Offshore banking is exactly what its name suggests: it is a financial process in which a depositor deposits his or her money in a bank that is located outside of the home country. The name traces back to banks found on the Channel Islands. They were “offshore” from the United Kingdom. It is a common misconception that offshore banks are only found in island nations. The phrase is actually figurative and can also refer to banks in landlocked nations. Here we will learn a bit about these banks.
If you are looking to open an account, there are many offshore banks to be found all around the globe. From Antigua and Luxembourg to Ghana and Macau, these banks are all over. But there are two countries that really dominate. The Cayman Islands and Switzerland make up a huge percentage of the total deposits.
When considering the global financial system, offshore banking is huge. Many experts in the field of finance will say that nearly a half of all the world’s capital goes through these centers. The numbers are striking. One report stated that over $6 trillion of the $18 trillion of the money held by the globe’s richest people are held away from their home countries.
Banking at foreign institutions has been associated with more than a few negatives. The top two concerns are money laundering and evasion of taxes. But one must keep in mind that such crimes are not carried out by the bank, but rather by the person or business whose money is in question.
There are several perfectly legitimate reasons why people would want to bank away from home. One main reason is security. People in countries that are suffering from political instability often find that a foreign account is safer. Of course one has to take into account the stability of the nation where the deposits are being made.
There are other advantages to consider. Firstly, some of these banks have fewer expenses, like lower overhead and lower tax liability. Therefore they are able to offer higher interest rates. Particular services are also worth thinking about. Some banks may be able to offer things that others cannot, such as low rates on loans and investment opportunities not available everywhere.
Before you go opening an account, you should realize the bank’s geographical location. If you plan to regularly visit the bank in person to conduct business, travel expenses can really add up fast if the bank is located very far from home. If doing your banking in person is not a top priority, then this is not an issue. Transactions can be made over the internet or phone. Telecommunications are great these days and make it super easy.
Offshore banking can be a complex world. Different banks will have different interest rates, loan rates, levels of security and services offered. It would do you well to research any banks that you might be considering working with. This will help you maximize your chances for a profitable banking experience.