| Commonly referred to as a CD, a Certificate | | | | 3. A third major advantage to an Offshore |
| of Deposit can be used as a short or long | | | | Certificate of Deposit is the anonymity and |
| term investment. Domestic banks offer FDIC | | | | confidentiality offered to protect your |
| (Federal Deposit Insurance Corporation) | | | | assets. Depending on the jurisdiction you |
| insured Certificates of Deposit with higher | | | | choose to obtain your Certificate of Deposit, |
| rates of return than other investment | | | | the bank may be forced to adhere to strict |
| options. The bank retains money for a | | | | secrecy laws which protect your money from |
| specified period of time with the promise to | | | | creditors and divorce. Also, since offshore |
| repay the principal and interest to the | | | | banks are outside the jurisdiction of |
| depositor at the conclusion of the investment | | | | domestic courts those wishing to sequester |
| term. | | | | your funds for whatever reason will be unable |
| | | | to do so. |
| Depending on the amount of money you invest, | | | | |
| and the particular terms of the bank you | | | | INSURANCE ON OFFSHORE BANK ACCOUNT CD |
| choose to invest with, you may choose to | | | | |
| invest your money for a period as short as | | | | Unlike domestic banks, an offshore bank |
| one month to six years. There is usually a | | | | cannot offer Certificates of Deposit which |
| penalty for withdrawing money from a CD prior | | | | are FDIC insured. Rather, these banks have |
| to the maturity date. Banks will also require | | | | their own methods of insuring investment |
| a minimum deposit to open a Certificate of | | | | money which guarantee that at any given time |
| Deposit. | | | | the bank has enough money in its reserves to |
| | | | cover all deposits made. |
| OFFSHORE CERTIFICATES OF DEPOSIT | | | | |
| | | | For example, in Panama all banks are required |
| International Certificates of Deposit vary | | | | to report each month to the BNP (Banco |
| slightly from domestic CDs. International | | | | Nacional do Panama) to ensure they have |
| Certificates of Deposit can also be referred | | | | enough reserves to cover deposits made. |
| to as Offshore Certificates of Deposit or | | | | Compliance officers are assigned to the banks |
| Eurodollar Certificates of Deposit. When | | | | to make sure depositor's funds are not |
| obtaining a Certificate of Deposit from an | | | | misappropriated. Additionally, offshore banks |
| offshore bank, the investor signs an | | | | will often maintain large insurance policies |
| agreement with the bank in which the bank | | | | to cover depositor's funds for amounts over |
| agrees to pay a fixed interest rate in | | | | what is normally covered by the BNP. |
| exchange to use the money during the | | | | |
| specified time period. | | | | EURODOLLAR CERTIFICATES OF DEPOSIT |
| | | | |
| Similar to domestic banks, offshore banks | | | | Eurodollar Certificates of Deposit are issued |
| will differ on the minimum amount required to | | | | in London according to the rates listed on |
| use as a deposit for a CD. Often the amount | | | | the London Interbank Offered Rate (LIBOR). |
| required for an Offshore Certificate of | | | | This interest rate is calculated on a daily |
| Deposit will be much higher than what is | | | | basis by the British Banker's Association. |
| traditionally required from domestic banks. | | | | Several countries that rely on LIBOR for |
| | | | calculating the rates for Certificates of |
| There are several advantages to having a | | | | Deposit are England, the United States, |
| Certificate of Deposit from an offshore bank. | | | | Switzerland, and Canada. Eurodollar |
| The advantages include: | | | | Certificates of Deposit, while being issued |
| | | | outside the United States, are still |
| 1. Higher interest rates. Unlike domestic | | | | denominated in American currency. |
| banks, offshore banks are not government | | | | |
| regulated and are free to compete against | | | | When choosing to open an International |
| each other for better rates. Depending on the | | | | Certificate of Deposit, it is important to |
| country you choose to bank in, interest rates | | | | consult with a financial advisor. Your |
| can be as high as ten percent. | | | | advisor will be aware of minimum deposits |
| | | | required to open the account, any penalties |
| 2. Another advantage to having an Offshore | | | | for withdrawing money early, the stability of |
| Certificate of Deposit is the income tax | | | | the bank you choose to invest with, and the |
| benefits. If you choose to open a Certificate | | | | denomination your money will be kept in. Your |
| of Deposit in a recognized tax haven such as | | | | advisor will also help you choose the |
| Panama, you will not be taxed on interest | | | | appropriate length of time to keep your money |
| earned because that particular government | | | | tied up in a CD to offer you the best return |
| does not impose interest on income taxes. | | | | of investment. |