Generally speaking, overseas or offshore banking has garnered a bad reputation in the financial world. Usually the term is synonymously used with embezzlement, money laundering and tax evasion; evoking reminiscent scandals such as the Panama Papers.
So why has the offshore world received so much criticism? Of course, every good thing will attract people who try to abuse the system. This article will discuss the benefits, associated with offshore banking as well as dispelling any myths.
What is the Definition of Overseas Banking?
Overseas banking (also referred to offshore banking or private banking) is typically owning a bank account and receiving banking services from a bank or lender which is outside of the depositor’s country of residence.” Overseas banks are legal entities and are subject to the local legislation of the host country. Service providers in each jurisdiction are familiar with the regulations and know the requirements for a successful application.
Common misconceptions about offshore terms implies that the bank is located on an island. Well, that’s not necessarily the case; many popular overseas banking destinations include:
- The Channel Islands.
- Isle of Man.
- Caribbean Islands.
- Cayman Islands.
How can one go about benefiting from an overseas bank account?
1. Foreign Exchange Facilities
Multiple foreign currency accounts allow for funds that are being earned in a weak currency can be deposited or transferred to an overseas account in another more stable currency.
2. International Investment Prospects
What is the point of having your money sitting dormant in an overseas account and just earning trifle interest? Local banks are not poised or structured to provide such international investment opportunities to their clients. So, overseas banks offer their customers a bouquet of investment opportunities (portfolios) in countries all over the world.
3. Enjoy Limited Confidentiality & Anonymity
This is the main reason offshore has a received a negative response from tax officials. And while there is a level of privacy enjoyed (such as some lenders allow their clients to use a banking number protecting their identities), however they don’t allow for absolute anonymity.
Overseas banks require valid documents and identity checks for all their clients; sound KYC procedures are in place that abide by all local legislation. Such personal information is obviously highly confidential and protected.
4. Gain Access to Outstanding Borrowing & Credit Services
Overseas banks typically have a larger capital than local banks. Additionally, they also have the advantage and security of having depositors’ financing as and when they need.
Accordingly, they are better positioned to offer a more flexible and personalised service, not only for businesses but also individual bank accounts as well. While smaller and more local banks may have a more limited range of lending facilities.