You enter the bank, leather briefcase in hand. You are greeted by someone in a suit and all you tell them is a number. The person nods and asks you to follow them. They present you to a teller. You place the briefcase on the counter. The teller opens it and takes out the five million dollars you have in there, counts them, and informs you that the money is now in your account. You leave the bank and continue to live off of interest and dividends paid from your numbered offshore bank account to your local bank account.
Sound too good to be true? That’s because it is.
A (Very) Brief History
It is unclear when numbered accounts first appeared but they were made popular throughout Europe when increasingly totalitarian secret polices (such as the Gestapo) were formed, as a way for people to protect their funds from questionable demands for disclosure of information.
According to an Andorran saying, only three people would know the identity behind a numbered account: the account holder, the bank manager, and God.
Nowadays, banks are required to be able to identify the person behind a numbered account upon request from relevant and competent authorities.
Differences between Numbered and Pseudonym Accounts
A numbered account has no name associated to it on bank statements and in internet banking environment. Instead, a number or a combination of numbers and letters is used.
For pseudonym accounts, a name will appear but it will not be your own name and usually not even a name that bears any resemblance to your real name.
Restrictions
Under most common standards, international bank transfers must contain the real name of a legal person, meaning either a personal name or a the name of a company. This means numbered and pseudonym accounts cannot be used for international bank transfers.
Domestic transfer are subject to local laws and it is rarely problematic to transfer funds in and out of a numbered account within the same country. The only issue can be interbank transactions.
Uses
Due to the restrictions on numbered and pseudonym accounts, the uses of the account is limited.
Instead, they are usually used either as a transit account using domestic in and out sources (since these accounts are often associated with wealth management, they are hardly ever usable as transit accounts), or as a final destination for funds received into an offshore corporate bank account in the same jurisdiction as the numbered account.
Bearer shares companies are often used in conjunction with numbered bank accounts.
For example, a Panamanian bearer shares company has a bank account under its name in Lebanon. Profits from the company are distributed to the directors’ pseudonym accounts in Lebanon.
As a further example, a director could then wire the funds into a bank account in Lebanon held by an UAE company and then wire the funds to another destination.
Numbered and pseudonym accounts often come with mail holding and forwarding of mail as an additional service. Any mail can thus be sent to the bank, which will either scan it or forward it to you.
Practical Secrecy
So how secret is your identity when using an account like this?
About the same as if the bank account were in a company’s name.
The benefits of using a numbered accounts are limited and the restrictions under which they are operated make them quite cumbersome.
Since the appeal of numbered and pseudonym accounts were their secrecy and the same level of secrecy can be applied to a company account, which is far easier to open and maintain, these types of accounts are on the decline.
Jurisdictions
Below are some jurisdictions that allow numbered or pseudonym bank accounts to be opened, subject to strict regulation.
- Andorra
- Austria
- Lebanon
- Liechtenstein
- Luxembourg
- Monaco
- San Marino
- Singapore
- Switzerland
The service is rarely advertised to the public and instead only mentioned to prospective wealthy customers or customers with established relationships.
I recently contacted OCBC (Singapore). They said that any offshore company that wants to get a corporate account with them must deposit at least USD 30,000.
I saw that in your “The Best Offshore Banks 2013” post that minimum deposit range from 500 USD to 5000 SGD at OCBC. Was the low figure for personal accounts?
If I recall correctly, they have lower minimum deposit for SGD than foreign currencies. The minimum may indeed have been for personal accounts, though.
This has to do with offshore vs. domestic companies. Their domestic company minimum balance requirements are fairly low but when dealing with offshore companies they require 30 000 in the appropriate currency (SGD, USD, EUR, etc.)
Hi Streber! I am the spice-trader from a month ago. I just need a simple corporate bank account for a new company I plan to form. All the bank account needs to do is to accept payments from clients around the world in either USD/EUR. The company will be either a US or UK LLP since my clients only like American/British companies.
I have recently developed an interest for Caribbean banks because they in general allow low minimum balance (i.e. a few thousand USD) and remote bank account opening. They also seem to be more relaxed about KYC and accept offshore companies as clients.
I know that you are not a big fan of Caribbean banks because of high fees. When you said “high fees”, did you mean they charge a lot for wire transfers? What do I have to watch out for when evaluating Caribbean banks? Everything seems a little too good to be true so I wonder if there is a catch.
When comparing jurisdictions in the Caribbeans (Belize, Bermuda, Cayman Islands, BVI etc.), which ones have banks that will serve my purpose?
Lastly, I realise that when one picks a bank (especially a bank in offshore locations), one should examine the bank’s financial health to avoid depositing at a risky bank. Do you think you will publish technical guidelines on choosing banks in the future?
If your clients only like US/UK companies, chances are they won’t be too thrilled about Caribbean banks. UK company with bank account somewhere in Europe is probably going to look best.
My criticism against the fees levied by Caribbean banks is largely the high per-transaction costs, in relation to the generally poor quality of service or range of products. Some of them charge quite high maintenance fees, which may or may not be lowered or waived once you reach a certain balance. You can certainly see similar fees elsewhere but you then usually get services good enough to justify the cost.
Except for a few accounts that I haven’t been able to close yet, the only worthwhile banks (except for branches of private banks) in the Caribbean are MCB in Curaçao, Butterfield, FirstCaribbean International, and most of the larger banks in Cayman Islands. That’s not saying all other Caribbean are all expensive and bad. They can certainly provide an easy way to start banking as a small offshore company.
I have an article upcoming about assessing banks but at the end of the day, there’s only so much you can learn from reading about a bank. The real experience lies in using the bank first hand. If the bank is no good (hopefully unlikely to happen if you’ve assessed them carefully on beforehand), it’s not that hard to go somewhere else.
Thanks for your responses.
I suppose another usage for such an account would be to keep the UBOs identity reserved to a select few in the bank (perhaps on paper in a safe and not in the bank’s computer system), and thus protected from employees selling client lists to foreign governments.
In regards to international transfers, I’m curious who has access to the SWIFT data for the transfers? Considering that SWIFT moved their datacenter from the US to Switzerland for privacy reasons, there may be some privacy risk involved here? Can a private detective ask his contact working at SWIFT for a favor and retrieve a list of transfers sent/received by his mark? Does an international wire from Hong Kong to Singapore in up in a database in Switzerland? I guess that’s why international wires should always be sent/received from offshore corporations for complete confidentiality.
SWIFT has comprehensive internal security processes and nearly every action anyone takes within their IT infrastructure is logged. In theory, it’s not enough to have a single contact within SWIFT in order to retrieve information. There are probably weaknesses but it would take an enormous effort to extract information without leaving a trace. The PI would have to have significant sway with the SWIFT employee or employees to pull it off. Even then, SWIFT has data segregated in a way which could make it difficult to extract all transactions for a person, account, or bank.
When it comes to physical location of data, it’s not entirely clear cut. SWIFT has two data centers in Europe (Netherlands and Switzerland) and one in the USA. European SWIFT members’ data is stored in Europe only but wires crossing the Atlantic are replicated into the US data center. So what about neither Europe nor US? It’s up to each SWIFT member to opt to be in the European SWIFT system or the US SWIFT system. Your transfer from HK to SG could end up in the US or it could end up in Switzerland and/or Netherlands.
It’s mentioned briefly on the SWIFT website.
Something worth keeping in mind, though, is the Terrorist Finance Tracking Program (TFTP), under which US authorities have essentially unlimited access to SWIFT’s records. There has been some talks within EU to revoke this following the NSA debacle, but nothing has really happened.
I’m also curious how the Swiss, Lux, and Austrians plan to manage reporting numbered accounts when they’re no longer allowed to do the withholding and anonymous tax payments…
The bank knows the true account holder nowadays (unlike back in the day), so it’s not a problem to comply with EOI and other agreements.
Very interesting.
There’s a short interview with Kashya Hildebrand while in Singapore where she said that if she wanted to make money insider trading then she would’ve used a numbered account. I suppose such trades would be registered under the bank’s name and LEI, but would you have direct market access when placing the trade from such an account? In order to place the trade independently perhaps you’d need the numbered account at a bank that also offered white-labeled access to IB or Saxobank since brokers would require the funds to be deposited and withdrawn from an account in the same name as the brokerage account and thus would not allow you to use a numbered account.
Trading done with funds on for example private banking (wealth management) accounts, which are opened as a numbered or pseudonym accounts, will not be done from the client’s bank account. Instead, the bank will trade on behalf of the client. This is enough to satisfy necessary compliance needs, since the buyer of the trade is identified and, although effectively a nominee, the identified party is able to disclose the UBO should a request arise.
Trading directly from numbered accounts won’t work. It could easily be abused by IPOing a company on some poorly regulated market (or maybe even a reputable market) and have all shares bought by a numbered account. The UBO of the company is then suddenly unknown.
It might be possible for certain types of trades and/or domestic only but I’ve never seen it.