Offshore Banking Information

by: Kevin Wessell  

 

Offshore Banking 

Offshore banking or Offshore banks refers to the many banking and investment institutions available in countries and jurisdictions other than the depositor’s home country. While technically any bank can be considered an Offshore bank when it meets the above criteria, the term is generally reserved for the banking institutions located in what are consider low-regulation, low-taxation “haven” jurisdictions. 

Since their origin, Offshore banks tended to be unfairly portrayed by both media and the home jurisdictions alike--the accusations have ranged from tax evasion to money laundering, but careful examination of the true purpose of the Offshore banks, and an unbiased examination of where illicit funds are truly held or “laundered” sheds light on the situation. Other false accusations have centered around criticism of unsafe environments, poor regulation, etc. Again, these could not be further from the truth. Most Offshore banking jurisdictions of any repute have very sophisticated, stable banking regulations, and because it is in their best interest to attract and keep depositors, these regulations are geared towards meeting the needs of the depositor. Many of these jurisdictions rely on foreign capital held in their banks as their primary economic factor, and as their only source of foreign investment. 

What is Offshore Banking? 

The broad definition of an Offshore bank is that of a bank that is located in a jurisdiction or country that is different from the jurisdiction or country that the depositor or investor resides in. One of the many benefits of holding an Offshore banking account is that they are usually located in tax havens that provide substantial asset protection and confidentiality benefits to the account holder. These jurisdictions also often allow for a relaxation of restrictions with respect to the types of accounts available to depositors or investors, and how then can manipulated. This amounts to decreased regulation. The more popular offshore jurisdictions often provide a substantial decrease in tax liability. While technically any bank outside of a depositor’s home country can be called an “offshore bank,” for our purposes here we will focus only on those proven to provide quantifiable benefits as outlined above. These Offshore banks can be located in actual island-states such as the Caymans or Channel Islands, or in landlocked countries such as Switzerland--being surrounded by water is no longer a determining factor. 

As mentioned in our opening paragraph, there are a number of misconceptions and myths associated with offshore banking in these offshore financial centers… Are Offshore Banks the Haven of Money Launderers and Criminals? We have additional information on Offshore Banking Myths that should be taken into consideration. 

Where Should an Offshore Bank Account be Established? 

It is important that the proper jurisdiction be selected when deciding which jurisdiction to use as an offshore banking jurisdiction. The majority of the offshore jurisdictions have prudent, sound regulations in place geared towards safeguarding the deposits and maintaining their confidentiality. However, some weigh their benefits in taxation, while others in confidentiality, and so forth. Though they all offer a comparatively confidential and secure environment, it bears consideration to outline what the banking goals are and then choose the jurisdiction accordingly. A small minority of the offshore jurisdictions do a poor job of managing and regulating their banking institutions, but the informed investor or advisor will deem these as unsuitable for themselves or their clients. Further, these poorly organized and run jurisdictions are often manipulated by illicit depositors and hence prove easy targets of the FATF (Financial Action Task Force) looking for money laundering or other criminal activity. 

Offshore Banking History 

It is an unfortunate fact that Europeans have always been subjected to relatively heavy tax burdens. This was as true on the British Isles as it was on the continent. Faced with the prospect of watching their hard earned assets and wealth diminish with every out-reach of the tax collector’s hand, they were ripe for a solution. And a solution came--the small, island nation state known as the Channel Islands convinced these frustrated depositors that deposits placed in its banks could be free from scrutiny and hence the heavy-handed taxation burden. The Euros were convinced--and soon this service thrived, with other small jurisdictions becoming savvy to this foreign capital-attracting status and they began to revamp their banking institutions, adopting sound, pragmatic banking rules and regulations that eased the potential concerns of investors and depositors. The Offshore bank was off to a running start! 

And soon the term “Offshore banking” became synonymous with any smaller, haven jurisdiction that offered safe, secure, confidential banking with practical regulations. Soon the rest of the world was “in the know,” and began to look at these havens as viable solutions to their needs. Americans, Africans, Asians, etc., found these Offshore banks quite useful for a myriad of reasons. Unlike their banks at home, these Offshore banks were not regularly subjected to political turmoil or economic strife, and were most welcome for their stability and asset protection benefits. 

In the years since they have come into greater use and thus more visible, offshore banks and accounts have been unfairly portrayed by the media and by the larger jurisdictions as the stomping grounds of the criminal underground--a veritable haven for their illicitly-obtained assets and funds, or the choice locales for their money-laundering schemes. Money-wise investors and depositors have long known that these prejudices could not be further from the truth. They know that offshore banks can be remarkably effective havens for assets and funds in need of safe, secure, confidential keeping. They know that these banks can safeguard their funds from the perils of civil, economic, or political strife in their home countries. Today, offshore banks continue to keep their end of the bargain and continue to provide a safe, confidential haven for those seeking to safeguard their assets and funds from the perils of undue regulation and taxation. 

Many a discriminating depositor has benefited from the safe, confidential, and low taxation environment that Offshore banking has to offer. While it is important to assess your goals and discuss these with a competent, experienced agent before leaping into un-chartered waters, there are many unquestionable benefits provided by establishing an Offshore account. Their reputation among depositors and investors for providing a viable banking location featuring protection from liability and confidentiality is growing, and Offshore banks will continue with this hard-earned reputation for asset protection, tax reduction, and superb confidentiality of deposits.