Clarification/Follow-up by Ccl471 on 05/12/07 11:55 pm:
No, I don't want to bank with that particular bank. If indeed it is not illegal for an American to bank offshore, I plan on personally making a trip down to the Cayman Islands and looking for a bank that is large enough and has been in business for a long time.

Clarification/Follow-up by Oldstillwild on 05/13/07 11:53 am:
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Banking

An offshore bank is a bank located outside the country of residence of the depositor, typically in a low tax jurisdiction (or tax haven) that provides financial and legal advantages. These advantages typically include some or all of

strong privacy (see also bank secrecy, a principle born with the 1934 Swiss Banking Act)
less restrictive legal regulation
low or no taxation (i.e. tax havens)
easy access to deposits (at least in terms of regulation)
protection against local political or financial instability
While the term originates from the Channel Islands "offshore" from Britain, and most offshore banks are located in island nations to this day, the term is used figuratively to refer to such banks regardless of location (Switzerland, Luxembourg and Andorra in particular are landlocked).

Offshore banking has often been associated with the underground economy and organized crime, via tax evasion and money laundering; however, legally, offshore banking does not prevent assets from being subject to personal income tax on interest. Except for certain persons who meet fairly complex requirements[1], the personal income tax of many countries[2] makes no distinction between interest earned in local banks and those earned abroad.

Persons subject to US income tax, for example, are required to declare on penalty of perjury, any offshore bank accounts—which may or may not be numbered bank accounts—they may have.

Although offshore banks may decide not to report income to other tax authorities, and have no legal obligation to do so as they are protected by bank secrecy, this does not make the non-declaration of the income by the tax-payer or the evasion of the tax on that income legal.

Following September 11, 2001, there have been many calls for more regulation on international finance, in particular concerning offshore banks, tax havens and clearing houses such as Clearstream, based in Luxembourg, being accused of being a crossroads for major illegal money flows.

Defenders of offshore banking have criticised these attempts at regulation. They claim the process is prompted, not by security and financial concerns, but by the desire of domestic banks and tax agencies to access the money held in offshore accounts. They argue that offshore banking offers a competitive threat to the banking and taxation systems in developed countries, and that OECD countries are trying to stamp out competition.

So,CcI471,

as far as I understand,any offshore banking is allowed,under the explicit requirements mentioned above.

hi.