Offshore banking once had and to some extent still has the reputation of being the preserve of tax dodgers and criminals. This is unfair. It is simply the use of a bank in a place different from the depositor’s residence. Offshore banks are often to be found in places known as tax havens and they do offer customers more privacy than they can expect from “home based” organizations.
Traditionally offshore banks were located in places such as Jersey, Guernsey and the Isle of Man. These are all islands “offshore” from Britain. They became known as “tax havens” and the term “offshore” was first used by these places and the banks based there. The islands became international banking hubs because of their relaxed tax and regulatory requirements. They were ideal places to hold funds and from which to invest or otherwise manipulate assets.
Offshore banks are less regulated than domestic ones because of the independence of their governments. These banks can allow depositors more freedom of action and have less responsibility to report activities to authorities than banks resident in the same place as depositors. Offshore banking is now a huge worldwide business operating from many bases and turning over trillions of dollars daily. This is far greater than the business conducted by a few organizations dealing with customers of dubious character just twenty or thirty years ago.
The services available from an offshore bank are the same as those available from a home-based bank. These include personal and business checking and savings accounts and the full range of facilities that are expected from banks. That is, internet banking, electronic and wire transfer systems and debit cards for use world wide at ATM machines. Some banks will provide credit cards and loans for all purposes. Investment management, trustee services, company administration and foreign exchange services are also often on offer. Offshore banks usually have both retail and private banking services. The latter is more personalized but also more expensive. There is still available anonymous numbered accounts for an extra layer of confidentiality.
For most it is not illegal to open and operate accounts at offshore banks. Privacy is the big selling point. The banks have no obligation to release any information on customers individual or corporate to anyone. Most banks will not tolerate criminal activity but in general it is possible to derive protection from creditors whether private or government. Assets can increase quickly without the imposition of taxes so tax efficiency is a major advantage to those having offshore banking facilities. This advantage is less now than it was previously. At one time the only tax liability incurred was on the repatriation of funds.
Recently many offshore jurisdictions have had to agree to the levying of withholding charges in lieu of taxes on clients who wish to maintain maximum confidentiality. It has not been possible for some offshore governments to resist having the aid and assistance offered by “parent” governments, such as Britain is to its offshore jurisdictions, being curtailed unless more regulation of the offshore banks was imposed. Maximum privacy comes at a price now but it is still the case that funds and assets held abroad are less subject to seizure and often legal problems and prying bureaucracy can be avoided.
The reliability of the above information comes from personal experience gathered over some 50 years. Some may try to sell the details of setting up an offshore account but it is really no different from dealing with a local bank. Most have done this quite successfully. It is no different offshore.