There are several laws and regulations consequences go with offshore banks that I want to cover in this article. However, do not interpret the information on this page legal advice. I am providing this information for free based on my own experience. Please consult with a professional lawyer or CPA (accountant) before you engage with offshore online bank.
What is Offshore Bank
To be the simple, an offshore bank is a financial institution outside the shores of your country. If you are in Australia, banks in the US is ahead of the bank to you. If you are in the US, banking in Singapore is from the bank to you. The idea of offshore banking is relative.
A company or individual, in this case you can choose an offshore bank account in jurisdiction is generally favorable in terms of taxes (often called a tax haven from the media), as well as with regard to the legalities. In addition to choosing the jurisdiction with no to little income tax, for many, privacy and “secrecy” banking are two of the larger main criteria.
It goes without saying that access to capital is important, as well as protection against corruption and stability in terms of certainty.
List of Common Offshore Online banking
This is a short list of services from offshore banks. This list is not full comprehensive list of gifts Offshore bank, but a list of some of the most common offshore online banking services to businesses and individuals are available:
- Remote Deposits funds
- Direct Deposits funds
- ACH / wire transfers / EFT – electronic transfers Fund
- Consumer and Commercial Lending
- All Basic lending
- Access to capital – Offshore debit
- Forex – Currency
- Asset Management
- Offshore Trading Account
- Offshore Brokerage Account
- Administrative Services
- liquidator Services
Note: Offshore banks usually have to focus on either consumer or commercial. Within the consumer, identify banks between retail consumers (average individual) or private banking (designed for high net worth individuals).
Because each concentration involves different cost structure from the perspective of the bank, when choosing an offshore bank for yourself, be clear on what type of consumer you are and what previous online banking services you need. Gaining this clarity will ensure you are not disappointed in the selection.
List of Common Offshore Banks
No doubt the two most common names in offshore banking are Switzerland and the Cayman Islands. Just pick up any business calendar or pop in a business based on Hollywood flick. It is probably the least Swiss bank account somewhere.
This is because as at least 2012, these two jurisdictions held the most number of total deposits among all offshore banking online. Some other jurisdictions that offer offshore banking are the following:
- Cook Islands
- Saint Kitts and Nevis
- New Zealand
- British Virgin Islands
- Cook Islands
- Channel Islands
- Hong Kong
- Regulation Offshore banking
With complexity comes an increasing regulation. The regulation of offshore online banking has increased steadily over the years, but according to many of its supporters is still not enough. This means much more is in the pipeline. Regulation has especially increased significantly after significant events September 11, 2011.
Regulatory guidance is issued and monitored by international organizations such as the IMF and the IMF, which requires financial institutions around the world to maintain a certain level of operation or standards, especially in terms of capital adequacy and liquidity. These key performance indicators are to be reported quarterly to the bank designated regulator of (such as the Fed or the FDIC in the US).
The list of regulations is endless and quite comprehensive to say least. Some notables include Anti Money Laundering (AML) regulations and Confidentiality of the Central Bank Act (BSA). These measures require banks and financial institutions to immediately report suspicious activity resembles money to local despite stepping out of BSA jurisdiction.
Another example is the information sharing requirements between a certain group of countries with regard to capital flows and taxation initiated by the members of the European Union. On the other side of the pond, the tax body of the US, Internal Revenue Service (IRS) requires financial institutions to report the names of companies and individuals who benefited from interest income from deposits in the US based organizations.
Most notable in my opinion the recently enacted rules US Patriot Act, which allows the government to seize all assets of a financial if it suspects that the institution holds assets belonging to potentially criminal. Several other countries have since followed suit.
I personally feel that these regulations strengthen the global banking infrastructure. But then again I’m just one person. There are others who think in all sorts of ways of offshore banking
Interesting fact :. Did you know that just until the 1990s, people got to create your very own offshore bank them. This practice was stopped and now only large organizations may do it.
interpretations consequences Offshore Online Banking
It is not illegal to conduct offshore banking, but such activities tend to carry with them a certain set of meaning and legal effect you must be aware of and accordingly. It can be severe fines, penalties and legal implications if you fail to comply with laws and regulations.
Why must you be thinking? Because Offshore banking historically has been used and abused by those intended to evade taxes, as well as those who use the funds for illegal reasons. For example, organized crime networks heavy use offshore banking to launder money.
But as I said, implementation of offshore banking is not illegal activities. All persons of offshore banking in most countries (depending on their residence) to publish the work and performance, such as interest income, for example.
Especially in the US, such income is resident is taxed globally. This means that even the interest earned abroad is taxable US authorities. Now, however, financial institutions are not required to disclose this information to the national interest because of the guidelines of banking secrecy, individuals are required to disclose this information.
Similarly, one can legally avoid taxes in certain situations. For example, a resident of Country X to live and work in the United Arab Emirates (UAE) may not have to pay taxes if Country X does not tax the global income of the individual.
Because there is no taxation of income in many Arab countries, interest income earned from deposits in UAE bank account is not taxable. Moreover, income is also not taxable in Country X. This is a common reason why so many wealthy people changing residence and citizenship status, one that resonates most with their financial goals and objectives.
There is a very interesting dynamic, and there is a ton of opportunity for counsel as you can imagine.
Dollar Strength in Offshore Online Banking
While offshore banking is not subject delved of the average person, the numbers involved (the concentration of wealth and financial) are quite significant. You can find many of these simply gorgeous.
For example, specialized economists and banking experts suggest that half the world’s capital (money) flows through one of the many offshore banks out there. So-called tax havens (think Switzerland), over a quarter of total wealth (think wealthy individuals and large companies). These Havens also hold over 30% of the profits generated by the company based in the United States.
And it is not. Over 6000000000000 US dollars owned by wealthy individuals are also reported to be held in offshore bank accounts in one form or another.
Illegal money in Offshore bank accounts
opportunists have identified weaknesses in the offshore banking system and thus have used the system to launder funds generated by illegal means and used for illegal purposes. According to the IMF, this amount is as large as 1.5 trillion dollars per year. To put things in perspective for you, this is about 5% of the total GDP of the world (GDP).
In addition, illegal money, there are also funds that have avoided taxation as well as the funds were generated through fraud, graft and corruption. All in all, the amounts great significance. And as I said above, two jurisdictions with the largest concentration of these amounts are the Cayman Islands and Switzerland (since 2012).
Offshore Internet Banking for Corporations of all sizes
I’ve already said this before, but offshore banking is not just for large companies, and companies of all sizes and individuals. There are a certain set of requirements that any organization, individual or company must meet in order to open and maintain an offshore bank account.
In fact, it is easier for individuals to open and maintain an offshore bank account before companies are required to complete more forms in a certain way when you come on the offshore internet bank.
Corporations typically involved in offshore banking when they consider one or combination of the following purposes.
- restraint (bank charges and fees)
- Pay and receive payments from suppliers and customers in the local jurisdiction
- Asset protection methods
- International acquisitions and investments
- Compensating local workers in the offshore jurisdiction
- political reasons – stability and predictability
- establish a local business presence
- Again, this is not an exhaustive list of why companies involved in offshore banking. There are several other reasons why a company may decide to establish offshore bank account. The only true way to find out the best offshore bank for you, and whether your goals will be met with offshore online banking is by talking to a professional who can walk you through the entire process.
Concluding Thoughts on Offshore Banking
I gave you tons of information to read and digest in this article. As you’ve read, from internet banking is used by several districts in several different purposes with several different intentions.
There are some significant benefits that can be derived from the opening of offshore bank account, such as entering new international markets and some serious from tax planning. I would obviously open before the bank for the right reasons, with full compliance with laws and regulations. For those contemplating to abuse the system, understand that secrecy is weakening concept, and it will continue to weaken over the years.
Countries are increasingly sharing information, some voluntarily and some while succumbing to pressure from powerful countries like the United States.