How to invest off shore?

You've been watching too many movies :-)

Offshore banking (OSB) is popular becuase many of the countries famous for the practice have lower taxation and increased privacy (accounts are titled with numbers, not names, and they don't ask where the money came from). In reality, OSB has some advantages, but it isn't all it's cracked up to be (I'm assuming you are a US citizen).

Some things to consider:

1. The US tax system requires you report unearned income regardless of where it was earned. The OSB is not required to report the income, but you still are. That alone probably eliminates most of your motivations.
2. Some of the infamous OSB countries are politically unstable. If political upheaval leads to nationalization of the OSB, you'll likely lose everything. If you already live in an unstable country, an OSB could actually be safer. However, I don't consider this the case for the typical American or western European.
3. In a similar vein, the US gov't suspects the OSB system of helping fund terrorism (although not necessarily on purpose). As a result, you can expect regulation too increase long before you see it decrease. How much so we can only speculate.
4. There's no "FDIC" in many OSB countries. The bank goes belly-up... you lose.
5. You can't get any substantial sum of money into or out of the US without declaring it. Even if you have been hiding your OSB income from the IRS, you aren't going to be able to get the money back into the US without sending up a dozen red flags.
6. OSBs can potentially shield your assets from creditors.

There are numerous legitimate reasons to open an offshore account, especially for large corporations. However, for the average American investor the benefits are minimal and are often outweighed by the additional risks. Simply put, if you want to avoid US tax law, move to a different country.

Dave, the US does not tax your accounts. The US taxes you as a citizen. Unless you become citizen of another country and renounce your US citizenship, you are still subject to US tax laws.

Even after that, if the US thinks renouncement was for tax reasons.