|
Offshore banking
refers to banks that operate outside the
resident country of the bank's customer.
Typically, these banks represent an
advantage to the customer over domestic
banks. Lower taxes,
more privacy, and better security are
examples of such advantages. Interest rates
and service fees may be structured very
differently to fit the specific needs of
the customer.
Offshore
banks are regulated by local and
international agencies much like local
banks. A common misperception of offshore
banks is that they are used to launder
money, disguise the account holder from
authorities, and to channel money without
being traced. But this is generally no
truer of offshore banks than of domestic
banks. Compliance to law is what keeps all
banks in operation and good standing,
essential to their main goal: making money.
Security and reporting practices are often
more conservative in offshore banks, but
are subject to international search
warrants that cite probable cause. Numbered
accounts are always traceable back to their
original individuals and institutions.
Reporting account activity to tax agencies
is often limited or non-existent, but does
not excuse the customer from their own
reporting responsibilities. Similarly,
creditors generally do not have access to
offshore banking information.
International
law has yet to force offshore banks and
individual account holders to report client
offshore investment profits to resident
countries. A corporation can be established
in the country of the offshore bank, its
capital gains profits exempt from tax
reporting. Nearly all the major
corporations in the world use offshore
banking to some extent. In recent years,
competition in
offshore banking has created
opportunities
for individuals and corporations of
lesser means to be able to use this
same tax shelter. Internet access,
debit cards, and credit card
processing increase accessibility.
Offshore banks in more politically and
economically stable countries offer
additional security for account holders.
Tie-ins with limited national currencies is
often minimized, resulting in less volatile
fluctuation in account cash value. Many
offshore banks invest in global financial
instruments with the specific design to
capitalize in any economic climate. That
is, while one country's currency value
decreases, another may increase by similar
proportions. Having investments in both
helps negate the fluctuation that more
nationalized investments experience.
|
