Offshore Banking

An Offshore Bank, unlike the onshore variety, is one situated in a different country to that of the individuals home territory. There are numerous Offshore Banks and investment institutions available in countries and offshore jurisdictions outside of the UK, many of which are incredibly beneficial to British and EU citizens to use due to their high levels of privacy and offshore asset protection and lower rates of tax with an offshore bank account. However, when we mention the term ‘offshore banking’, we generally mean offshore banking services that are located in tax havens or low regulation and low tax jurisdictions.

Since its inception, Offshore Banking has been perceived by many as a method of tax evasion and money laundering by stories regaled in the tabloid press. More criticism has reigned down on offshore banking locations as being risky environments due to unstable politics or poor regulation. As with anything in life, when the subject is thoroughly researched, the offshore banking myths are revealed, then one understands that these situations simply could not be further from the truth.

Offshore jurisdictions of any repute have incredibly sophisticated and stable banking regulations. They have a vested interest in attracting and retaining lifelong clients and the rules and regulations governing these offshore bank accounts are very much geared towards addressing the needs of the depositor / investor. It is also true that many of these offshore financial centres and tax havens rely heavily upon foreign capital held in their banks as their primary economic factor. Indeed, in some cases it is their only source of foreign investment.

What is Offshore Banking?

The broad definition of an Offshore Bank, as indicated above, is bank which is located in an offshore jurisdiction different from the domiciled jurisdiction of the depositor. One of the numerous benefits of opening an Offshore Bank Account is that they are often situated within tax havens, which means that the individual pays less tax. Additionally, these international banking accounts also provide substantial offshore asset protection and privacy benefits to the offshore account holder. The types of offshore bank accounts available to depositors are greater than in the home jurisdicition, due to the more relaxed regulations and restrictions imposed by the offshore havens. This means that the manipulation of these accounts to benefit the investor or depositor is greater. An offshore account held in the most reputed offshore financial centres will, also, often have a lesser tax liability than in the UK and Europe.

For those domiciled in Britain, any bank outside of the UK can, technically, be referred to as “Offshore Banking”, for the purposes of these information pages we we will highlight only those locations proven to provide the aforementioned quantifiable benefits of offshore asset protection and tax efficiency. It is important to note that although one assumes that these tax havens are located in islands such as the Cayman Islands or Channel Islands, in actual fact they do include landlocked countries such as Switzerland or Luxembourg.

Where Should Offshore Bank Accounts be Established?

Selecting the right location of an account for your offshore banking is crucial: this offshore financial centre will enable you to protect your assets and manage your wealth. Your final selection of your chosen offshore location will take into consideration a number of personal facts and an analysis of your financial needs. Most of the offshore financial centres / tax havens have strong, sound regulations in place to ensure safeguarding of deposits and maintaining the anonymity of the investor.

Depending upon the offshore banking priorities of the investor depends upon the offshore banking location chosen. Whereas some overseas jurisdictions have greater tax benefits, others have greater confidentiality and anonymity for the client. Although all offshore banking facilitators offer a relatively confidential and private environment, it is still important to identify what your banking goals and strategy is and and then choose the offshore jurisdiction accordingly. Unfortunately, there are a small number of offshore jurisdictions which struggle to manage and regulate their offshore banking institutions. This serves to reiterate that knowledge and research is power and, therefore, the informed investor or advisor will deem these as unsuitable for themselves or for their clients. Furthermore, these poorly organised and run offshore jurisdictions are often used and manipulated by illicit businesses and, hence, are easily identified and taken to task by FATF (Financial Action Task Force) whose job it is to seek out money laundering or other criminal activity.

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