Passbook Accounts
Various foreign countries offer confidential bank accounts. The client needs to assess the risk in opening and funding with an unknown financial institution.
Secret Bank Accounts
There have been numerous changes in international banking since the days of the infamous numbered and bearer Swiss bank accounts. Switzerland has come under undue scrutiny because of numerous scandals relating to money laundering and holding assets belonging to Jewish families confiscated by the Nazis during World War II. Currently Switzerland is no longer considered to be a asset protection country of choice. Although other European countries have bank accounts offering asset protection benefits since privacy laws exist in these countries.
Secret accounts must be created with the participation of a facilitator. Usually the client is required to provide the facilitator with a non-disclosure letter and comfort letter from an attorney and/or CPA regarding the client’s legal and tax issues. After the due diligence has been completed the financial institution will offer two types of accounts, numbered and bearer accounts.
Numbered Accounts
Numbered accounts usually require a minimum amount of money as the initial deposit plus the cost of the facilitator’s fees. The client must be present and meet with the facilitator and bank officials to set the account up. The services of a local attorney may also be required. This type of account only recognizes the beneficial owner of the funds while the identity of the person remains private under the bank secrecy laws of the country. Only three bank officers must know the beneficial owner. Typically there is no governmental reporting requirement, unless a criminal investigation arises. The income earned from the funds of the account is subject to tax, but there is no tax reporting requirement in the foreign country. Clients U.S. income reporting requirements are not waived although the specific identity of the account is not disclosed in the event a tax return is discovered in litigation.
Bearer Accounts
Bearer accounts usually requires lees of a minimum as the initial deposit then numbered accounts and requires a facilitator’s fees. This account has no name and requires a password to do transactions. Funds are only deposited or withdrawn upon proper presentation of both a valid password and a bearer bank account book. This type of account can be done without the client being present.
Local legal counsel is required to transact business on this account. Like the numbered accounts above the income earned from the funds of the account is subject to tax, but there is no tax reporting requirement in the foreign country. Only the bank, the attorney and the client know the password. The bearer bank account book can be retained by the attorney or by the client.
Clients should not use secret bank accounts to hide money from the IRS. Secrete accounts should only be used as an effective technique to keep your assets protected.