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Preventing Online Offshore Banking Fraud

Virtual banking has been offered on the Internet since 1995. Along with banking, a host of other commercial ventures including online forex trading, PayPal and e-bay have offered great opportunities for people to send and receive money for a variety of business and personal reasons.

Banking is one of the businesses that have benefited considerably from the cyberspace evolution, and some foreign banks now offer offshore banking. While a number of reputable banks offer their services online, a surprising number of these online offshore “banks” are really nothing more than rip-offs and scams.

What is Offshore Banking?

Many offshore banks are located on islands and they generally offer both secrecy and high interest rates. Sometimes these rates seem excessively high, and they often serve to lure in greedy people to open offshore banking accounts.

Offshore banking scams frequently rely on the greed of the individuals they take advantage of. When it comes to offshore accounts, this tends to target those who wish to avoid disclosing their financial accounts to creditors or tax authorities from their particular countries.

Offshore Banking Pitfalls

Since you would potentially be committing the crime of tax evasion by opening an offshore banking account, you would then have no legal recourse if the institution is a scam and decides to keep your money. Often, the offshore “bank” will be set up like a Ponzi scheme, paying out the high interest, but withholding the principal amount on deposit.

Eventually the “bank” will simply disappear taking all of their client’s money. Another major drawback is that the offshore institution might not only keep your initial deposit, but may even attempt to extort additional funds from you in exchange for not revealing the fact that you have committed tax evasion.  This is certainly a losing proposition.

Preventing Offshore Banking Fraud

Basically, most of the offshore banks are registered in small countries which have set up their laws to encourage foreigners to open this type of account. Nevertheless, regulators in those countries will in many instances be in on the scam and even collude with the banks.

The best way to avoid these types of scams is to not get involved in the first place. If you are banking online, make sure that any institution you choose is not on any of the watch lists put out by the FDIC. Also make sure that the financial institution is chartered and regulated.

Many online banks can be verified by a “SightCertain” seal which is an electronic watermark or a digital certification offered by the American Bankers Association. By clicking on this logo, the customer is directed to a secure online database that will verify the legitimacy of the financial institution.

Clearly “caveat emptor” or buyers beware applies when it comes to online offshore banking. Remember, if things look to good to be true, they most often are.