Staying onside when handling offshore accounts

By Staff | August 25, 2003 | Last updated on August 25, 2003
4 min read

(August 25, 2003) It’s bound to happen sooner or later. A client comes into your office and requests your services to help him open an offshore account.

Shady notions of international intrigue and secret numbered bank accounts leap immediately to mind. There’s a certain air of mystique about the whole business. In a post-September 11, 2001, world and a global banking system moving toward greater disclosure, an advisor needs to be even more careful about handling this type of account. How should the request be handled?

That depends, say those in the industry. The term “offshore account” can apply to many things, from credit cards registered in the Caribbean to investments registered in exotic corners of the world, all of which are perfectly legitimate and absolutely legal. In fact, all the major banks provide these services as a normal course of business.

Best intentions?

It’s the intent that counts. Separating those who are looking for legitimate offshore options from those who are seeking to hide money from the government is the first step toward keeping a practice out of danger, according to Jim Rogers, a Vancouver-based advisor speaking on behalf of advisor industry group Advocis.

“You have to ask them what they have in mind. Many people operate under the incorrect assumption that Canadians are under no obligation to report that income — that’s just wrong,” says Rogers. “If they demand that I do it anyway — help them hide their money — I say you’re talking to the wrong guy. In fact, I go further and do them a great service and tell them that any ethical advisor will not take their business.”

Beyond most needs

R elated Story

On the other hand there are instances when offshore accounts might make sense. “If the client is doing everything they can in Canada — their RRSP is maxed out, they’ve saved up six months’ income to get them through an emergency and they’ve paid down the mortgage and outstanding debt — but they’re still in need of some tax relief, then it might make sense,” says Rogers.

In many other areas of the world, returns on capital can be higher because of lower tax rates in some global jurisdictions, so there can be a bonus for someone with some extra money to spare. But the number of people who are in that boat, so to speak, is a tiny portion of the population, according to Rogers — far less than even 10% of Canadians.

“If you want to get aggressive and play, you can. But to me it’s well beyond what anyone needs to do to meet their financial goals, all of which can be met here in Canada. It’s a lot sexier to talk about than it is to do it,” he says.

Keeping it in Canada

In fact, many wealthy Canadians have one thing in common — they don’t want to lose the money they’ve acquired. For that reason, they like to keep their money in Canada, where they can observe the system that preserves their wealth on a local, regular basis, something that often isn’t possible with offshore money. According to Rogers, “Many well-off people say they like their money where they can see it.”

From a technical point of view, it’s also getting more difficult to do the things that used to be associated with offshore accounts, such as keeping money anonymous. Along with seemingly everything else, the events of and after September 11, 2001, have changed the way the global banking system works and nations known to provide anonymous banking services are coming under great pressure to give up names.

Téj Thind is the president of International Finance Marketing, an Ottawa-based company that specializes in helping individuals avoid offshore traps. “Everyone thinks it’s all about palm trees, pina coladas and yachts,” says Thind. “That’s not true. The new laws around disclosure have changed everything and business has declined since 2000.”

Most recently, Canada’s banking regulator, the Office of the Superintendent of Financial Institutions (OSFI), unveiled new rules that will work to lift the veil of secrecy around corporate offshore accounts by requiring those opening them to reveal not just the corporate owner of the account, but anyone considered an end beneficiary of that account.

“I would say the high-water mark was 2000. With all of the new treaties on sharing information it’s difficult now to hide ownership of offshore accounts,” says Thind.

Have you ever been approached to create an offshore account? If so, what did you do? If not, what would you do if a client did ask you to do so? Share your thoughts with your fellow advisors in the Talvest Town Hall on

(08/25/03) staff


The staff of have been covering news for financial advisors since 1998.