It’s a game of politics and power: self-proclaimed international financial “authorities” such as the OECD, as well as the popular press in many countries, are rigorously campaigning against “tax havens”. They try their best to eliminate banking privacy as we know it – despite the fact that the right to keep one’s financial affairs private has been part of our culture for centuries.
Their logic is simple – actually too simple to be reasonable: if the government does not know whom the bank account belongs to, it cannot tax the account owner. Unfortunately they deliberately ignore and try to hide the many benefits of going offshore that are not tax-related at all.
The effects of the FATCA actions, the imposition of the CRS and other requirements are evident today. The world promotes transparency in all spheres of life including banking.
At the same time, a bank account in a foreign country remains a powerful instrument of asset protection and diversification. If your activities do not violate any laws, you can make full use of this instrument. There is no legal nor moral obligation on you to open an account in a jurisdiction that promotes automatic exchange of information – especially while vast parts of the international business world, such as the USA, do not report to foreign governments. In the text below, we discuss why European banks can disclose the information about the account owner.
Banking privacy in the European Union
After the passage of the fifth EU Directive that is aimed at combating money laundering and terrorism financing, the notion of banking privacy has changed. The Directive makes it obligatory for the banks to disclose their clients’ financial information to the national and international fiscal authorities. The latter are entitled to obtain complete and truthful information about all bank account owners.
Ironically, this goes against the trend of data protection, another tenet of European Union policy. The EU is proud that the data of its citizens is some of the best protected in the world. Yet, it doesn’t seem like that applies to bank account holders!
What banks offer a high level of banking privacy?
Of course, anonymous (numbered) bank accounts are a thing of the past. No one can hide their capital in an offshore bank any longer. You can use a foreign bank account for tax planning and geographical asset diversification but you cannot use it for evading taxes. Let us discuss four European states that offer a high level of banking privacy to their clients in the current ‘transparent’ era.
Banks in Switzerland
Switzerland is probably the most famous financial center in the world. One third of all private capitals are kept in Swiss banks. Banking privacy used to be the strongest selling point for Switzerland and the banks in the country do whatever they can to maintain a high level of banking privacy in today’s world. Unauthorized disclosure of the account owner’s information will lead to legal action in the country. Swiss banks will disclose their client’s information on a court decision only.
Banks in Liechtenstein
Liechtenstein is among the oldest and the best-established banking centers as well. The country makes banking privacy a high priority. Banks will disclose their client’s information only if his/ her case is tried in a court of law and the court officially requests the disclosure. For this reason, Lichtenstein bankers carefully select the clients that they provide services to.
Banks in Luxembourg
Luxembourg is one more financial center in Europe. The country specializes in non-resident banking. Luxembourg attracts foreign investors by low taxes. In particular, dividends and interest are not taxed in the country and the banking privacy standards are very high.
Banks in Andorra
Andorra is perhaps the least-known private banking haven in Europe, but nonetheless an important one. Andorra la Vella is the highest capital city in Europe and also offers high levels of confidentiality and private banking services. Andorra is known as a “middle class” private banking haven where smaller accounts are welcome. It has recently joined the SEPA area.
There are other jurisdictions in the world that provide for a high level of banking privacy too. If you would like to protect your assets without violating any fiscal regulations that apply in your country of residence and in the country where you would like to open a foreign bank account, we will be happy to help you find the best option.
Legal grounds for disclosing bank clients’ information
If you have a bank account in Europe, your home country police, financial intelligence unit or some other authorized government bodies can request your account information from the bank. However, there have to be unquestionable legal grounds for requesting the information.
For instance, if the bank client’s case is tried in a criminal court, the judge can send an official request to the bank for the account information. The request needs to be substantiated by some weighty arguments that clearly show that the information is required for making a decision on the court case. The judges will assess the cogency of the arguments and decide whether to disclose the information or not.
If you are not involved in any fraudulent activities, if you do not try to evade taxes, and if you do not sponsor terrorists, you can rest assured that no third party will be able to learn how much money you have in your foreign bank account.
As far as taxes are concerned, basically the only way to legally opt out isto hange your residence to a country that does not tax its residents. It is possible to optimize your tax burden. Offshore Pro Group exerts will gladly assist you in changing your tax residency if you feel that you are paying too much in taxes. We offer personalized solutions to each of our clients. Every single personal situation is unique to a certain extent and different asset protection and diversification mechanisms will work best in every particular case.
If you are interested in opening a foreign bank account in Europe or elsewhere, you are welcome to apply for our free consultation on choosing the foreign bank and the account type that will suit your purposes well. If you would like to ask us any questions about foreign bank accounts, banking privacy, and other related issues, please do not hesitate to contact us by email, live chat, or a messenger. We always reply promptly!
21 February 2021 