The Risks of Banking Offshore

If you are looking for a way to keep your money safe, keep your transactions private and lower your tax burden, you may be considering opening an offshore bank account. An offshore bank account can be a good idea for some people, but there are some things you should know before you set up your account.

Unlike what you see in the movie's, offshore bank accounts are not illegal on their own. If, however, you set up an offshore bank account for an illegal reason, like tax evasion or money laundering, you could still be in a lot of legal hot water if you get caught. Even if your offshore bank account was set up for illegal purposes, your money could still be protected, depending on the laws of the country where you have an offshore bank account.

For all of the benefits in having an offshore bank account, there are some risks involved. If you keep you money in a U.S. based bank account, your account is protected by the FDIC. Offshore banks offer no such guarantees. If your offshore bank account is in a country that is hit by a natural disaster, strife or civil war, your money could vanish and you would have no recourse to recover your money.

Even though you don't have to be a millionaire to have an offshore bank account, you should have enough cash to deposit to make your time and trouble worthwhile. There is no one minimum amount for an offshore bank account. Different banks have different rules, but if you want to get the most out of your account, plan on depositing at least $10,000.

The Internet has made managing your offshore bank account easier than ever, but even with secure websites and excellent security, it is still possible for someone to hack into your system or to gather your personal information through a phishing scam.

If your account information is compromised, you could lose your entire investment and there would be little you could do to get your money back. To minimize this risk, never access your account with a wireless connection, especially in a public place. Stick to accessing your account at home with a protected wired network. Never respond to an email from your bank asking for your password or other account information. Reputable banks will never ask for account information in an email.

If you have decided that an offshore bank account is for you, do your research and select a location with laws that are the most favorable for your situation. You can move your money fro country to country, but each time you move your money, you take a risk that you account information will be compromised and your money will be lost.

An offshore bank account provides many benefits, but before you open your account, you should carefully weight the benefits versus the costs and risks involved. If you decide to open an account take steps to protect yourself to minimize the risk.