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Offshore Banking Faced with loss of financial privacy, oppressive taxes, frivolous lawsuits, and miles of bureaucratic red tape, Americans are moving hundreds of millions of dollars into offshore banks. An American citizen can consider any location outside the United States to be an offshore jurisdiction. Some locations, however, do not have the following characteristics necessary to make them effective offshore banking centers: favorable tax legislation, few exchange controls, political stability, economic stability, strict privacy laws, and a variety of banking and investment options. Luxembourg and Bermuda are two distinguished international financial centers; the legislation and stability of both countries permits a variety of offshore banking activities. Americans often choose to invest in offshore locations where they can escape high U.S. tax rates. Luxembourg is a high tax country where income tax rates can reach forty-six percent (lowtax.net). There are also several other taxes imposed on the residents of Luxembourg. However, foreigners who only bank and invest in Luxembourg are not subject to any income, capital gains, or holding taxes. Bermuda is a crown colony, but it is fully independent from the United Kingdom.