a suspicious looking parcel from a tax haven, possibly with a bank's franking mark on it, the bank's return address, etc. The parcel could be sent via registered post, but that is not a cast iron guarantee that it won't go missing en route.
Even if the package eludes the attentions of hawk-eyed criminals, it will certainly arouse the attentions of professional mail snoops. They do watch for mail from known tax havens, and they do pass findings of interest on to investigative bodies.
If you decide you really must use this method of accessing cash, at least take precautions. Have your bank send the package to a maildrop in a neutral third country. A country that is not internationally recognised as a tax haven or international banking centre. Then have the maildrop operator forward the package on to an address of your choosing, or travel there to pick it up yourself. Remember, reporting requirements also apply to packages, so make sure the contents don't exceed the amount you can legally bring into the country without making a report.
Avoid using private courier services to transport cash, i.e. Fedex or UPS. Contrary to rumour, packages carried by private courier service are regularly opened and the contents inspected at customs. Cash in transit, particularly if appropriate reporting forms have not been filed, is likely to be confiscated. Even if it is allowed through to its destination, notes will be taken, observations made, and subsequent mail activity between you and your bank closely monitored.
It isn't uncommon, at least in the US, for police agents dressed up as UPS or Fedex employees to make deliveries to persons suspected of criminal activity. This for the purpose of making an arrest when delivery is accepted. Both companies, UPS and Fedex, make it a policy to co-operate with law enforcement authorities.
Using Your Next Door Neighbour - Your haven may be a four or five hour flight away, while the country next door may just be a relatively short car-ride over the border.
Why not open an account there?
Then you could use this account as a bridging account. You can have your offshore bank wire funds to your bridging account, making it a simple matter for you to cross the border to the nearest branch of your bridging bank to access your offshore stash.
The cash can then be carried home. This has the advantage of being less expensive and will not attract attention. People frequently cross the border into the country next door for all manner of reasons. Americans could use Canada. The British could make use of Ireland (only an hour or so away by plane). Germans could use the Netherlands or France and vise versa.
Alternatively, have your bank send you an international money order, in the currency of the country next door to you. Just make sure that your offshore bank is not identified as sender. and that the amount does not trigger reporting requirements. You can simply travel next door to cash the money order.
Using the country next door isn't an excuse to ignore laws. Don't make the mistake of making trips too frequently. The authorities and banks in the country next door may construe frequent withdrawals of cash just below reporting requirement minimums as structuring; seen as evidence of criminal financial activity. Just as a home country bank would monitor such customers suspected of structuring, so will the banks next door. With the current contention over the arrest, by the US, of dozens of Mexican bankers for alleged money laundering, Americans definitely should not use Mexican border banks as the country next door.
Using Plastic Is Risky
Many people believe that the best way to draw money from an offshore stash is by using plastic. They are wrong. Using offshore plastic in your home country is very dangerous . It is not private and it is not low profile.
Many offshore accounts nowadays come equipped with a cash, credit or debit card, enabling you to access your offshore stash from virtually anywhere in the world, at any time of day or night.
Do not access offshore funds in your home country by using your card at an Automatic Teller Machine (ATM). ATM transactions are recorded. The records of your transaction, your account number, your bank's sort code, and other details are ultimately stored and maintained offshore, where they are subject to whatever privacy laws exist in your banking haven. Records of these transactions are also maintained in the country in which the ATM is accessed.
You also need to be aware that many ATMs are conveniently situated in areas where they can be observed by CCTV cameras. And many ATM machines actually have cameras built into them. It is a simple matter for investigators to match ATM transaction and routing date with footage taken of the card user. If you're caught out you can be definitely linked to your offshore account. Your cover is blown.
Ideally, you should never use your offshore credit, debit or ATM card at an ATM machine in your home country, or any country in which you have reason to believe you are under suspicion. If you really have to, take precautions and minimise the risks. Don't use the same ATM machines you use for domestic account withdrawals. Use an alternative ATM, perhaps in the next town. Don't do this repeatedly, or you run an extremely high risk of being caught out.
What about using offshore plastic to purchase goods and services?
Again, its dangerous, so don't take the risk. When you use your offshore plastic in a store in your home country, your name is a component of the transaction, your signature is required, an impression of your card may be taken. Transaction records do end up offshore but records are also maintained in the country the transaction took place. If you use cards at home, an investigator looking closely at your affairs and poking into your background could unearth data which could prove expensive if used against you.
If you use your offshore credit card to pay for the weekly shop at the local supermarket, it's possible that an investigator could quiz the checkout girl to find out how you pay for groceries, etc. Some credit cards from offshore banks are printed in a foreign language. They look different from cards issued at home. Your bank's name or symbols on the card may not be recognised by the girl working the checkout machine. In her dull day, doing exactly what she did yesterday and is likely to do tomorrow, is it possible this card might spark a little interest, might rouse her from her stupor? Is it possible she might remember this strange card and later be able to recall details about the man using it? Is it possible she might recognise him again, and take more notice of him? It's very possible. Don't take the risk.
What about precautions in the event of an absolute emergency?
Consider asking your bank if it's possible to have a card issued in the language of the country you live in. Even then, keep your purchases conservative and low profile. No Rolex watches, or other items likely to arouse unwanted interest. Only use the card where you are not known or likely to be remembered. Take note: you may not even be using the card, but it only takes a glimpse of a strange card from an offshore bank to arouse the curiosity and suspicions of a friend, relative, complete stranger or the tax investigator standing behind you in the queue at the petrol station.
As a precaution against breaches in security, theft and loss, only carry your offshore credit card on your person when you know you are going to need to use it. At all other times keep the card stashed safely, at home in a secure hiding place, to thwart thieves and to minimise the time you are physically in possession of the card. For maximum security keep the card stashed out of harm's way in a safe deposit box in the next town or even the next country.
Make Plans Not To Need This Advice
Finally, try to organise your financial affairs so that you won't need to access your offshore stash to cope with unforeseen expenses at home. It only takes one slip-up when spending offshore funds at home, and your whole offshore stash is suddenly dragged under the microscope. Only move cash offshore when you can safely say you won't need it at home in the foreseeable future. Have domestic reserves of funds in place for any domestic needs which may arise.
Enjoy Your Stash When Overseas
The best, most low profile way to spend your offshore stash is to dip into it when you spend time overseas, on vacation, business trips or at conferences. Your tax authorities at home can't see what you are doing when you're abroad. Wherever you are, you are just one of many tourists spending cash freely and not meriting any special attention.
"Ultimately, rash actions will expose your offshore assets."
"Packages carried by private courier service are regularly opened."