Benefits of Offshore Banking
What comes to your mindwhen you hear or read the word, “Offshore Banking?” Stolen or embezzled funds? Tax evasion? Funds associated with criminal activities, terrorism or moneylaundering? Unfortunately, those aresome of the general misconception about offshore banking. Naturally, everything good has its shortfallsand short-comings. So, in this article,I will dispel myths associated with offshore banking and go further to discussbenefits, yes, benefits associated with offshore banking.
Most of us, if not all ofus, currently hold and operate (or have held or operated) a bank account in ourlocality. And that is (or was) a goodthing. So, when not the same withoffshore banking?
Definition
TheInternational Monetary Fund (IMF) simply defines Offshore Banking(also known as PrivateBanking) as “the provision of financial services by banks and other agents tonon-residents.” In layman’s words,offshore banking is having a bank account in and enjoying banking services froma banking or financial institution outsidethe country in which you reside. That itis prefixed with the word “offshore” does not imply that they are located onisland. The emphasis is on it beinglocated outside the country of the depositor.Offshore banks are legal entities and are usually ownedand operated by larger business or financial institutions or a consortium ofsuchlocated in other countries. Althoughthey are subject to the laws of the host country, regulations guiding them areusually less strict than those imposed on local banks in the same country. They can be found in many countries in theworld such as Luxembourg, Isle of Man, Macau, Panama, Cayman Islands, Austria,Cyprus, Caribbean Islands, Bermuda, Switzerland, The Channel Islands and manymore.
Benefits ofOffshore Banking
So what are the benefitsassociated with offshore banking? Well,there are quite a few:
A Safe and Secure Environment
Countries in theworld are prone to all forms of risks, threats and instability – be itpolitical, religious, ethnic, economic, natural calamities and others. The more a country is vulnerable to suchinstability, the less safe and secure are funds and investments in thatcountry. Therefore, having an offshoreaccount in a country that is less prone or vulnerable to instability provides asecurity and peace of mind to the depositor or investor.
Excellent Foreign Exchange Services
Customers mayhave multiple foreign currency accounts in an offshore bank at their choice andselection. For example, funds could beearned in a currency that may be weak and unstable but deposited or transferredto an offshore account in another more stable currency. Furthermore, local banks in most countriesare usually subject to strict and highly regulated foreign exchange laws thatgoverns exchange rates, importation and repatriation of funds. Such do not generally apply to offshorebanking. Customers receive excellentforeign exchange rates and can transfer their funds and investments at will toany currency or to any country of their choice.
Availability of High International InvestmentOpportunities
What is thepoint of having your money sitting dormant in an offshore account and justearning trifle interest? As seasoned andexperienced bankers, offshore banking institutions recognise the desire andneed of willing clients to have their deposited funds also earn themmoney. So, offshore banks offer theircustomers a bouquet of investment opportunities (portfolios) in countries allover the world. Local banks are notpoised or structured to provide such international investment opportunities totheir clients.
High Level, Excellent Banking Service
Because of thenature of their services, offshore banks provide the highest banking servicesto their clients in terms of types of banking services, tools, moderntechnology and personalised customer service. Because they service customers from all parts of the world in differenttime zones, they are usually available 24/7, 365 days of the year. Each customer is usually assigned an accountrepresentative and customers have unfettered access to their funds throughhighly secure and specialised telephone and online banking.
Privacy and Anonymity
This is one ofthe major reasons why offshore banking is generally frowned upon. Yes, offshore banking provides clients withprivacy and anonymity but not total and absolute anonymity. Offshore banks require valid proof ofidentity and verify the identity of all their clients in a bid to stem fraudand money laundering. However, suchidentify is highly classified and protected. Some offshore banking institutions provide their customers with abanking number shielding their identity from the general public. However, regardless of the anonymity andprivacy offered, some countries require their citizens to declare funds,investments and banking accounts held in foreign countries. Failure by them to do so is criminal andexposes them to prosecution and possible fines, forfeiture of the funds orinvestment and even imprisonment.
Tax Haven
Depending on thelaws of the host country and the laws of the depositor’s country of residence,offshore banks can be a tax haven where low or zero-tax is applied to funds.
Superb Lending and credit Facilities
Offshore banksusually have a high capital than local banks. Also, they have a large amount of depositors’ funds at theirdisposal. Consequently, they are betterpositioned to and they do offer their customers excellent credit and lendingfacilities are not available locally or even through international banking andlending institutions.
Centralised and Convenient Access to Funds
Some customersare international movers. Whether bypersonal choice, business or career, they move from country to country. For these people, transferring funds eachtime they leave a country to another country can be a hassle and aninconvenience. However, having anoffshore bank account provides a stable and centralised location for theirfunds to which they have easy access from any part of the world.
What’s ourtake?
As you can see from theabove, you don’t have to be an international traveller or a rich, businessmogul to have an offshore banking account. Some offshore banks allow customers to open an account online from theircountry of residence while for others, accounts can be opened through an appointedagent or representative of the bank in a locality. Some institutions require you to notarizeyour proof of identity locally and upload or send it to them. Having an offshore banking account is not forthe criminally inclined as is mostly misconstrued.
If any of the above benefits apply to you, feel free to go ahead and open offshore bank account. Terms and conditions vary from bank to bank and from country to country. Ensure that you are thorough in your investigation before deciding on which bank in which country to open you offshore bank account.
You may also like to read:
What’s with Offshore Accounts, Shell Companies and Tax Havens?
Role of Technology in Accounting and Banking
(By Molly Joshi)
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