Low tax jurisdictions that offer legal and financial advantages are the perfect spots for offshore banking, where people deposit funds outside of their countries of residence. The term ‘offshore,’ which originates from the Channel Islands being offshore from the UK, and most offshore banks being situated in island nations, is used symbolically to denote such banks in spite of location, incorporating Swiss banks and those of other non-coastal countries such as Andorra and Luxembourg.
The term ‘offshore banking’ is usually used for the banking institutions that are situated in jurisdictions that have a high regard for confidentiality when it comes to their depositors, although theoretically a bank can be considered offshore if it has depositors who live in another country.
Offshore banks have since their beginning been unjustly described by both home jurisdictions and media alike. The allegations range from money laundering to tax evasion, but careful assessment of the exact reasons for conducting accounts offshore, and an impartial scrutiny of where illegal money is really kept or ‘laundered,’ will shed light on the situation.
Politicians and other public figures have always been pounded for their use of offshore banking in an effort to malign them. There is nothing wrong with banking in a foreign country, contrary to any rhetoric that may have gone before. It’s a smart idea to diversify. Additionally, earning money in various currencies is hardly unusual in today’s global economy, and depositors sometimes bank their money where they earn it to avoid wire transfer fees and losing on exchange rates.
Other factors which lead to depositors choosing offshore banking and trusts to assist in managing cash, property and income are the growing use of the Internet to make a living or help administer businesses from afar and the increase in global travel. Offshore banking is multifaceted, and includes international trusts, business companies, limited liability partnerships, protected cell companies, captive and other types of insurance, mutual funds, international foundations, open ships registries, securities and foreign exchange trading and a host of associated services.
To open an offshore account you may need a certain level of relationship balance (the total amount of your holdings across the bank), and you may also be required to maintain a minimum cash balance. In many cases the bank will not charge any fees once these requirements are met. Offshore banks offer many of the services that are standard in other banks, such as international money transfers and debit cards.
Having an offshore bank account is particularly important in these times when government policy and currency controls are becoming stricter. The US and other governments may freeze and take possession of your belongings on a mere hunch, and it can sometimes take years of legal battles before you can have the use of your assets again.
The offshore world is the ideal setting for shielding hard-earned assets and achieving financial confidentiality. Offshore banking has helped depositors from around the world protect their wealth and maintain financial confidentiality in their business and personal affairs. Going offshore is usually the simplest, most convenient and affordable option. But be warned: citizens of certain countries that sign on offshore investment and bank accounts may need to divulge this information to their governments and pay taxes on any capital gains or interest.