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Legality of offshore accounts

On Behalf of | Feb 2, 2021 | Criminal Defense

Storing funds in an offshore account became a mainstream topic of conversation when the Panama Papers scandal divulged that hundreds of heads of state, politicians, celebrities, business people and others were doing it. Suddenly, the prospect of not having to pay hefty taxes seemed a very real option for many people living in Texas and around the rest of the country. Understandably, some are hesitant to go this route because they do not want to get into any legal or financial trouble with the IRS. However, that hesitation is often removed once they learn how much they can really save. The main question, of course, is whether offshore accounts are legal.

How does it actually work?

The act of placing money into an offshore account is not an illegal act on its own. In fact, many Americans have bank accounts in nearby countries such as Mexico and Canada. Foreign banks also take into consideration their own laws and apply them to everyone. However, if the compliance requirements of the WTO and OECD are too troublesome to handle, they may simply deny foreigners the privilege of keeping their money with them.

So, is it illegal?

No, there is nothing intrinsically illegal about choosing to place your money in an offshore account. What does make it illegal is attempting to hide the act of placing money somewhere other than a U.S bank. If you do lie about this, you might face charges for the white-collar crime of tax evasion, which carries hefty financial penalties and worse. The reason why it is not a crime to simply store money in an offshore account is that the FATCA requires all foreign banks to report financial activity made by American citizens.

The benefits of an offshore account

Many believe that placing funds in an offshore account is simply done to circumvent high taxes. Although that is the motivation for some, there are other legal benefits to this act. One of those involves making your money work for you. In some jurisdictions, placing money into such an account allows it to earn capital gains without having to pay taxes to the country where the money is being stored.

If you are facing an accusation of tax evasion or you simply want to protect yourself against that possible event, having an attorney at your side could possibly save you both headaches and financial losses. Consider consulting legal council before making firm plans.