Robots, Art, Offshore Finance, and Life 

fast2value

Offshore - Due Diligence (Page 1 of 8)

Robots, Art, Offshore Finance, Life - Offshore due dilligence; page 1 of 8
"Offshore Finance" safe harbour

Bankers have been educated in the use of non-specific  (e.g. "To whom it may concern") reference letters and any request for one may raise a red flag.  Requests to your high street bank account officer to issue a non-specific bank reference letter may be sufficient reason for your account officer to take a closer look at your affairs or file a Suspicious Activity Report (SAR) with HMRC or regulatory bodies. But even if you are successful in obtaining one, the new offshore bank may call the issuing bank to verify the details. Your high street bank officer might wonder why and offshore bank is verifying the details and your chancing of been reported under an SAR have suddenly increased.  And you have NOT committed any offence.


HOW TO DEAL WITH ISSUE OF BANK REFERENCE LETTERS

A direct option is to simply give your business to a bank that does not need any reference letters from new clients. Despite what a surprising number of people think, reference free banking is still widely available -- although not in common-law jurisdictions.  Civil law jurisdictions, on the other hand, as well as a number of hybrid common/civil law jurisdictions, typically do not require references. 


Common Law or Civil Law?

The reason for this is historical and directly relates to the way that people are identified under the two different systems.
Common law based countries have often lacked centralised registers of population and ID cards, and there has been no reliable way to confirm a person's identity except to take his word for it. To minimise the possibility of deception, a system of using references developed -- that is having another person confirm that you in fact are who you say you are.


In contrast, civil-law jurisdictions have always had much less need to rely on references (other people's opinions) for reasons of identification. Instead, they developed centralised government registers of citizens, personal numbers and compulsory ID cards to refer to.


Key Differences which drives accepted practices

This key difference between the two systems has formed accepted practices. As a result, many bankers in civil law jurisdictions do not even understand the concept of -- let alone the need for -- bank reference letters. As far as they are concerned, an official document confirming your identity (such as an identity card or a passport) is all that's needed to get an account opened. 


While there are still many places to go for reference free banking, it must be noted that under the guidelines set by the Financial Action Task Force on Money Laundering (FATF), many bankers now view bank reference letters as a necessary confirmation of a prospective client's suitability. As a result, a number of bankers in civil-law jurisdictions have followed their common-law colleagues and also insist that a reference or two be provided by all new clients.


CHOOSING THE RIGHT JURISDICTION!
Choosing the right jurisdiction, the right bank, and the most appropriate type of account is important. For example, there are circumstances where you might be better off with a large retail bank and not one that exclusively offers private banking services; particularly if keeping a low profile appeals to you more than facing intrusive questions in a one-to-one meeting with your private banker.  These and other issues require an almost encyclopaedic knowledge of local financial customs, and it is best to seek professional advice from a source that shares your concerns, ideally in the jurisdiction that you wish to utilise.

For professional advice on the jurisdictions that could be utilised 

DUE DILIGENCE CHALLENGES. 

Browse through the corporate brochures soliciting for offshore business and you will eventually stumble upon the requirements for those wishing to bank offshore today.


Examples that jump out of the small print are:

​​Stringent monitoring and vetting procedures existand following information must be provided

  1. ​Beneficial owners passport (Photo, signature, personal information, used visa pages)
  2. Bank reference letter(s) for each beneficial owner (relationship of at least 2 years and account in good standing)
  3. Details of applicants business (location, purpose, annual volume, source of funds, annual value of funds passing through account)


Reference from High Street Bank?

Typically, the average private individual who might wish to use the offshore environment for asset protection and privacy will (either willingly or begrudgingly) comply with the requirement.  However, asking your high street account officer to issue a bank reference letter (specifically addressed to your new offshore bank) completely defeats one of the principle aims of offshore banking; privacy.