What’s My Option For Offshore Banking?

Having an offshore bank account is not just a strategic decision you make just for your money but rather an imperative for many people in the business world. Thanks to favorable tax benefits both for corporations and individuals, these are still popular financial arrangements across the globe.

Having tax haven banking often used to carry negative connotations about people’s intentions and was also often considered to be reserved for the elite. If that does not dissuade you, the perception that you have will have to jump through an array of legal and regulatory hoops to open an offshore account possibly will.

The truth is that any layman can have an offshore bank account and he or she can open one quite easily. Also, having offshore banking isn’t a nefarious act based on illegal intentions. An offshore bank account is simply having a bank account in a country other than your home country. Different individuals have specific needs to have these financial arrangements, and they can truly vary from person to person. Below I outline what are some common reasons for opening an offshore bank account and what you can expect when opening such an account.

First, let’s start with what you will need. You can open a bank account offshore via a process similar to the one used in your home country. So, the choices of in person, via a representative or doing it online. There is some pertinent information you will need to provide, why you want to open an offshore bank account, valid proof of identity, the source of funds that you will be depositing in your new bank account, a verifiable address, and confirmation that the person exists in reality as you are showing on paper. The last point can now be easily be verified via video conferencing.

Regulation

One thing to be mindful of is that opening this type of account will not protect or shield a person’s illegal activities. There are international laws and treaties in place among various jurisdictions that protect the privacy rights of depositors so long as those depositors are not engaged in wrongdoing.

All countries have in place laws to oversee banks such as Anti–Money Laundering (AML) and Counter-Terrorism Funding (CTF). They are carried out by regulatory compliance processes such as Know Your Customer (KYC) and Customer Due Diligence (CDD). The laws that put in place these rules are very thorough and often require a painstaking amount of details to comply with. The amount of work needed to be carried out by bank compliance teams to open an offshore bank account often discourages many banks to freely offer the service to foreign clients.

All banks must abide by these regulations and also look into their agreements with other countries to determine if any depositors opening an offshore bank account are doing so in order to evade taxes in their home country. As such, it is important to be mindful of the fact that opening an offshore account has benefits and protections, so long as the purpose of having this type of account is copacetic.

Ease of doing business

One of the primary reasons of opening an offshore bank account is the ease of doing business and/ or the ability of transferring funds into and out of a certain market, options that may not have been available to a person in their home country. We have been seeing for many years’ where countries facing a shortage of dollars resort to instituting controls on dollar transactions among their citizens. Businesses operating in such environments are ideal candidates for opening an offshore bank account.

As a result of such capital controls by many countries, legitimate businesses functioning in the import or export of products suffer due to additional tax on foreign currency transactions or volatile exchange rates.

Economic stability

Another benefit of opening a bank account offshore, is the economic stability of having an account in a foreign currency. There are many countries that may make it illegal to have a foreign currency account. This is mostly due to the reasons cited above, where countries may be facing a balance of payment crisis and the governments need all the dollars they can get their hands on. Simultaneously, the value of the home currency starts to rapidly lose value, inflation becomes rampant and people are left with very few options to mitigate these economic risks. In such situations having an offshore bank account can really help in securing the value of your assets.

Political stability

Then there is the aspect of political instability in a given country. There are numerous cases we seen individuals ensnared in trumped up charges of ill-gotten gains and had their life savings seized in the name of the law. Such outcomes are not unheard of or even unfathomable. This is usually coupled with above scenarios of economic hardships a country may be facing that force their hands to take some measures against their citizens to shore up their treasuries.

Beyond economics, there are so many other motivations governments may have that warrant individuals to have an offshore bank account. We’ve all read about political instability of many kinds; coups, riots and protests, changes in governing parties. Sometimes it’s not malicious intent by a government but rather a case of mistaken identity for which your assets are frozen all of a sudden. It could also be a result of an ongoing lawsuit that compels courts to appropriate money into a restitution fund. All these scenarios warrant a pragmatic approach by having an offshore bank account open and at your disposal when needed.

Keep in mind that having an offshore bank account is not illegal. As long as you are not engaging in tax evasion or any form of illegal activity, it is perfectly legally to mitigate the political and economic risks you may face in your home country by opening an account offshore.

That said, it is not easy to open an offshore bank account as there are so many laws for which banks must put in place regulatory compliance. All of which carry their own costs and may actually prohibit some foreign banks in the future to offer opening an offshore bank account altogether.  All the more reason to put your plans into action and open an offshore bank account today, well before you face the need to have one in the future.