Offshore Bank Account

Offshore Bank Account

It is advantageous to use opportunities offered by today’s international banking world. Many private persons and corporate entities choose to open an offshore bank account in order to protect their own privacy and minimize taxes. An offshore bank account is a bank account set up in a bank outside your home country, thus the word “offshore” is used. It is necessary to underline that offshore banks adhere to international banking rules, their policy and practice correspond to the high standards of the industry.

Choosing an Offshore Banking Partner

The choice of a good offshore banking partner plays an important role in international business. There are many banks worldwide, but it is crucial to choose the right banking institution for an advantageous long-term financial relationship. A financial consultant may provide professional and efficient advice in this sphere, by introducing his client to a bank with which the financial consultant has created stable relations over the years. The following are important factors when choosing an offshore banking partner:

  • A bank must have a governmental banking license and be regulated by governmental authorities;
  • An offshore bank account must be situated in a politically, economically and socially stable country;
  • A bank must follow international regulations on DDQ and KYC procedures;
  • A bank must follow a bank secrecy policy;
  • A bank should have a convenient geographic location, in case you may have a need to visit it in person;
  • Offshore banking must provide and utilize the latest technological developments; the need to be able to use internet banking is always increasing;
  • A jurisdiction where your chosen bank is located must have free circulation of different currencies, which will preclude any obstacles for an international business management or different nature of international transactions;
  • It is necessary to find out a bank’s policy towards operations with cash; and
  • A bank must be known internationally, its financial statements must be accessible for analysis and it must adhere to international banking regulations and standards.

If your chosen bank satisfies all the criteria outlined above, you will be able to establish profitable long term relations with it.

How to Open an Offshore Bank Account

international banking Banks around the world have basic principles for allowing foreigners to open accounts. Worldwide banks basically agree in order to combat illegal money laundering or support for terrorist groups that banks need to “know their customers”. This means every bank offshore will require certain documents to make sure the customer is who he claims to be and that the funds are clean.

To open an offshore bank account usually requires a personal interview with a bank officer. Not every offshore bank requires an interview. But, if an offshore bank does require an interview, the types of questions revolve around who the customer is, what he does for a living, where he lives, the purpose for opening an account in a bank offshore, and where the source of the funds will be coming from. Correct answers to these questions give the offshore bank assurances that the new customer and the funds are clean.

Opening an account in a bank offshore usually requires the following documents:

  • Official offshore bank account application form;
  • Copies of customer’s passport (photo and information pages) and a second ID (like a driver’s license or national ID card), both notarized;
  • Copy of some form of proof of residence like phone or utility bill or credit card statement, all showing current address and notarized;
  • Original bank reference letter on the bank’s letterhead and signed by an officer of the bank addressed to the offshore bank where the customer has had an account. This letter will state how long the customer banked there, estimate of amount of funds held over time, and that the customer is of good character;
  • Proof of the source of funds which will be deposited in the offshore bank account. This may involve copies of employment contract or a letter from an employer, copy of pension or annuity payments, commission agreements, inheritance, or investments payouts, etc. The offshore bank may require all of these must be notarized or if government issued an Apostille. This is an internationally recognized method for governments to certify their documents authenticity without requiring notaries;
  • For a corporation to open an offshore bank account, the owner will be required to submit all of the above mentioned documents along with every corporate officer and director; and
  • A corporate offshore bank account will also require copies of the Articles of Incorporation, government registration, meeting of board of directors authorizing opening an offshore bank account, letter explaining reason for the offshore bank account, and a power of attorney for the signatory of the offshore bank account.

An offshore bank account requires more documents than a bank account in your home country. However, the benefits of an offshore bank account in a tax haven country affords privacy (if the tax haven has good bank secrecy laws), and little or no income taxes on the bank offshore account interest.

Benefits of Offshore Banking

global banking Some people may be concerned about protecting their privacy when conducting offshore banking. To accomplish this, find a country which has laws favoring anonymous ownership of their legal entities such as corporations and private foundations. An offshore corporation or an offshore private foundation can own a bank account in its name rather than in the name of the individual. The corporate stocks can be owned in an anonymous manner. The same goes for the offshore private foundation.

There are other ways to earn a profit besides not paying any income tax on the foreign bank account’s earned interest which is anonymously owned. Many banks located in countries that do not tax interest earned from a bank account countries also offer services in additional to those of traditional banking services. A brokerage account can be opened in some of these banks. This would be an offshore brokerage account owned by the offshore corporation or offshore private foundation. The offshore brokerage account can engage in many types of investments such as buying and selling corporate stocks in any stock exchange, or commodities in any commodity exchange, or precious metals, or international currencies using a Forex platform. A brokerage account can also avoid paying income taxes when selling any of the above mentioned products and securities just as the offshore bank account does.

Some banks are connected to real estate companies allowing for an offshore account to engage in real estate investments in several ways. One way is to invest in a real estate investment trust called a REIT fund which pools different investors’ funds into several investments such as a condo, apartment building, large housing projects or beach front resorts projects. The foreign bank account can also make private loans to individuals or companies from purchasing vehicles to real estate. The offshore bank account can also provide venture capital to existing or start-up businesses. All of these profits can be earned income tax free.

Some offshore jurisdictions are known for the opportunity to establish banks that are able to offer a restricted range of services, being under the management of another bank, the holder of a full banking license. These banks are known as cubicle banks, and they have many benefits in terms of set-up costs, significant tax reduction, and less rigid supervision.

Many offshore centers have joined the Offshore Group of Banking Supervisors, which is an international organization for inter-country cooperation, the members of which have adopted laws, regulations and procedures similar to onshore countries that follow Basel principles. It includes a due diligence and know your customer procedures in order to ensure the legitimate group of clients. However, it still allows the banks ensure a high level of privacy and confidentiality, as banks within diverse jurisdictions do not cooperate in terms of information exchange on rejected clients, there is also no a precise definition accepted by all countries that would state what a legitimate and illegitimate source of money is. In addition, the lack of exchange control regulations in major part of offshore countries is another benefit integrated into offshore banking daily activities.

Some offshore centers offer an opportunity to open a bank account by distance, without the necessity to travel and visit a bank, providing the whole set of notarized documents in order to let a bank make the due diligence on a future customer. Fast services of offshore banks, that in most cases are cost-effective for the same quality in relation to onshore banks, determine the banking partner of a private person and a corporate entity.

Finally, an offshore bank account is a good way to keep money outside of your country in case of an emergency such as a political crisis, economic meltdown or a banking crisis threatening your country’s banks. This so called “nest egg” account is outside of your country’s jurisdiction which can be a desirable benefit for many people. One such benefit is that your country’s civil courts will not be able to seize the foreign account funds to pay off civil debts where the plaintiff successfully sued you for monetary damages.

As you can see, an offshore bank account can be totally income tax free, anonymous, and a hedge against future crisis.

CS&P’s team of lawyers, advisors and agents is spread over the six continents and brings to the table expertise in all the major disciplines relevant to international strategy, finance, operations and marketing when it comes to offshore banking. Find out how our team can help by contacting [email protected]

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