Question: Millenium Bank, an offshore institution, is offering CD’s at 5%. Is IFSA coverage comparable with FDIC? John, Los Gatos, CA

Answer: We’ve been getting more questions about Caribbean-based Millennium Bank and its ilk. The bank offers high interest rates on its certificates of deposit. For instance, it advertises a 6% interest rate for a 1 year CD with a $25,000 investment. Savers are hungry for yield in today’s low interest rate environment. But there’s nothing wrong with a low yield if your money is safe.

To be absolutely clear, I would not put any money into any offshore bank. Period.

I would not put any money into a bank that is not insured by the Federal Deposit Insurance Corporation (or its credit union equivalent.) Period.

The Millennium Bank is both offshore and its not insured by the FDIC. It’s located in the tiny Caribbean country of St. Vincent and the Grenadines (SVG), with a population of 118,432 (July 2008 estimate), according to the CIA World Factbook. To be sure, the government has brought international regulatory standards to its small offshore finance sector, but the International Financial Services Authority (IFSA) isn’t an FDIC or anything like it.

The bottom line: Caveat Emptor. Stick with the FDIC label.