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When thinking about international banking, Swiss banks will naturally be at the forefront of many peoples’ minds. Switzerland is a European country with a centuries-old tradition for stability and discretion that has grown to become the number one center for offshore finance. In addition, the privacy associated with Swiss private banking makes it an attractive option when considering where to bank.
Most people might believe that Swiss banking is all about high-end financial services and access to global investments. However, offshore banking can also play an important role in the context of asset protection. This is usually done with an offshore asset protection trust opening a bank account in order to hold its assets in a different jurisdiction. This article will discuss important information regarding Swiss banking and the use of offshore bank accounts as a key component of an offshore asset protection plan.
Opening a bank account offshore can be a bit more challenging than working with a local bank, after all, you can’t just walk into the nearest branch on the way to work. So, why not just keep banking at home for your asset protection plan? Well, if you are serious about asset protection, going offshore makes a lot of sense.
We have discussed the benefits of offshore asset protection in numerous other articles, in short, offshore asset protection is all about removing funds and valuable assets from the reach of local courts. An offshore trust removes the management and nominal ownership of any trust assets to a different country such as the Cook Islands or the island of Nevis. Once this is done a court in the U.S. is unable to have authority over them. Because these jurisdictions are foreign sovereign countries, they can decide whether to obey a foreign judgment or ignore it.
A court in Canada normally cannot issue a judgment about business dispute in Norway or California because it lacks the proper jurisdiction. A court needs to have a sufficient connection to the matter in order to justify why it should decide a case. If there is none, the court should refuse to hear the matter. Simply stated, a court’s authority generally does not travel beyond the reach of the country’s borders.
With an offshore trust, the trust assets are owned and managed from abroad, and it only makes sense to keep these assets beyond your borders as well. Let’s explain why. While it is entirely possible for an offshore trust to own a bank account in the U.S., doing so can place the funds back within the reach of domestic courts. This means the trust funds could potentially be seized if the local bank receives an order from the court, thus invalidating all the legal planning that went into developing the offshore trust structure.
While such a risk is not common, we want to think this is largely due to the fact that most offshore trusts are properly maintained and rarely keep funds in the home jurisdiction. From an asset protection standpoint, offshore banking simply makes sense when working with an offshore trust. The added paperwork involved is a small price to pay for the benefit of having the funds out of reach of potential lawsuits at home.
Swiss banks have been extremely secretive about clients since at least the 1700’s and the tradition has continued to this day. Additionally, the country’s stable political climate and strong financial regulation makes it highly attractive for offshore clients. This translates to low levels of financial risks and high levels of privacy that are virtually unmatched anywhere else. It is largely for these reasons that banks in Switzerland are among the most prestigious and respected.
Absolutely. Individuals and companies all over the world trust Swiss banks to hold, manage, and protect their funds. Opening a Swiss bank account as a nonresident is generally a straightforward process, not unlike opening a bank account at home. In fact, Switzerland’s banks welcome foreign capital and the country is number one for offshore banking in terms of the amounts of assets held there. It is estimated that around one-third of the world’s offshore wealth is stored in Swiss banks.
In theory, anyone over the age of 18 can open a Swiss bank account as a non-resident. However, Swiss banks, much like other financial institutions all over the world, have to comply with strict government regulations. This means anyone that wishes to open a Swiss bank account will need to provide adequate documentation regarding their identity, as well as information regarding the source of the funds used to open the account. In addition, any potential client has to meet the account minimums (discussed below) which can limit access for many.
More recently the Swiss banking underwent a major shift when the country agreed to join the global exchange of information regarding financial information in 2014. Yet Switzerland’s banking system continues to be one of the most secretive in the world. Many different banks still offer enhanced privacy and while bank secrecy is not as strong as in the past, Switzerland remains one of the best options for offshore banking and privacy in the world.
While banks such as UBS or Credit Suisse have received the most attention from international news media, the truth is there are hundreds of different banks in Switzerland and most of them are extremely safe and conservatively managed. In fact, there has only been one bank failure in the modern history of Switzerland. All Swiss bank accounts are insured by the government for up to 100,000 CHF. That means those funds are protected even if your bank declares bankruptcy, which is an extremely rare event.
Currently, information regarding your Swiss bank account is required to be sent to the IRS if you are a citizen or resident of the United States. The IRS is responsible for collecting taxes and evaluating the wealth of Americans regardless of where it is located. Funds held in Swiss bank accounts is no exception. In fact, the United States and Switzerland have agreements in place between that facilitate the exchange of this information.
Additionally, if you are a U.S. taxpayer, it means you are responsible for delivering information about your offshore bank accounts to the IRS. When reporting your income and other financial information as part of your income tax return, you must disclose foreign bank accounts. Swiss bank accounts are not meant to hide assets from tax authorities or a means to deceive or defraud any parties.
It is not surprising to learn that most of the ultra-high net worth rely on a combination of different investments such as stocks, real estate, private equity, hedge funds, alternative investments, and other financial vehicles. However, much like the rest of us, millionaires and billionaires are also in need of liquid funds and generally rely on major banks for this purpose. While offshore banking is less common for wealthy people in the U.S., globally, the ultra-rich rely on financial centers such as Switzerland, Singapore, and Hong Kong to diversify their holdings.
One thing to note about Swiss banking is that you must use a Registered Investment Advisor (RIA) to open a bank account. A Registered Investment Advisor is a firm that advises clients on fund management, financial planning, and investing their portfolios. As their name suggests, these firms need to be registered with a federal or state agency for their purpose. In Switzerland, financial services are regulated by the Swiss Financial Market Supervisory Authority (FINMA) and the Swiss National Bank (SNB).
A Registered Investment Advisor can be an independent financial institution, or an advisor associated with a larger bank. When deciding what could work best for your situation you can consider standalone RIAs such as BFI Infinity, Swisspartners Advisors, or WHVP. Or, you can decide to work with RIAs that are associated with banks like J. Safra Sarasin and Kaiser Partner. Many of these institutions are very familiar or even specialize in working with American clients.
Once you have selected an RIA, your RIA will assist you in selecting a bank and then you can move forward with the account opening process. Working with an RIA means having someone as a point of contact, while also making sure there is a professional overseeing the funds. An RIA normally works based on a set management fee depending on the size of the assets and often provide much more than just investment advice. The standard of care required from an RIA is normally higher than other financial professionals.
Normally, a sizable initial deposit is required by financial institutions in Switzerland. Most Swiss banks will have a one million dollar minimum in order to open an account. In some cases, $250,000, or less, will be an acceptable initial deposit. Keep in mind that the accounts will normally not be opened in your own name, rather it is an asset protection trust that will be the named owner in the account.
Thanks to our firms’ connections, we can help you find the right institution that can work with your individual needs and level of assets. Blake Harris Law provides its clients with access to our global network of bankers as well as trust companies and trust protectors. If you are considering a lower initial deposit, there are other banking alternatives in the Caribbean that have more permissive account requirements. In any case, travel is not required to open an offshore bank account and the entire process can be done remotely.
Hopefully, this article was helpful in clarifying important information regarding Swiss banking and the use of offshore bank accounts for offshore asset protection plans. In the context of asset protection, having funds abroad is all about keeping your wealth beyond the reach of your local court in case a lawsuit is ever filed against you. This results in additional leverage during the negotiating process and can help save your assets from an adverse court ruling.
Offshore asset protection and offshore banking can be complex topics that are best addressed with the help of experienced professionals in the field. At Blake Harris Law, we have helped numerous clients establish offshore asset protection solutions, including financial accounts with banks in Switzerland. Thanks to our contacts and our experience, we can provide the right advise and make the asset protection process much easier.
If you have additional questions regarding offshore banking, asset protection, or other related matters you can contact Blake Harris Law to speak directly with an attorney regarding your asset protection needs.