Offshore Banks: Benefits & Examples
Offshore banks offer a number of advantages. Some of these include enhanced privacy, asset protection (especially when coupled with an offshore trust and/or LLC), higher interest rates, tax savings (depending on your jurisdiction) and asset diversification. Moreover, opening an offshore bank account is perfectly legal. There are trillions of dollars that go back and forth across international borders every year. Thus, offshore banking is commonplace and mainstream and has been so for many decades. Apple, Microsoft, Google and the bulk of the large international corporations have offshore bank accounts.
The services and financial instruments offshore banks offer are no longer restricted to high-worth individuals and multi-billion dollar conglomerates. If you are a professional working in a high-risk field with liquid assets you want to secure them from frivolous lawsuits. You can do this using an offshore bank in combination with an offshore LLC or trust. Likewise, if you’re a business owner engaged in international trade, using the services of an offshore bank can not only facilitate your international business transactions, but provide a measure of security as well.
Offshore Bank Definition
Technically, an offshore bank is any bank located in a jurisdiction or location that is different from where you, as the bank account holder, reside. The first offshore banks were said to have been located in the Channel Islands, which quite literally were located off the shores of Great Britain. The islands were not subject to the same tax laws enforced on the mainland. Because of this, they were able to offer the over-taxed members of an emerging European elite class a low-tax safe haven. By placing their assets in the offshore locations, the rich shielded them from the crushing tax laws imposed in the mainland.
Several offshore banks are still located on island nations today. Some, like Bermuda and much later on, Singapore, are or were linked to Great Britain at some point in their history. After a time, the British former colony that became the United States of America took its place on the world stage. Increasing trade and rapid new discoveries created an entire generation of wealthy industrialists and capitalists. Soon, the islands close to this young nation began offering the same offshore banking services and an incipient industry took hold.
Development of Offshore Banks
Today, the term ‘offshore’ refers to more than just a bank’s location. Instead, the aspect of providing a tax haven or shelter for the ultra-rich has erroneously been attached to the term. In time, the strict privacy and relaxed banking regulations of offshore banks made them an easy mark for money launderers and tax evaders. Because of this unfortunate link, many view offshore banks as a tool for unsavory individuals to hide their ill-gotten loot or for giant corporations to stash their earnings tax-free.
However, recent world events, such as terrorism and rampant international drug trafficking, have affected offshore banking laws. These world-wide developments eroded the rigid privacy regulations that used to be strictly enforced by offshore banks. It’s not as easy now to conceal the true owner of an offshore bank account as it used to be. This has actually been beneficial for the offshore banking industry. Criminals and tax-evading corporations now find it difficult to hide behind the privacy screen once so conveniently put up for them by offshore banks. Because of this, they are forced to find other ways of hiding their illegal wealth. If you’re an honest, tax-paying individual who accumulated your assets the old-fashioned way, that is, through hard work, you can continue to use offshore banks without fear of recrimination.
Offshore Banks and Asset Protection
Offshore banks offer a certain amount of passive asset protection benefits for financially successful people who are not necessarily billionaires. This is especially true for Americans who reside in one of the most litigious countries in the world. U.S. courts teem with frivolous lawsuits lodged by opportunistic plaintiffs looking for a big pay-off from individuals with ‘deep pockets.’ It almost doesn’t matter whether or not they have a genuine claim or grievance against you. They are only interested in assets they can get a hold of and how easy you make it for them to accomplish that goal.
Sometimes, placing your assets in an offshore bank can be enough of a deterrent. Even if a cunning plaintiff wins his or her case against you, they will still have to go through a lengthy legal process to gain control of your assets in an offshore bank. After all, there are legal remedies available to you as well. No one, except perhaps the most dogged of creditors or plaintiffs, relishes the thought of a protracted legal battle.
You do have to make sure that any assets you entrust to an offshore bank are part of a carefully-crafted comprehensive asset protection plan. You need to put as many layers of protection between your assets and an opportunistic plaintiff or creditor. This way, you can be assured your assets will be used and enjoyed only by you and your intended beneficiaries. The more you protect your assets, the less likely they are to be the target of a predatory claim.
Offshore Banks and Higher Interest Rates
With the current dismal interest rates on U.S. savings accounts, placing your money under a mattress almost makes as much as sense as parking it in a stateside bank. Consider this: the current inflation rate is hovering at around 2 percent. The average savings account interest stands at .06 percent. You would actually be losing purchasing power the longer your money stays in the bank. Little wonder that up to one-fifth of Americans, roughly 66 million, do not have any savings at all. For as long as interest rates remain below the rate of inflation, you will continue to lose purchasing power year after year if you keep your money in a U.S. savings account.
Offshore banks can typically offer a higher interest rate on your money. This is due to a combination of factors, including lower overhead expenses and lack of restrictive government intervention. Offshore banks can also offer investment opportunities and funds options that are not available elsewhere. These types of financial instruments usually have a higher yield, so depositors enjoy a higher interest rate as well.
Banks located in countries where the demand for US dollar loans is high but the dollar supply is low, will offer a higher interest rate. They do this to entice you to deposit your money (U.S. dollars) with them. They will then turn around and lend your money to borrowers looking for dollar loans and charge them enough to cover the interest they’re giving you. Any amount they charge over that is theirs to keep as profit from the transaction. Before you decide on an offshore bank, find out if the country or jurisdiction where the bank is located is facing these circumstances. This will not be the sole basis of your decision, of course, but it could be a factor worth considering. It’s a lot better than keeping your money under a mattress or in a U.S. savings account.
Offshore Banks Offer Safety Through Diversification
It is never a good idea to place all your eggs in one basket. This tried-and-true adage is sound advice for a number of things like investments, asset protection instruments, choice of banks, and other similar financial ‘eggs.’ Consider moving a portion of your assets to a conservative offshore bank in a politically stable location. This way, if the U.S. federal government makes a fiscal decision that puts your assets in jeopardy, the money you deposited in an offshore bank will remain safe.
You might be amazed at how easy it can be to open an account in an offshore bank. Then once you do, you will have open an offshore bank account online that you can view from the convenience of your home.
Because of stricter reporting regulations, most offshore banks these days require that they meet you in person at least once. This face-to-face meeting usually takes place when you open your account with them. Other banks allow remote opening with the aid of an eligible introducer. This company provides that service. Us the inquiry form or the number on this page to get added details.
Offshore Banks: A Conclusion
No longer the private domain of the privileged and other individuals with dubious reputations, offshore banks now offer legitimate banking services to ordinary folks with assets to protect. In litigious-happy America, almost anyone can be a target of a frivolous lawsuit. However, predatory claimants are often deterred when they realize your assets are secured in an offshore location.
The benefits of offshore banking do not stop at asset protection. More often than not, you also end up enjoying a higher interest rate than what most U.S. banks currently offer. From a strictly financial viewpoint, it makes sense to place some of your assets in an offshore bank. Your money will simply earn more.
Additionally, by diversifying your asset allocation, you can be assured of access to some of your assets all of the time. If an unexpected turn of events in your home country threaten your assets, you will still have the assets you have in an offshore bank available to you.
Ultimately, the best offshore bank is the one that will address and support your individual financial and asset protection goals. There are offshore banks in island locations such as Antigua and Barbados, and in inland jurisdictions like Switzerland and Liechtenstein. There is no shortage of options; all you have to do is choose and choose well.
Last Updated on April 6, 2019